Carillion: building on shaky ground

Carillion’s rapid and unexpected collapse led to it filing for bankruptcy in January 2018. Its failure raised uncomfortable questions about the role of those expected to adopt a more critical stance, including the Board, the auditors, the Regulators and the government. The chain of events leading to its bankruptcy was set in motion when a review of the company’s contracts led to a provision of £845m. The case focuses on financial analysis and its limits, encouraging students to question the decision usefulness of current financial reporting standards. The case uses Carillion plc, a company which focused on providing maintenance, facilities management, and energy services to buildings and large property estates, in public and private sectors; infrastructure services for roads, railways, and utility networks, with contracts including road and hospital construction and many strategic service contracts e.g. free school meals. The case uses financial analysis techniques to explore whether the failure was foreseeable and questions the extent to which existing international financial reporting standards support or inhibit the decision usefulness they aspire to. The case uses only publicly available information. This case can be used in undergraduate financial reporting and current issues in accounting courses/modules at the postgraduate level.