BIG (ASX) Ann: Update on USA Operations

Originally posted by toesen ↑

So what way are expenses actually account for?

This is actually the part I am spending hours daily to try and figure.

I am trying to examine month 11-12 in the life of BIG.

An order is given in month 11-12 and according to big it takes 6-8 weeks before the video is produced and another 2-3 before the editing has taken place.

So expenses to a camera crew, editing, announcer, gurus simply cannot be included in FY17 according to BIGs own words.

Now - it is unclear to me how much of the package price cost is related to the above but it sure is not anything and it is not fractional. It is bigger than that.

In that light -then the -4.2 is really 4.2 is not true.

My simple thinking is that had it been another company with no deferred revenues and no questions to ask about future costs of orders already taken then the valuation of the share would very much depend on a result being -4.2 or positive 4.2 ------so I take the same approach here.

All in all then the sky is not the limit anymore because BIG margins are simply not good enough to place a high multiple on the SP.

It doesn't make BIG a bad business - it just makes the risk/reward different.

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Well the expenses that would be deferred in normal business are expenses that have been incurred but not yet paid. A good example in any business is monthly payroll as technically it's deferred until payment on an accruals system. So with that knowledge we can determine that if big hasn't actually filmed the footage. They haven't incurred any expenseses, even though there is deferred revenue this is simply from up front payments which BIG is technically yet to earn.

As for the loss being made a profit by recognising the deferred revenue we still made a loss by accounting standards. But really does it matter if it's deferred if BIG has the cash and is allowed to spend it?

Hopefully that clears up the deferred expenses situation for everyone. It doesn't mean there won't be expenses linked to the deferred revenue it's just simply that big hasn't incurred them either on a cash or accruals basis. They will be incurred as they forfill there job