What does Origin Energy mean by “recognize non cash charges in FY 2020”. This is in their latest report to shareholders 15/7/20.
Would also like your opinion of Class (CL1), it is struggling to get ahead, 1 step up, 2 steps back and far from it’s all time high.
A: Under Australian Accounting Standards, companies are required to “test” and “confirm” the carrying value of assets on their balance sheet
Because the wholesale price of oil has fallen (and as a flow on, the price of LNG), Origin is impairing its assets by around $1.2bn. Essentially, it is writing down the value of its assets because it thinks what it can generate from them in future revenue will now be lower. They are not worth as much! Because the writedown is a ‘book’ entry, there is no impact on cash. It will however report a statutory loss because the offsetting accounting entry is a charge to profits.
With Class (CL1), has gone off the market’s radar. A bit of disquiet from shareholders and Directors. One step forward, two steps back……….
The only recent analyst cover I can find is Ord Minnett with a “buy” and target of $1.50 (current price $1.37).