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2.4¢ winmar resources limited

We are in the end game now, page-434

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HAC30

5,633 Posts.

479

03/02/19

17:29

Post #: 37314784
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Originally posted by 82Punter: ↑

How is anyone not involved in the management of WFE going to be able to provide evidence of the ASX shifting the goalposts in this instance??
What I can say is that in an IPO I was advising on, for the tax aspects, the company had appointed a second tier accounting firm as their auditor, which firm is a the registered auditor for many other ASX listed companies and the ASX required them to appoint one of the Big4 accounting firms as the auditor otherwise the IPO couldn't proceed. So, the ASX has been known to shift the goalposts from time to time...

"Put the JV partners hat on for a minute. Does an official revaluation above zero, suddenly create some tax problems for them as they have the plant at $0 valuation??? Does the JV partner have some type of comeback to WFE in the contract fine print, that makes the JV more expensive if there are tax implications for the JV partner??"

No it won't because the depreciation to $0 would have been done by the JV partner under the relevant depreciation rules in the DRC tax regime. Similar to what happens in Australia, when a depreciable asset is dep-reciated to $0 for accounting and tax purposes it doesn't mean that the asset is in fact worthless. All it means is that if the asset is sold for greater than it's depreciated carrying value, then the $$ above that amount is treated as income for tax purposes. The JV partner isn't selling the plant to WFE. The JV partner is contributing the plant into the JV (that is different). In any event, the JV partner's tax position is their concern and not ours.

Further, it is actually very common in business sale transactions for assets to be revalued by the purchaser upon acquisition to recognise their cost of the asset rather than the seller's depreciated value.

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Completely disagree from a tax perspective. They are contributing the plant to a new entity, of which 50% is going to have a completely new beneficiary. Depending on which jurisdiction you're in, 50 - 100% of the plant value would be a crystallised sale as part of the contribution.

WFE Price at posting: 2.4¢ Sentiment: None Disclosure: Not Held
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