I could not agree more - the ethics, management style and history makes me comfortable in the view that Management is doing the right thing. This is important in a sector not known as to be a paragon of virtue, and where profits can so easily be created for a few years. As long as PDL amortisation is in the range of about 45% to 50%, I feel that the PDL value in the balance sheet is probably not inflated in the interest of fabricating higher NPAT for a few reporting periods.
However, I would still like to know how CCP actually derives its PDL amortisation.
Why do companies not simply write off the cost of each tranche of PDLs over five years, and let the NPAT flow out from that? Obviously, this could be varied for each tranche, to give managements leeway to handle some tranches differently - just as what happens with depreciation. Nobody gets upset if vehicles, office furniture and the like still have useful value years after the items are fully depreciated.
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