Sino Grandness

[Aldar]

depreciation doesn't really affect cashflow as the depreciation expense is always "removed" from the profit before tax as an adjustment. hope that helps

Depreciation expense is a non-cash expense that is added back to net profit after tax in the computation of cashflow from operations.

BUT as it is embedded in COGS and operating expenses, depreciation affects cashflow by impacting the amount of taxes that the company needs to pay.

I don't think it has any impact in taxes payable either. Taxable profit is different from accounting profit and depreciation is a non-deductible expense.

Could you please elaborate on how 'taxable profit' differs from 'accounting profit'?

I think there's some confusion between effective tax rate (computed based on net profit after tax in financial statements) and the statutory tax rate (stated by govt) but I'm not really sure of the difference between 'taxable profit' and 'accounting profit' that you have stated.

Also could you please explain in further details what you mean by depreciation being a non-deductible expense? In the income statements, depreciation can be reported as a separate operating expense or COGS line item or it could be embedded within other operating expense or COGS line items.

Thanks!

Taxable profits are earnings reported to tax authorities in compliance with the relevant tax codes.

Some expenses are recognized for accounting purposes but not for tax purposes. For example, parking tickets, fines for legal violations etc.

In the case of fixed assets, for each class of fixed asset, different tax jurisdictions provide different capital allowances. Think of capital allowances as depreciation rates for tax purposes. In general, capital allowances claimed by an enterprise and the depreciation charged on it's P&L are not the same amounts.

It generally behaves something like this:
Profit before tax <--- P&L profit
Add non-deductible expenses
Add depreciation
Less Capital allowances and other tax credits
Taxable profit. <---- Reported to tax authorities in tax filings.

Taxes will then be assessed on taxable profits.

Thanks for the explanation.

1. Depreciation versus Capital Allowances
In my opinion, depreciation would be a close proxy for capital allowances in most cases as I have yet to see a line item for capital allowances in the cash flow statement in all annual reports.

Hence I still stand by my point that depreciation will impact the amount of taxes paid especially when you have to forecast the unlevered free cashflows of the company.

Typically I would project depreciation:
- as a % of revenue (quick and dirty method) or
- if I have the assets and capex schedule, project a depreciation schedule

2. Taxes
I understand how you derive taxes payable based on taxable profits (after accounting for capital allowances).

However, for forecasting, I also tend to project taxes payable by applying the effective tax rate or the statutory tax rate on the projected net profit before tax, with a sanity check based on historical effective tax rate.

[Clement]

Depreciation expense is a non-cash expense that is added back to net profit after tax in the computation of cashflow from operations.

BUT as it is embedded in COGS and operating expenses, depreciation affects cashflow by impacting the amount of taxes that the company needs to pay.

I don't think it has any impact in taxes payable either. Taxable profit is different from accounting profit and depreciation is a non-deductible expense.

Could you please elaborate on how 'taxable profit' differs from 'accounting profit'?

I think there's some confusion between effective tax rate (computed based on net profit after tax in financial statements) and the statutory tax rate (stated by govt) but I'm not really sure of the difference between 'taxable profit' and 'accounting profit' that you have stated.

Also could you please explain in further details what you mean by depreciation being a non-deductible expense? In the income statements, depreciation can be reported as a separate operating expense or COGS line item or it could be embedded within other operating expense or COGS line items.

Thanks!

Taxable profits are earnings reported to tax authorities in compliance with the relevant tax codes.

Some expenses are recognized for accounting purposes but not for tax purposes. For example, parking tickets, fines for legal violations etc.

In the case of fixed assets, for each class of fixed asset, different tax jurisdictions provide different capital allowances. Think of capital allowances as depreciation rates for tax purposes. In general, capital allowances claimed by an enterprise and the depreciation charged on it's P&L are not the same amounts.

It generally behaves something like this:
Profit before tax <--- P&L profit
Add non-deductible expenses
Add depreciation
Less Capital allowances and other tax credits
Taxable profit. <---- Reported to tax authorities in tax filings.

Taxes will then be assessed on taxable profits.

Thanks for the explanation.

1. Depreciation versus Capital Allowances
In my opinion, depreciation would be a close proxy for capital allowances in most cases as I have yet to see a line item for capital allowances in the cash flow statement in all annual reports.

Hence I still stand by my point that depreciation will impact the amount of taxes paid especially when you have to forecast the unlevered free cashflows of the company.

Typically I would project depreciation:
- as a % of revenue (quick and dirty method) or
- if I have the assets and capex schedule, project a depreciation schedule

2. Taxes
I understand how you derive taxes payable based on taxable profits (after accounting for capital allowances).

However, for forecasting, I also tend to project taxes payable by applying the effective tax rate or the statutory tax rate on the projected net profit before tax, with a sanity check based on historical effective tax rate.

Hi, capital allowances are not reported in cash flow statements, they do not result in any cash flow in themselves, they just reduce tax payable if larger than that year's depreciation. The difference between capital allowances and depreciation results in deferred taxes.

[CityFarmer]

A good discussion on the capital allowance, depreciation, taxable profit and deferred tax.

To add-on, I put-up links here for further exploration

Ref: IRAS on capital allowance
http://www.iras.gov.sg/irashome/page04.a...What_is_CA

Ref: A doc on deferred tax
http://www.chinaacc.com/upload/html/2013...adf253.pdf

(not vested, and learning here)

[2V.]

Did anyone notice the substantial changes in the balance sheet? Trade receivables almost $1B!!! Current inventories only $110M and cash $120M

[felixleong]

obviously most of the receivables will never be received
they just aggressively pushing earnings up
that's why the PE ratio is so low for this S-chip

fools and their money soon part ways

[jackphang]

latest quarterly report shows that Receivables seems reduced but A&P expenses was doubled up to intensify brand awareness campaign in mainland. The catalyst now is whether its a success / failure for the co. to spin off beverage division. A success will award the shareholders in good return but a failure may punish the shares price to drop.

[Tiggerbee]

The analyst report from Kim Meng probably could have provided the excuse for short sellers and some shorter investors to short or sell the stock.

(Vested)

[ValueMaster]

The analyst report from Kim Meng probably could have provided the excuse for short sellers and some shorter investors to short or sell the stock.

(Vested)

Why are u vested?
don't u think there are many red flags in this company? especially that its a S-Chip

[Tiggerbee]

Sino Grandness stock price had started to rebound on last Thur and rose above 70c since announcing its Q1 results. Seems like punters or perhaps insiders are buying the stock in anticipation of the Garden Fresh ipo. Many companies are rushing to file for ipo by end of June to avoid the tighter rules that will be implemented with effective from 1st July 2014.

Perhaps SGX should had queried Sino Grandness on its price surge on last Thur as the company had yet to provide any updates on its Garden Fresh ipo progress since February 2014.

(Vested with a small speculative position)

[heifien91]

Trading halt announced since yesterday till now. Wonder what the announcement is going to be. Pretty unlikely for them to be announcing their plans on the Garden Fresh IPO during such times especially given the riots in Hong Kong.

http://infopub.sgx.com/Apps?A=COW_CorpAn...CvfNSldVuA

(vested)