Alloy Steel Inc. (fka AYSI)

[fwentz]

I asked Sam on the subsidiary acquisition why the debit was made to retained earnings rather than to assets. He responded:

"Good question. In effect when we acquired Matrix we bought an intangible asset, namely the earning potential in certain supply arrangements. Past US accounting rules would have shown the price paid as a form of goodwill on the consolidated balance sheet. Current US accounting practise (as stipulated by our US auditors who reviewed the quarterly results release) requires the price paid to be deducted from retained earning upon consolidation. As too why this should be so, you would need to pose your question to someone who has a better understanding than we do of the logic behind this US accounting standards."