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Strategies & Market Trends : Bosco & Crossy's stock picks,talk area -- Ignore unavailable to you. Want to Upgrade?

To: Sergio H who wrote (3212)	1/1/2003 12:30:06 PM
From: Crossy	Read Replies (1) \| Respond to of 37387

Godot re: adjusted Book Value, I start with "Shareholders Equity" then subtract all primary Intangibles like "Brand" and "Goodwill" and even "Patents" in any case.. Amortization and deferred components are another thing and right now I leave them as they are but one could argue to strip them out as well. I find this arguable. For example on life insurance accounting, there's the DAC (Deferred Acquisition Cost, a part of the comisson paid to agents , stretched over the years of life-time of a policy). Normally one would feel tempted to subtract this as well. On the other hand, the title of an insurance company to your payments is nowhere reflected in the books and this is not such a shaky link to a recurring earnings stream than a "brand" or "goodwill" of a quasi-distressed company that's still on the books.. In such cases, a first analysis would leave those amortization "assets" where they are. In another round of refinement I would look to industry practice, most importantly how leaders of a respective industry are performing with regard to this... (for example the relation of DAC to assets under management) On "defers" one would feel tempted to add "deferred revnue" to book value (at least partially to the extent of Gross Margin indicates) because they represent usually hard to retractable commitments on the part of customers. Deferred payments could likewise be treated. It's also important to get a handle of the "skew" of book value. In some cases (warrants), GAAP figures do not show the market value but rather the lower of market value and the amount invested. In such cases, the balance sheet figures would be too conservative. Similarly, if real estate is involved, a change in property value is also often not reflected in the balance sheet. Hidden reserves of assets or operations that could be realized if subsidiaries or assets are sold (as in the case of IPSU) are another factor of influence.. all the best CROSSY