12/22/2012

What is real or unreal in accounting?




Or what is truth and fiction in accounting? SIA has booked a gain of $322m for selling its shares in Virgin Air for $439m. It bought the shares at a cost of $1.6b. I am a bit dull and think that this should be a loss of $1.161b! I am just being simple minded or ignorant of accounting practices and how profit and loss are computed.

Yes, the buying at $1.6b and selling at $439m led to a gain of $322m. I was reading Goh Eng Yeow’s article last Saturday and he explained how the apparent loss of $1.16b could turn into a profit of $322m. He said that over the years, the goodwill of Virgin Atlantic had been written down. There was also an amount of $117m written off to reserves. I do not know what this meant, really.

I must say that this is brilliant accounting practices and must be legal and correct. SIA is making money out of this deal by buying high and selling low. No wonder lay people are confused and there are companies like Muddy Waters trying to clean up the mud to make the water clean again.

42 comments:

Anonymous said...

In my opinion Muddy waters was spot on about Olam. It is well known in the industry that Olam uses a very creative and somewhat surreal way to recognize revenue.

But even if Muddy waters is right, it is doubtful that Olam will go down under. As it is really the only for our government to guarantee food security.

If they Temasek was really smart then I think they could have bought into a better managed outfit, still make a decent return on investment and still deliver on the food security agenda.

Unfortunately Temasek does not appear to be vert smart. As for retail investors, they have to be absolutely crazy to go anywhere this stock. I have shares in ADM, but even if you give me a 50% discount on Olam and I could buy in at a PE of zero, I will still give it a miss.

Darkness 2012

jjgg said...

Rb...even the uncles n aunties in toa payoh are laughing..imagine sending your kids to school/ universities/business colleges n they come out with this sort of rubbish...I'll never use the term...pigs can fly anymore...hehe

Anonymous said...

I think I read a comment in this

blog that this kind of accounting is

called "keling accounting", what

ever that means.

Chua Chin Leng aka redbean said...

For food securities, I still advocate the acquisition of big agriculture and farm lands in Nothern Australia, nearer home and more predictable, for our future needs.

Olam is not designed for this kind of purpose. It is more an organisation built to reap profits not on food and commodities but on trading and financial instruments. The food and commodities are just the chips to create value.

Veritas said...

Olam got nothing to do with our food security. Its about saving the backside of Ho Ching, who after making initial investment in Olam, cannot see it fail.

And today, sadly speaking, SIA has the same accounting standards as ENRON. Never mind SIA can lost lots of monies, its book must look good, in order for PAP to look like talent.

SIA, Temasek, GIC, set the example, I am sure that our listed companies now have cook their book crazily. And investors' confident vaporize. This is one of the reason our stock market dry up.

Worst, Singapore office is one of the major center the trespass in the LIBOR-gate. Singaporeans are normally honest and timid. Libor fraud are often at behest of FT.

I am really nostalgic to Goh Keng Swee time, where we really has high standard. Kuan Yew-ism is nothing but fraud.

Anonymous said...

In my opinion, WP can do much better.

Now people are laughing this type of rubbish accounting also can, some more all experts in accounts and more.

I am sure WP will not allow all these, WP will be good, all will be well. WP will never allow our money to be invested in these type of investments. They will do very thorough checks and investigations, interviews with many insiders before plunging in with our hard earned money. If not sure, they will not invest a cent.

If you are serious about ensuring our food security, in my opinion, the govt can buy up hugh plots of land in Iskandar and plant crops for our sinkies, like chye sim and padi, coconuts etc. Far simpler.

jjgg said...

hiho anon 12.28...what!!! u want to invest in crime ridden Johore ...)))
look at Olam's African activities extracted from wiki..Olam too was initially exporting cashew from Nigeria to India. From Nigeria, it went into other key producing countries in West Africa like Côte d'Ivoire, Burkina Faso, Mali, Guinea Bissau and East Africa, including Tanzania, Mozambique, Kenya and Madagascar, and finally expanded into Vietnam and Indonesia. It then expanded down the processing value chain by processing raw cashew nuts that it sourced from these origins into blanched kernels, first in India, then Vietnam and then Brazil. It is now scaling the cashew processing in the raw nut origins and have built a scalable model for this in Tanzania, Mozambique, Côte d'Ivoire and Nigeria. For instance, in Tanzania, with the help of the Government and funded by USAID, Olam along with Technoserve, is participating in activities to improve productivity of small farmers and increase yields and incomes in rural areas.

Hey it made mega millions out of cashew nuts ..ok..scary?? look at olam's competitors, again from wiki..
Competitors
Kraft Foods
Ebro Puleva
Greencore Group
Cerebos Pacific Ltd
Illovo Sugar Ltd
Cargill
Archer Daniel Midland
Bunge
Louis Dreyfus Group
Armajaro

no problem..ah..we'll take them all in our stride...

Temasick will make sure that Sinkies are never short of....cashew nuts...hehehe

jjgg said...

hiho anon 12.28...what!!! u want to invest in crime ridden Johore ...)))
look at Olam's African activities extracted from wiki..Olam too was initially exporting cashew from Nigeria to India. From Nigeria, it went into other key producing countries in West Africa like Côte d'Ivoire, Burkina Faso, Mali, Guinea Bissau and East Africa, including Tanzania, Mozambique, Kenya and Madagascar, and finally expanded into Vietnam and Indonesia. It then expanded down the processing value chain by processing raw cashew nuts that it sourced from these origins into blanched kernels, first in India, then Vietnam and then Brazil. It is now scaling the cashew processing in the raw nut origins and have built a scalable model for this in Tanzania, Mozambique, Côte d'Ivoire and Nigeria. For instance, in Tanzania, with the help of the Government and funded by USAID, Olam along with Technoserve, is participating in activities to improve productivity of small farmers and increase yields and incomes in rural areas.

Hey it made mega millions out of cashew nuts ..ok..scary?? look at olam's competitors, again from wiki..
Competitors
Kraft Foods
Ebro Puleva
Greencore Group
Cerebos Pacific Ltd
Illovo Sugar Ltd
Cargill
Archer Daniel Midland
Bunge
Louis Dreyfus Group
Armajaro

no problem..ah..we'll take them all in our stride...

Temasick will make sure that Sinkies are never short of....cashew nuts...hehehe

Anonymous said...

Sinkies pay millions in salaries for Temasick's investment genius.
Wud be cheaper to shut down Temasick.

And we hire an 'O' level clerk to buy Berkshire Hathaway shares.
Warren Buffet's investment genius comes with Berkshire Hathaway shares.

Ho Ching's investment genius comes with Temasick.

Matilah_Singapura said...

I've been hearing rumours of heavy drug use amongst today's young and ambitious finance professionals.

After hearing the antics of young bankers, financial engineers, equity and debt traders and now accountants I have reason to believe those rumours are true.

There is definitely s funny side to the fact that the world's wealth is being "taken care of" by a bunch of drugged-out macho cowboys, all with their dicks out, swinging in a challenge to see who has the biggest one.

I'll laugh and have my jollies. You religious types -- better pray, and don't stop! ;-)

patriot said...

Me feels that accountings by CONmercial houses is not the Problem.

The Problems are due to poor governance and lousy Judiciary that allow the businesses to do what many found suspicious.

patriot

Anonymous said...

The problam is not that they are allowed by the powers that be to do what many found suspicious.

The problem is that they have even been accorded the god given right by the living god to do what they like, so juggling the figures is no big deal.

And may i say, nothing new.

patriot said...

@Anon 10:25 PM.

Absolute concur with You.

Sinkies have played out themselves by being greedy breeding and inculcation from the Leaders. Unfortunately, the selfishness in the average Sinkies has blinded them to the extent that only few are able to undeestand the consequences.

The near 9O% that owned properties now are just greedy for property prices to shoot through the roof. They cant even be bothered to think of what their children and grandchildren have to face since a decade or two ago.

How Sinkies had Sunk to suck a level is beyond me. They are blinded and lost now and the direction given by the Leadership will only lead them to man make disaster. And it is not too far from now.

patriot

patriot said...

My apology for some typo errors.

Absolute should be absolutely
and
Sinkies have played out themselves by greedy breeding and inculcation......'being' got to be deleted.

patriot

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