Capital Alliance Group - CPT (CDNX) Message Board

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Gold/Mining/Energy : Capital Alliance Group - CPT (CDNX)

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To: marcos who wrote (221)	4/3/2000 10:13:00 PM
From: keith massey	Read Replies (1) of 960

On what will SEG operate? Funds loaned from cpt perhaps? O.K, time to make things far more difficult with a short accounting lesson . . . When a parent company (CPT) owns more than 50% of a subsidiary (SEG and CIBT) they are required to use the consolidation method of accounting. To keep it very simple let's just focus on CPT 51% stake in SEG. CPT's 100% stake in CIBT and all of CPT's other projects will not be taken into consideration. Using the consolidation method of accounting . . . On the balance sheet (Consolidated) they will show the total assets for the combined SEG / CPT. They will also show all the liabilities for the combined CPT / SEG. Under liabilities they will also show something called Minority Interest. This is the part of the assets owned by SEG (49%). In this case, part of the cash received from the seed capital and IPO are assets of SEG so they will show up as a Minority Interest under liabilities. On the Income statement (Consolidated Statements of Operations and Retained Earnings) they will show all income and expenses from the combined CPT and SEG. In this example all income would be coming from SEG since CPT would be a holding company for the stock (ignoring CIBT and CPT's other projects/income). This Consolidated Statements of Operations and Retained Earnings would show the total net income for the combined companies. The part of the income that belongs to SEG(49%), called minority interest, would be subtracted from this net income. Under 'Other Items' on the income statement CPT will show a dilution gain on issuance of shares of a subsidiary. This will not be for the full amount of the seed capital and IPO financing but will be based on the percentage they own (51%). This is added to the net income number. On the section of the balance sheet called Consolidated Statements of Changes in Financial Position portion, in the sub-section Financing Activities . . . It will show the full gain of the IPO and seed capital under the heading, 'issuance of shares of a subsidiary' which in this case will be a minimum of $50 million US. Under 'Cash, end of the period' you will see the full amount of money gained from the seed capital and IPO along with the current cash held by CPT from the private placement. What will not show up on the balance sheet is the value of CPT's 51% ownership in SEG. Lets say that SEG has a market cap of $500 million Cdn . . . Technically CPT would be sitting on an asset worth $255 million that they could cash in by selling their shares on the open market. However this number will not show up on the balance sheet. I hope this clear things up <gggggg> Best Regards KEITH P.S My apologizes to any accountants if I screwed this up.

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