SECRET ACCOUNTING IN NEW ZEALAND

The Union Steam Ship of New Zealand was one of the largest and most important companies in New Zealand in the years between the First and Second World Wars. Union was taken over in 1917 by the Peninsular & Oriental Steam Navigation Company (P & O), Britain's second largest shipping combine. Over the next twenty years, P & O extracted from Union a total of over eight million pounds in undisclosed dividends and credits. P & O was able to do this because Union had accumulated extensive secret reserves.

This paper examines the origin of these secret reserves, the extent to which their use led to the gross understatement in published accounts of the financial performance of Union, and the role played by the secret transfers in supporting P & O at a time of financial crisis. By utilising Union's secret reserves, P & O was able to conceal from the New Zealand Government and public the extent to which it was exploiting the New Zealand economy for the benifit of investors in the United Kingdom.