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Strategies & Market Trends : Three Amigos Stock Thread

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To: Sergio H who wrote (7215)	7/26/1998 10:55:00 PM
From: milesofstyles	Read Replies (2) of 29382

sergio, you're not getting it...for this post forget about acquisitions completely...forget about falsifying values. the following transaction has nothing to do with buying another company. the furniture in their own companies is old...thus they need new furniture plain and simple... company a has revenues of 100, company b 100, both buy furniture at a cost of 10. company b needs to boost their balance sheet to establish better credit. they treat the furniture as an asset. they depreciate the asset over five years at a cost of 2 per year. company a does not have a credit problem, but would like to reduce their income so not to pay as much tax. so they treat the furniture as an expense and not an asset. now company a return is 90 and b is 98. next year company a return is 100 and b is 98 again. the treatment of how this transaction was viewed by two different companies will alter the resulting outlooks. this transaction has nothing to do with acquisitions but still causes the same affect to the statements. does this help? milesov

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