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| Subject: Deferred development expenses.Protonaccelerated amortisation | |
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Author: N.E. RentonPage 183. Goodwill.Securities Institute of Oz. |
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Date Posted: 12:12:20 01/14/03 Tue Oct15thnotes (ID#: 418407) accelerated amortisation 7/10/02 9:38:32 PM 5599511 « Prev Msg Thread Next in Thread » Next Msg Thread » Subject: Re: Deferred development expenses.Proton accelerated amortisation Author: anonymous [ Next Thread | Previous Thread | Next Message | Previous Message ] -------------------------------------------------------------------------------- Date Posted: 02:43:06 10/07/02 Mon In reply to: anonymous 's message, "Deferred development expenses.Proton accelerated amortisation" on 02:43:06 10/07/02 Mon -------------------------------------------------------------------------------- N.E. Renton has to say in Understanding the Stock Exchange. Page 183. Goodwill. -------------------------------------------------------------------- 972) A compulsory accounting standard (ASRB 1013), entitled "Accounting for Goodwill", applies to companies for financial years ending on or after the 19th of June 1988. Companies purchasing assets which fall within the general scope of this standard are expected to write goodwill off out of their profits after tax over a 20 year maximum period. 973) As a result, companies in their balance sheets are forced to set out some meaningless figures and their published profit or loss figures can be positively misleading. Investors need to make their own adjustments in order to overcome this statutory piece of nonsense. Shareholders who take a company's reports at face value may well be induced to let their shares go too cheaply. 974) As mentioned in para. 812, valuing assets is often an art rather than a science. The value of a company in a fire sale is likely to be much less than its value on a leisurely voluntary winding up. Its value as a going concern will be different again. 975) However, writing one particular asset off over an arbitrary 20 years and regardless of the circumstances, especially when its commercial value and income producing ability may easily then be considerably greater than before, must produce results which are neither fish nor flesh nor good red herring. It would be far better for balance sheet purposes to have regard to net tangible assets only and to write intangibles off "below the line" immediately on purchase. 976) The published profit would then represent the true accretion of wealth during the year and at least results would be consistent from company to company and comparable from year to year. 977) Writing off intangible assets is very different from depreciating most tangible assets over their working lifetime. While the precise period for such an asset to lose its value completely and the pace at which this happens may both require a value judgement, at least any estimates made in practice to be of the right order of magnitude in the aggregate. Writing off goodwill over 20 years is not approximately right--it is 100% wrong. 978) One possible side effect arising for this strange accounting standard should also be mentioned. It tends to discourage economic growth as companies become reluctant to make expansion moves because of its existence and enforcement. ----------------------------------------------------------- The entity has instituted a policy of accelerated amortisation and depreciation-----so it is getting more valuable as it moves through time (this is the company itself---not how well Nasdaq or the S&P500 goes---ERG itself) ------------------------------------------------------------ -------------------------------------------------------------------------------- [ Next Thread | Previous Thread | Next Message | Previous Message ] Subject: Deferred development expenses.Proton accelerated amortisation Author: anonymous [ Next Thread | Previous Thread | Next Message | Previous Message ] -------------------------------------------------------------------------------- Date Posted: 22:47:07 10/05/02 Sat -------------------------------------------------------------------------------- ------------------------------------------------------------ Deferred development expenses. ------------------------------------------------------------ Proton. ------------------------------------------------------------ Below assesing company performance--small extract--Securities Institute of Oz. ------------------------------------------------------------------- Deffererred development expenses are expenses incurred while developing products. This can take several years. Expenses incurred are accumulated over the years and upon completion of the product (when the benefits commence) the accumulated expense is amortised over the period in which future benefits are expected to be recouped, if during the development stage, the development is discarded or the future benefits will be less than the future costs plus the defferred costs to date, then the accumulated losses are written off when the situation becomes known. The research and development accounting standard requires development costs to be disclosed seperately, ie they should not be included with other assets. The amount amortised should also be disclosed seperately. Further the gross amount and the accumulated amount should be shown. (just as for good will) The amortisation period should be chosen to match revenue earned with expenses incurred. This tends to be a maximum of five years. ----------------------------------------------------------- By receiving all of Protons revenue instead of just ten percent, which was the situation before 100% ownership took place, the Group can acelerate it's amortisation--to use some home grown jargon--un write things down quicker (lol) -------------------------------------------------------------------------------- [ Next Thread | Previous Thread | Next Message | Previous Message ] |