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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: marty009 who wrote (29687)	1/12/2008 9:56:56 AM
From: Grommit	Read Replies (2) \| Respond to of 78456

I will try to help you out here. This is pretty basic... However, after reading about their aggressive accounting, - it is standard accounting for a BDC. I have second thoughts. I am most disturbed to learn that markups of investment values are treated as income. - It is called "Net unrealized appreciation (depreciation) of investments". It is separate from Net Operating Income and Net realized gain on investments. I feel that real income comes from operations...interest dividends, fees and capital gains. - you accept capital gains as "income". well, the net unrealized gains and losses are recognizing the capital gains (as best as can be determined) in the time period they occur. They are expected to be realized when the investment is eventually sold. ACAS is in the business of buying and selling businesses. It is their normal course of business. This is different from a company like Toyota writing up the value of their factories because selling the factories is not normal course of business. A mutual fund write up the value of its businesses on a daily basis. So, I asked the question on the ACAS board at investors Village....does any expert know if they are required to show the markup as income? No answers! - sounds like conclusive evidence to me. I will need rethink my investment here. I feel that changing values in a potfolio should be shown on the balance sheet...not income statement....JMHO. -- They are shown on the balance sheet. You are objecting that they also show up as unrealized income. But in fact, we want the information. We need to know the unrealized gains and losses. If we did not have it we would be flying blind. That is why BDC accounting is this way. And yes, it may seem a little more subject to opinion than the accounting of other businesses, but that's life. (But then look at the accounting of Enron or of recent sub prime loan valuations and tell me that regular accounting is better.)