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Round Robin Valuations | 101 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Agree with above analysis
Authored by: Anonymous on Monday, November 05 2012 @ 06:13 PM EST
I think your analysis of the situation is fundamentally correct. It certainly
would explain many anomalies in the IT sector, particularly the behavior of many
American stock exchange listed companies.

[ Reply to This | Parent | # ]

Round Robin Valuations
Authored by: Anonymous on Tuesday, November 06 2012 @ 04:40 PM EST
Hey, there is really something to this!

During the 'tech boom' the Australian tax office changed the accounting rules
with respect to IP to 'bring them into line with international standards'.
Before they changed the rules, IP expenses (outgoings, i.e. real cash expenses)
were considered costs (liabilities) on a company's balance sheet and tax forms.
After the changes, those expenses were to be shown as 'assets', which is clearly
the opposite of business realities.

One effect of this was that small to medium enterprises immediately cut back or
eliminated licensing and patent applications - or even patent renewals (which
are expensive). I suspected at the time this was to give further advantage to
large foreign multinationals. Now I realize it gives a certain set of them an
(ultimately infinite) advantage for accounting purposes (selling of stock and
borrowing).

Think about it, the 'money' (book keeping entries) they have coming in from IP
licensing is shown as earnings, but the 'money' they have going out in IP
royalities is shown as an increase in assets! The book value of every company
involved in this round-robin scheme increases toward infinity even in the
complete absence of any actual sales. Nice work, if you can get it!

[ Reply to This | Parent | # ]

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