From a Quindell perspective, the realisable value of the PSD was the amount paid by S&G. Hence it makes complete sense to change accounting policy for revenue recognition to a cash basis.
From a S&G perspective, the realisable value of the PSD will depend on the future cash generation of the existing 8000 files, and the capacity of the acquired division to generate future cash from new cases taken on. How much is this worth and was the cost of the acquisition, too much? Time will tell. IMO it does not make sense to change accounting policy to a cash basis, but a conservative accruals basis which has been validated by ASIC will go a long way to clearing things up. At this stage I can only rely on what management tells me and I have no reason to disbelieve them, but waiting on ASIC to give the ALL CLEAR. This puts ASIC in the spotlight because a negative finding will put a lot of pressure on the SP.
SGH Price at posting:
$3.27 Sentiment: Hold Disclosure: Held
