Replies (14)
Please login or register to join the discussion.
The biggest worry must be that a 10.6% increase in sales has been accompanied by a £4.4 million loss.
Gormley is merely following the agreed principles of the International Institute of Chief Execs:
1. Blame your predecessor.
2. Blame a convenient scapegoat you can sack.
3. Blame the messenger.
4. Any old smoke and mirrors will do.
These have been the key building blocks of many a successful career.
Exactly! Would he say his £200k Aston Martin is still worth £200k after 5 years, with some bumps and scuffs and 80k miles on the clock?
Same idea expressed for laymen. Is the asset you own, really worth what you say it is/what it was when you bought it?
Exactly! Would he say his £200k Aston Martin is still worth £200k after 5 years, with some bumps and scuffs and 80k miles on the clock?
Same idea expressed for laymen. Is the asset you own, really worth what you say it is/what it was when you bought it?
Did you even read the article? It is saying that this is precisely not what has happened here, though it is the excuse used by Gormley thus demonstrating his failure to understand the underlying accounting principles at work.
But then, his beloved Aston may well "be worth" several million. Worth being a somewhat subjective concept, made concrete by a market.
spot on Mr Mischief...it is unfortunate but has taken me most of my career to realise that the easiest way to progress up the chain is to take all of the credit and none of the responsibility. Something most of the high flying execs have in abundance.
It is an interesting, and perhaps somewhat provocative idea that anyone might "understand" accounting standards. Valuing goodwill has long been a challenging conundrum, which the somewhat trite conclusion to this piece rather glosses over.
why is there any goodwill if Majestic bought a "PUP?" Mr Gormley is ok though when concentrating just on the trading profit. But is there a conflict of interest re his Naked Wines?
So,straightforward, is it not?!
Oh here we go, A loss loss has been reported and guess what its all due to .........Accounting rules, nothing to do with him or his business, if he is right he could contact RBS, Lloyds, Barclays.......
And we have all heard the following before, its normally the first nail in the coffin. Its like a struggling football team picking up a point at home.
Reactions in the City were generally sympathetic, citing the “hangover” from last year’s poor results and reporting the claims of new chief executive Rowan Gormley that the company had reached the tipping point and was heading in the right direction.
"IFRS principles work in the same way as other GAAPs in that you cannot carry assets in the balance sheet at any more than their recoverable amount"
That perfectly sums up the problem of goodwill. There's no objective way to value it without putting it on the market. At least with an Aston Martin you can get a quote from buyanycar dot com
He was talking about acquired goodwill, not fixed assets. FRS102 states:
“If an entity is unable to make a reliable estimate of the useful life of goodwill, the life shall not exceed five years.”
The amortization period can still be 20 years, but it is hard to prove your case if the company is making losses.
Under IAS38 the annual impairment test seems less empirical than FRS102.
FRS102 can help in keeping arguments between auditors and management short and sweet.
What if they did amortise the good will and not impair it because the FD didnt realise there was a difference and the auditors didnt spot it or didnt realise....
Is that worse?
Most of this is good technical stuff but it miss the real point - apart from a small mention by tiswas12.
Majestic brought Gormley in and at the same time bought his company Naked Wines for £4.5m more that it was worth. So someone has been stuffed.
Maybe Gormley stuffed Majestic...and they still employ/ed him????
Or maybe this is a device to replace income tax and NIC on £4.5m with CGT at 10% after entrepreneurs relief and it is HMRC (and us) who has been stuffed.
But no doubt the supporting paperwork is impeccable.