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  1. #16311
    Speedy Az winner69's Avatar
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    Our David won’t understand a word of it .....accounting stuff not one of his strengths ...after all he is a scientist .....whose probably never signed off a set of accounts that show a profit in his life (even his previous life)
    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

  2. #16312
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    Quote Originally Posted by winner69 View Post
    Our David won’t understand a word of it .....accounting stuff not one of his strengths ...after all he is a scientist .....whose probably never signed off a set of accounts that show a profit in his life (even his previous life)
    Most employees don’t worry about the bottom line they worry about their job security

  3. #16313
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    Quote Originally Posted by winner69 View Post
    One good thing there shouldn’t be any bad debts under the new reporting standards ....cause all the bills stay in their ‘billing and reimbursement process’

    And cash burn ~$18m ...hmmm
    Next thing they'll change is the accounting period. Anything to avoid the reality.

  4. #16314
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    No worries - it wasn't flagged as price sensitive... looks like Mr Market disagrees though. Me thinks the Kaiser and Veterans bits probably would be. Interesting it couldn't wait for the reporting next week.

    Could be a good investment if hope is your main strategy.

  5. #16315
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    Quote Originally Posted by JohnnyTheHorse View Post
    No worries - it wasn't flagged as price sensitive... looks like Mr Market disagrees though. Me thinks the Kaiser and Veterans bits probably would be. Interesting it couldn't wait for the reporting next week.

    Could be a good investment if hope is your main strategy.
    Negotiations started with Kaiser in April 2017 (a year and 1 months ago) after the large scale user program was completed.

    Aug 24th 2017 : "Kaiser .... we are now nearing the end of the negotiations on a commercial agreement"

    Nov 29th 2017 : "Commercial negotiations are progressing positively with Kaiser Permanente"

    April 19th 2018 : "Making good progress"

    May 22th 2018 : "The commercial agreement continues to move forward"

    Looks to me like the Kaiser deal is dead from Kaiser's point of view but PEB keeps on hoping?

  6. #16316
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    Quote Originally Posted by blackcap View Post
    This bit is quite funny if not comical:
    o The revenue number in the financial accounts for FY18 will be lower
    than under the previous revenue accounting standard:
    Under the previous accounting standard as used by Pacific Edge for FY17
    financial results, revenue was recognised when tests were performed. This per
    test revenue was set using an average of the historic per test revenue that
    had been received from a large number of tests completed, for these patients
    to date. With the change to the new standard, where revenue for these US
    customers will be recognised when the cash is received, there will be a
    reduction in the reported sales revenue for these US tests. The change will
    mean that Pacific Edge will no longer report accrued test revenue for the US
    component of the revenue.
    Creative deceptive accounting - revenues were manufactured.

    How the heck did the accounts passed audit?

  7. #16317
    Speedy Az winner69's Avatar
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    Did I see 28 cents ...hasn’t been that low for a while?
    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

  8. #16318
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    Pacific Edge provided a good summary of the nature of revenue recognised, and the risk that significant reversals could occur in their FY17 financial statements, which coincidentally, was the year in which they recorded a $2.6m bad debt expense for the first time, reversing revenue previously recognised:

    “Revenue from Cxbladder sales is accrued at specified Gross Recoverable Revenue (“GRR”) amounts, which are considered to be estimated net realisable amounts due from patients and third-party payers for services rendered, including estimated retroactive adjustments under reimbursement agreements with third-party payers. Under the terms of various agreements, regulations, and statutes, certain elements of third-party reimbursement are subject to negotiation, audit, and/or final determination by the third party payers. In addition, laws and regulations governing Medicare and Medicaid programs are complex and subject to interpretation. As a result, there is at least a reasonable possibility that recorded estimates will change by a material amount in the near term. Differences between amounts previously estimated for retroactive adjustments and amounts subsequently determined to be recoverable or payable are included in net patient service revenue in the year that such amounts become known. Changes in prior-year estimates will be accounted for in the period that the change occurs.”

    In FY16, only a generic statement around revenue recognition was made.

    To look at how the revenue recognition works under IAS 18, an analogous situation might be a sale where the buyer has a right of return. Typically you wouldn’t recognise revenue until the customer has the goods and hasn’t exercised their rejection option – however, the door is left open to use historical data to estimate the expected return rate, and recognise revenue to this extent, with reversal or incremental recognition made once rejection or acceptance is known.

    What’s more challenging to understand is whether there was enough historical data about the behaviour of the third parties providing the cash such that the expected cash receipt rate could be reasonably estimated. Given a) the complexity of the situations in which non-payment could occur and b) the comparatively short duration of the retrospective period from which historical trends could be drawn for to apply to future revenue and in the context of an array of new third party funders, it seems challenging to accept the treatment applied was reasonable - something I think the significant later reversals demonstrate (however hindsight is 20/20). Whatever your views on this, the auditor must have been comfortable enough with the judgments made by Pacific Edge management.

    Looking ahead to the application of IFRS 15, it’s hard to know exactly how they’ve landed on “cash accounting” US revenue under IFRS 15, as this is an extremely layman definition of what’s probably a much more complicated assessment under IFRS 15, which is itself significantly more complicated, and prescriptive, than IAS 18.

    I would suspect that they might in fact be falling down on the first step of the five step revenue recognition model which is to “identify the contract with a customer”. This sounds obvious, but one of the elements of this assessment is that collection of consideration is considered probable. Given the reversals which we have now seen occur under IAS 18, it’s possible that it was not possible to realistically say (initially at least) that collection was probable with the recent history of significant reversals. This may have acted as a natural inflection point where a more conservative approach to revenue recognition could be taken without them needing to restate purely based on an accounting policy change. Where the criteria for recognising a contact are not met, the contract continually reassessed until the point at which the criteria are met, and then the next steps of revenue recognition are moved into.

    The frustrating thing is that Pacific Edge in their FY17 annual report noted that in respect of their initial assessment of the impact of IFRS 15 “this standard is not expected to significantly impact the Group”. Presumably at this stage, analysis must have been at best, preliminary. This falls against the backdrop of the FMA specifically stressing that they believed that many entities had not yet started proper impact assessments, or even thought about the impact of implementation. Unfortunately, impact assessments of standards issued but not yet effective is not required as part of interim financial statements so the FY18 interim financial statements were silent on the IFRS 15 transition.

    I find it a pretty cynical move to then provide an updated assessment seven days before the release of the FY18 financial statements clarifying that actually, there is going to be a significant revenue impact from the application of IFRS 15. There has been a huge lead in to IFRS 15, and I find it extremely difficult to believe they’ve only just landed on their final approach to revenue recognition 7 days before the release of their financial statements.

    Disc: Regrettably hold

  9. #16319
    On my rounds and just a little behind..
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    Quote Originally Posted by winner69 View Post
    Did I see 28 cents ...hasn’t been that low for a while?
    Hasn't been below 30c since late 2012

  10. #16320
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    Quote Originally Posted by winner69 View Post
    Did I see 28 cents ...hasn’t been that low for a while?
    Has it ever been that low? My 5 year chart shows 31 as the low but I guess before 2013 it may have been lower? All this talk about tests being revenue and putting a $ figure on them when no $ is actually coming in may have spooked the market for a bit. But as DD says, they are on track and all is well. Should be a good buy sometime.

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