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whereverilaymyhat

Accountancy Question

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Ok This is probably a simple question to you guys who deal in shares and finance, im tearing my hair out! and i have a crew cut haha

Anyway in tescos financial report for 2006 they state that they valued their property assets at half of the book value?? on the balance sheet,

why would a company do this, would they receive less tax? would it have an effect on whether their stocks are attractive or not,

also could this be done because of property price speculation?? i can get the link if you guys need it,

thanks!!

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Ok This is probably a simple question to you guys who deal in shares and finance, im tearing my hair out! and i have a crew cut haha

Anyway in tescos financial report for 2006 they state that they valued their property assets at half of the book value?? on the balance sheet,

why would a company do this, would they receive less tax? would it have an effect on whether their stocks are attractive or not,

also could this be done because of property price speculation?? i can get the link if you guys need it,

thanks!!

don't you mean they valued at cost less depreciation (i.e. book value) rather than market

value (i.e what a valuer reckons they are worth at the balance sheet date)?

this is because balance sheets are, broadly generalising, very conservative. there are arguments for and against this treatment. especially whenever there is a dose of inflation and accountants tie themselves up in knots with the pros and cons of inflation accounting. by the time they come to any agreement the inflation is usually over so they go back to life as it was before. :lol:

hence it is not uncommon for businesses to be taken over and asset stripped - a savvy buyer could look beyond the figures in the balance sheet to the true 'worth'of the business. this has happened for years - see people like jim slater in the '60's and more recently, private equity.

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