obiero wrote:VituVingiSana wrote:obiero wrote:Ericsson wrote:KQ will make the biggest loss in Kenya's corporate history.
I foresee minimum loss ksh.18bn before tax.
This will wipe out all the retained earnings and company will now be technically insolvent
Pepo mbaya. Wit the sale of four planes and the 'unfortunate' sale embakasi land, do you think what you have written is possible??
1) Are the planes being 'retired' leased or owned by KQ?
2) If they are owned by KQ, what is the estimated selling price vs the Book Value? If the BV is higher than the Selling Price then KQ has to book a loss for the difference.
3) If the planes have loans and these loans are equal or greater than the Selling Price, then KQ gets ZERO cash from the sales.
4) Has KQ sold the land in Embakasi? If the process is ongoing then KQ cannot apply the proceeds/profits in FY 2014-15.
No. 1 & 2 are rhetorical, but I ask:
3)if the proceeds from sale are used to reduce debt. Is it a bad thing??
4)The land sale agreement though incomplete/ongoing can be provided for in the accounts
Why are 1 & 2 rhetorical? I do not follow KQ as closely as you do. Please answer the questions so it can help the rest of us understand KQ better.
Good for KQ if it can reduce the debt but these are cheap loans. Anyway, lower debt = lower finance costs. If they can sell the planes at Loan Values. Anything less than that means KQ has to find the cash for the difference!
No, when you are selling something prudence (sensible auditors) doesn't allow you book profits for a deal not done. What KQ can book - if the deal is signed - the deposit if it is non-refundable. Until the land is under contract, and the Buyer doesn't have a way out without breaching the contract, KQ cannot book profits for a 'future sale' of the property. Prudence (IFRS) expects profits are booked when the likelihood of getting paid by the Buyer are very high. To be safe, one books profits AFTER the cash is received.
When you buy a ticket from KQ to fly in May 2015, it does not book the 'potential profit' from the sale in FY 2014-15 but the fare/proceeds are booked as a Liability until you fly when it moves into Revenue for the then current period (FY 2015-16).
Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett