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Post by winstonsmith on Nov 4, 2020 16:50:27 GMT -5
Does anybody know how this long term liability gets treated in the upcoming years? This has got to be one of the bigger blunders that MNKD made thinking they needed a shirt load of insulin before demand or lack thereof even was established.
Recognized loss on purchase commitments — long term $84 million
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Post by matt on Nov 4, 2020 17:30:32 GMT -5
Generally LT liability of this nature is treated as a reserve. The expense hit has been taken so when excess inventory is actually discarded it is charged against the reserve rather than the income statement. However, the auditors will not let the company write the inventory off until it is actually disposed because that would open up all sorts of possibilities to game income in future quarters. Thus they can book the expense now, but so long as the physical inventory remains theoretically useable both the asset and the liability remain on the books.
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Post by winstonsmith on Nov 4, 2020 19:00:13 GMT -5
Generally LT liability of this nature is treated as a reserve. The expense hit has been taken so when excess inventory is actually discarded it is charged against the reserve rather than the income statement. However, the auditors will not let the company write the inventory off until it is actually disposed because that would open up all sorts of possibilities to game income in future quarters. Thus they can book the expense now, but so long as the physical inventory remains theoretically useable both the asset and the liability remain on the books. Thanks so much Matt |
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