The real value of RRR assets17 Oct 2024 11:07
Nike asked about RRR assets
The assets are in the main sunk exploration costs mainly in Kenya.
The obvious question is why when we have nearly £20m of assets on the balance sheet can we not get any kind of sale for any amount over the line ?
The answer is the assets are carried at cost, when their real value is only a fraction of cost.
Get this the crux of the accounting valuation approach known as “area of interest” is the assets are worth what we paid for them in the accounts until Mr Bell himself says they are not.
So Nike the assets are not relevant in any type of solvency calculation. Excepting Soma which I have previously advised.
All relevant extracts from the accounts below
“Should the Group be unable to continue trading as a going concern, adjustments would have to be made to reduce the value of the assets to their recoverable amounts, to provide for further liabilities, which might arise, and to classify non current assets as current. The Financial Statements have been prepared on the going concern basis and do not include the adjustments that would result if the Group was unable to continue as a going concern”
“The Group adopts the “area of interest” method of accounting, whereby all exploration and development costs, relating to an area of interest, are capitalised and carried forward until abandoned. In the event that an area of interest is abandoned, or if the Directors consider the expenditure to be of no value, accumulated exploration costs are written off in the financial year in which the decision is made. All expenditure incurred prior to approval of an application is expensed with the exception of refundable rent, which is raised as a receivable.”
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