I think only an accountant and a lawyer could understand it and...

I think only an accountant and a lawyer could understand it and i am neither.

"The claim alleges that between the end of FY14 and the publication of the FY15 financial statements, Spotless changed its policy in relation to the capitalisation of ‘pre-contract costs’...."

In the market update on 9th December 15, EBITDA was adjusted downward by $5m for "Treatment change from capitalising smaller bid costs at balance date for tenders yet to conclude. Only costs associated with very large contracts where Spotless is the preferred bidder capitalised at balance date"

I think they believe this change was deliberately left out of the FY15 report to make the numbers look good, and that it is a change in policy from the FY14 report without proper notification.

Ive gone around in circles trying to understand it further, but a couple of points;

What they dont mention is that Martin Sheppard, the Spotless CEO joined in Nov15, after the FY15 report and before the market update, he worked at KPMG for 23 years in Auditing and Accounting, it seems reasonable to me that he wanted a change in accounting practices, which puts a big hole in the timeline and motive around their case.

The annual reports are signed off by auditors who state "An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.", if there was accounting policy change that needed to be stated, the auditors must be partly responsible as well, perhaps it was a conspiracy !!!

The market update is not signed off by auditors like the annual report, but it has an impressively broad amount of disclaimers at the start.