Derwent wrote:The level of loss on the P&L account will have absolutely no impact on the level of current liabilities. It will simply transfer to the P&L Reserve Account on the balance sheet. If HKR have made a loss for 2009 then it does not automatically follow that their current liabilities have increased. In the P&L account losses how much of it was non-cash items which don't actually cost the club anything such as depreciation ?.
There are 2 parts to a balance sheet, net assets and shareholders funds, which have to balance. You don't just adjust the P&L reserves (in the shareholders funds section) with no impact on net assets.
Take Rovers 2008 accounts. Loss of 447,462, negative movement on P&L Reserves, plus a £250 increase in Share capital = -447,712 movement in shareholders funds
Movement in net assets = -447,712
Increase in Fixed assets = +373,807
Decrease in current assets = -69,036
Increase in creditors = -751,983
Total reduction in net assets = -447,212
Or looking at it another way, Rovers creditors have gone up £752k to fund a P&L loss of £448k and investment in fixed assets of £373k.
Depreciation charge was £108k BTW so relatively immaterial.
Derwent wrote:The turnstile investment (whatever that is) will be capitalised on the balance sheet as a fixed asset and again will have no impact on the P&L account or the level of current liabilities. It is purely a balance sheet item - i.e. reduce cash at bank, increase fixed assets.
Rovers have only £12k cash. Therefore if they are buying say £100k of turnstiles, the double entry is Debit Fixed Assets, Credit - guess what -Creditors. Which are in current liabilities.
Derwent wrote:Current liabilities can take many forms and it isn't always a case of actually owing any money. For example, in a 3 year sponsorship deal if the sponsor paid the whole amount up front then you'd already have the cash but you'd have to include a liability on your balance sheet which would reduce pro-rata over the length of the deal - this would be in case you went bust during that timeframe and could not meet your part of the agreement in which case the sponsor would be due money back. There may also be accruals/provisions for potential liabilities which have not yet arisen and which may not materialise.
You would have the cash, that's right, but Rovers don't have any cash at bank (apart from the 12k). So if a sponsor paid up front for 3 years, that would be Debit Overdraft (Creditors) Credit Deferred Income (Creditors). So net nil balance sheet impact.
Derwent wrote:The bottom line being that from an abbreviated set of accounts without proper disclosure notes it is impossible to ascertain the things that make up the balances and therefore everyone is acting from a position of pure speculation and assumption.
There is no full disclosure of creditors, granted. But the facts are as follows. Rovers have lost (excluding the 2009 loss of £450,000 already declared by Hudgell) £1.5m since 2004 and invested £1.2m in fixed assets. Their creditors have increased by £3m over that time period. They have only a minimal cash balance.
It seems that you haven't seen Rovers accounts at all, but make the fair point that some comments are speculation. There are other sorts of information like Dun and Bradstreet reports and also the comments of the chairman in online and newspaper interviews which suggest the club is heavily indebted to its directors. As are most SL clubs.
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