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Re: [OM] Re: Discontinued lenses

Subject: Re: [OM] Re: Discontinued lenses
From: julian_davies@xxxxxxxxxxxxxx
Date: Mon, 14 Oct 2002 19:45:29 +0100 (BST)
Different countries, different professional slants, different perspectives.

It is entirely self evident that you are better off after tax on a profitable 
sale. You get taxed on profits, after all, and at a rate less than 1000sually. 
No profit, no tax. Not all sales make a *NET* profit, however.
Who or what defines the scrap value of an OM4ti, for example. Lots of 
unrecoverable items and 20g of titanium? So you get bids, you spend money 
administering the sale. You find that you have employees doing this instead of 
what you actually employed them to do. That *NET* profit's getting 
smaller....That skip is looking more attractive......
Meanwhile you have capital tied up. How much? depends on your valuation, but it 
doesn't look good for liquidity. Oh a bit here and a bit there and there and 
there and there...... Why is it tied up? to defer a distress sale, if you wrote 
the stock down, evidently.
I can hear the skip arriving......
Then you have the corporate limits on working capital. What do you want your 
allowance in? Bits of old OM, or shiny new digiboxes that people actually buy? 
It's nearly here.....
Then you have the cultural pressures. Where was JIT invented? Why?
Bang! It's at the door.

Like it or not, companies work in this environment, and come to these decisions.

My branch of accountancy is not specialised in taxation. Mine is very closely 
focused on corporate profitability and genuine shareholder value. That does not 
include ridiculous financing schemes, BTW.

I didn't say there were tax *REASONS* for throwing things away. I said there 
were tax *ISSUES* around old stocks, and some companies are more sensitive to 
these than others. International companies get a lot of hassle from tax 
authorities worldwide, because the authorities believe (usually quite rightly) 
that the companies are trying to export profit to the most favourable tax 
regime, and import losses to the least favourable.

Julian Davies (ACMA)
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