Neither a certified accountant nor a certified lunatic
Quote:
Originally Posted by
Snoopy
Here is a question for the accountants on this forum. If Pizza Hut goodwill in the books is accurately valued, why was it necessary to write off $3.192m of goodwill disposed of as a result of selling off PH stores to owner operators during the year?
Does this not mean that the actual price received for those PH stores on a willing buyer, willing seller basis, meant that it was not possible to sell those stores with the value of that goodwill included? IOW, that $3.192m of goodwill on the books connected with those PH outlets being sold was really a figment of RBD management's imagination?
SNOOPY
So Note 5 says they made a loss of $1M664 selling stores with $3M192 of booked goodwill attached. (Note 8 suggests originally about $13M but written down over prior years).
The entire amount was not 'written-off' but as a result of the sales the amount of goodwill owned by the company decreased.
The buyers paid more than $2M484 for PP&E valued by RBD at $958K so the buyers were willing to pay at least $1M5 for goodwill which appears as cold-hard cash.
Other than that all I will say is:
that I have never liked RBD as an investment;
this years annual report is a lot better than the 3D (glasses supplied, but not with the e-copy) version for 2012.
Best Wishes
Paper Tiger
Is RBD overstaing their profits?
Quote:
Originally Posted by
Paper Tiger
The total loss on the transactions is the $1.664m (in note 5). The loss on sale of goodwill will be less than this because there will be other expenses involved in the sales that add to the loss.
What RBD considers the carrying value of goodwill of an outlet as part of a national chain and the value an independent operator is willing to pay are going to vary.
The question heading this post is something that I have believed for some time. Of course when RBD was trading on a PE of 10 there was a much larger margin of safety than now. So overstating profits by not reducing goodwill by a couple of million did not affect my decision as to whether RBD was a good investment or not. Now the PE is nearer to 15, some of what were small points should not be so readily swept under the carpet.
PT I fully accept there may be some business broker fees and/or legal costs associated with the sale of each PH branch. However it is hard to imagine these being much more than say $10k on each sale. So instead of these PH stores having $130,000 written off their goodwill on sale, it might ""only" be $120,000.
I also accept your point that goodwill associated with being part of a national chain, and goodwill as agreed to by an independent buyer may vary. But I would have thought that, if anything, a good independent operator who knows their local market might be willing to pay a bit more for that PH store on the block (implying higher goodwill than on the RBD books), not less. Nevertheless I do see that on a one off basis, a variation of goodwill by $120,000 could happen on the sale of a store.
The problem I have with this argument is that we are not talking about the sale of one store. We are talking about the sale of thirteen stores. Why is the 'error' in book valuation something like 20% of thirteen store? "Whoops" once or twice I will tolerate. "Whoops" thirteen times and I start to wonder whose shoes have been resoled with banana skins.
SNOOPY
PS For those 'worried about the recent RBD share price decline, I should point out it went ex-dividend last Friday.