Informed estimate of cash position, page-33

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Rokewa

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20/04/18

06:17

Post #: 32573620
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Originally posted by Jack1960 ↑

It is a very good point you raise Rokewa.

To my knowledge, the AASB (accounting standards) are overridden by International GAAPs. The GAAP standards require each reporting entity to adopt an accounting policy consistent with the terms of sale they offer in relation to returned goods/money back guarantees. The policy must takes into account the particular conditions to which returns are accepted and recognise revenue accordingly. Generally speaking most corporations treat invoiced sales as sales and then maintain a contingency account/provision (negative sale) for the reasonable estimate of returned goods. These two items are usually offset and sales disclosed represent the net amount.

Consistency is the key point here since as long as the treatment is consistently applied, any movements or changes in returns experience from period to period are smoothed out. Consistent application of accounting policy is generally accepted as the means to ensure companies do NOT either under or overstate relevant income or expenses. In practice, this is not the actual outcome since there will always be the ability to justify alterations to the contingency rate. It must be accepted as a tolerated margin of error.

You correctly point out NUH has a high(ish) return rate. I would expect the auditors would demand this be taken into account when reporting net invoiced sales. In the scheme of things, I don't believe NUH would be in a position to materially mis-state sales (using returns policy), which is by the way, illegal.

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Hi Jack

Thanks for yr response. Appreciated.

In order to assess whether this constitutes abuse or not, I guess you need to identify the motive. I am not for one moment questioning the BOD’s motive and the degree to which their accounting is lawful. My niggle is whether we are dealing with a level of conservatism which could be skewing Revenue to the downside (given prevailing uncertainty) and impacting on the timeline from despatch to receipts.

Once again, thank you.

Rokewa

NUH Price at posting: 9.0¢ Sentiment: Hold Disclosure: Held
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Informed estimate of cash position, page-33

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