SKE (ASX) Ann: Skilled Group to be acquired by Programmed

Originally posted by craft ↑

"SKE = [(PRG - $0.115) x 0.55] + $0.25"

Question please Madamswer or anybody that knows the answer.

When it comes to accounting for the business combination in PRG’s books will the purchase consideration be based on $2.82per PRG share or as the div was already declared and payable before settlement will it be the ex-div value of $2.705??? or some other figure altogether?
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On the issue of unusual outcomes from business combination accounting, I noticed SKE has written of over the last two reports all $4,638,000 contingent consideration on the Broadswood purchase, effectively sending that amount straight to bottom line profit. One wonders why they haven’t correspondingly impaired the goodwill created via the business combination accounting of the said contingent liability?? I guess we are expected to miss the capitalisation of thin air to produce statutory profit in a particular period and of course they don’t call this thing out as an adjustment. Yet when they finally impair the goodwill you can bet the adjusted profit figure ignoring the “one off – non cash” write off would have been the figure being marketed.

I guess it won’t matter now – It will all be lost into the PRG business Combination accounting. Hope they are more transparent then SKE management.

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Craft,

I think it is impossible to know for certain at exactly what carrying value PRG will account for the acquisition of SKE in its books, because but if I was to hazard a guess I'd say that it would have to be on the ex-dividend (i.e., PRG's dividend) basis.

But then there is also the adjustment that would need to be made for whatever final dividend (ordinary and/or special) the SKE board decides to declare because, as you know the cash consideration payable by PRG is to be diminished by any such dividend(s).

So I 'm afraid you are trying to solve n equations with n+1 variables.

As for the contingent consideration write-off, are you sure it hasn't simply been the disbursement of the consideration in the periods you are reviewing that has reduced the deferred consideration balance? Which would make the absence of goodwill impairment consistent with acquisition accounting practice.

But you are right, it will all become academic in a few months' time.