Monday, March 19, 2018 1:24:24 PM
Yes. IF they are sold it goes to zero ONCE the transaction completes in strict book keeping terms. In prcatice, If an acceptable offer is made, the balance sheet value is the value of the offer before the transaction completes.
And after they are sold, while their value on the balance sheet goes to zero, a corresponding entry relating to the proceeds of the sale will be entered, so the overall assets will elevate by the proceeds of the sale, less the asset value listed upon acquisition. And that is what I was driving at.
Companies enter asset revaluations all the time. Upwards and downwards. Nothing wrong with it if it can be properly justified. The opposite in fact, as it is not good practice to either understate (tax avoidance) nor inflate (share pumping, creditor defrauding) the value of a companies assets. Periodic revaluations are essential to avoid this. The question is always "Can the valuation be justified? And on what basis"
But the asset in this case is effectively a lottery ticket for a draw that has not taken place yet, or a betting slip for a race that has not yet been run.
Once the draw happens the ticket is worth either nothing or the value of a prize. Until the draw takes place the ticket is worth what someone else is willing to pay for it. That may be nothing. or it may have a bookable value.
And different countries have different rules on how such contingent assets and liabilities have to be valued and presented in the accounts.
So you need an accountant and an actuuary for that, and I am neither of those things so am not qualified to say whether and how they should be listed as assets!
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