I always find it weird that Directors/major shareholders refused to allow perpetual bond holders to have voting rights that clearly defines a shareholder as a shareholder. However when it comes to Earnings or payments to "not shareholder" perpetual bondholders, these payments are considered as earnings of "not shareholder, now shareholder" so that the earnings per share is computed as higher.
if this is not double talk of a snake oil salesman, I dun know what is
in the Malaysian Goodwill scandal many years back.
Goodwill in Malaysia was supposed to be "all" written off. Nobody bothered about it.
No worries, no problem, was ok, can be done. Yes Sir, if you say so.
... until some Captains of Industry found out that their PLC companies might become PN17, wink wink, as a result.
Delegations after delegations after delegations visited the Ministry of Finance and end result is that the Accounting Bodies were asked to bend over to be publicly caned.
new solution => No need to write off Goodwill.
:)
does it not sound like why Accounting Body after public caning walked away from perpetuals as mere liabilities?
@i3lurker ... that's harsh. Unfortunately Yinson's perps may indeed be required to be classified as equity. Have to take any further argument on that issue to IASB instead. @benlim yup, treating perps like preferred shares is what I argued for as well.
The Accounting Standard is what those Captains of Industry say it is.
Accounting Bodies says "Please tell me what you want and I will make it happen"
Posted by Neoh Jia En > Jan 22, 2022 7:39 AM | Report Abuse
@i3lurker ... that's harsh. Unfortunately Yinson's perps may indeed be required to be classified as equity. Have to take any further argument on that issue to IASB instead. @benlim yup, treating perps like preferred shares is what I argued for as well.
FPSO can be anchored at any part of the world unlike oil rigs. The question is when and not if tecnology advance in energy will make crude oil obsolete.
earnings per share was originally ONLY meant for Ordinary Shareholders, telling them how much profits their investment made before issuing dividends.
Once you add a perpetrator like perps into the equation, the inflated "extra" earnings were NOT banked into the company at all but were paid out to those perps.
EPS without perps => X sen
EPS with perps => X + Y sen where Y had "gone out" of the company
Earnings per share was originally ONLY meant for Ordinary Shareholders had been grossly distorted by this Snake Oil Scheme.
there is the accounting standard and the "spirit" of the accounting standard.
just like contravention of the "spirit of the takeover code" is also a major contravention.
I dun see how heaping loads of "Gone Earnings" given to perps onto EPS retained earned earnings calculations meant for ordinary shareholders can reflect a "better picture" rather than a Snake Oil picture.
@SarifahSelinder memang saya dah fikir tentang kemungkinan untuk ubah denominator, tetapi unit untuk "perpetual" tak sama dengan unit untuk saham, dan "perpetual" yang saya bincang tak boleh ditukar kepada saham. Dan sebab Dialog jatuh beberapa hari yang lalu, pergi tanya Macquarie. Laporannya memang bagus.
@SarifahSelinder IAS 33/MFRS 133 paragraph 3: "An entity that discloses earnings per share shall calculate and disclose earnings per share in accordance with this Standard."
Put it this way ...u need to differentiate between Perpetual Bond v Preference Share mah!..!
Legally Perpetual bond....is actual borrowing with no clear repayment or maturity schedule mah! As long they pays the interest when due...the perpetual bond have no expiry period loh! However....to avoid the perpetual bond....exist forever...sometime the investment bankers...sometimes set certain dates for review for potential redemption at the discretion of both borrowers or lenders say every 7, 10, 15 years loh!
Legally Preference share...or are actually equity.....they pay dividend instead of interest loh! Preference shares....can also be classified as liability when they are contractually redemption schedule period of the bond mah!
For accounting treatment of Perpetually bond & preference share....they both can classified as equity loh...! But for the portion due for redemption say within 1 yr....that is usually classified as short term liabilities loh!
During liquidation perpetual bond rank as liabilities whereas Preference share rank lower than liabilities loh!
For investors to assess the strength of balance sheet, it is preferably to analyse the perpetual bond as a liability, since u need to pay interest on it, although the bond is perpetual with no fixed term liablity loh!
For preference share assessment....it is preferably to analyse it as a liability if it has fixed period of redemption loh!
But as an investors analysing the business potential u must not be confuse loh!
Put it this way ...u need to differentiate between Perpetual Bond v Preference Share mah!..!
Legally Perpetual bond....is actual borrowing with no clear repayment or maturity schedule mah! As long they pays the interest when due...the perpetual bond have no expiry period loh! However....to avoid the perpetual bond....exist forever...sometime the investment bankers...sometimes set certain dates for review for potential redemption at the discretion of both borrowers or lenders say every 7, 10, 15 years loh!
Legally Preference share...or are actually equity.....they pay dividend instead of interest loh! Preference shares....can also be classified as liability when they are contractually redemption schedule period of the bond mah!
For accounting treatment of Perpetually bond & preference share....they both can classified as equity loh...! But for the portion due for redemption say within 1 yr....that is usually classified as short term liabilities loh!
During liquidation perpetual bond rank as liabilities whereas Preference share rank lower than liabilities loh!
For investors to assess the strength of balance sheet, it is preferably to analyse the perpetual bond as a liability, since u need to pay interest on it, although the bond is perpetual with no fixed term liablity loh!
For preference share assessment....it is preferably to analyse it as a liability if it has fixed period of redemption loh!
DO NOT BE CONFUSED MAH!
Posted by SarifahSelinder > Jan 23, 2022 11:05 AM | Report Abuse
Alsvin dah la Yinson treated its perpetual bond as equity
Byk jenis perpetual bonds depending on d terms some r loan liabilities some r more akin to equity
Examples of Amounts or Other Items that May Be Included in the Other Information
The following are examples of amounts and other items that may be included in other information. This list is not intended to be exhaustive.
Items in a summary of key financial results, such as net income, earnings per share, dividends, ....
ISA 720 (Revised), The Auditor’s Responsibilities Relating to Other Information
Other Information [or another title if appropriate, such as “Information Other than the Financial Statements and Auditor’s Report Thereon”]
Management is responsible for the other information. The other information comprises the [information included in the X report,7 but does not include the financial statements and our auditor’s report thereon.] Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard
Tengok ni
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
Klau data used to calculate EPS are derived from audited figures (yg ni auditors ok) tapi cuma formula yg diguna is arguable mcn mana ada ka auditors responsible?
Coming back to MFRS, IFRS, GAAP Standard...accountant treatment are different from legal treatment and the treatment of the investor mah!
It is better to call a duck a duck instead of accountants sometime trying to be smart calling a duck as a chicken and get confuse mah!
They can call a "duck" as "chicken" loh!
But as an investors analysing the business potential u must not be confuse loh!
Put it this way ...u need to differentiate between Perpetual Bond v Preference Share mah!..!
Legally Perpetual bond....is actual borrowing with no clear repayment or maturity schedule mah! As long they pays the interest when due...the perpetual bond have no expiry period loh! However....to avoid the perpetual bond....exist forever...sometime the investment bankers...sometimes set certain dates for review for potential redemption at the discretion of both borrowers or lenders say every 7, 10, 15 years loh!
Legally Preference share...or are actually equity.....they pay dividend instead of interest loh! Preference shares....can also be classified as liability when they are contractually redemption schedule period of the bond mah!
For accounting treatment of Perpetually bond & preference share....they both can classified as equity loh...! But for the portion due for redemption say within 1 yr....that is usually classified as short term liabilities loh!
During liquidation perpetual bond rank as liabilities whereas Preference share rank lower than liabilities loh!
For investors to assess the strength of balance sheet, it is preferably to analyse the perpetual bond as a liability, since u need to pay interest on it, although the bond is perpetual with no fixed term liablity loh!
For preference share assessment....it is preferably to analyse it as a liability if it has fixed period of redemption loh!
@AlsvinChangan These four companies classify their perpetual bonds as equity. If you check their statement of profit or loss, the distribution paid to perpetual bond holders are not deducted from profit or loss. I have even cross checked these figures in the cash flow statement, and those distributions are indeed separated from finance costs deducted from profit or loss.
@SarifahSelinder Interesting info on auditors' responsibilities. Unfortunately I am not an accounting professional so I don't know the details. In the first place, it could be me who are wrong about this.
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
i3lurker
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Posted by i3lurker > 2022-01-21 23:26 | Report Abuse
substance over form and intention
I always find it weird that Directors/major shareholders refused to allow perpetual bond holders to have voting rights that clearly defines a shareholder as a shareholder.
However when it comes to Earnings or payments to "not shareholder" perpetual bondholders, these payments are considered as earnings of "not shareholder, now shareholder" so that the earnings per share is computed as higher.
if this is not double talk of a snake oil salesman, I dun know what is