KKD is still over $6? But everyone (at least almost everyone here) says it will be BK soon! WHY would anyone be buying?? And here I though we had this all figured out!!
.....Oh that's right, it's all Short covering!!
I am in a quandry why you divided the Carry forward amt by the tax rate to come up with a presumed total of operating tax losses. In fact the smaller number is not a tax credit but aready the amount of GROSS operating tax losses to carry forward which is multiplied by the tax rate to show the tax benefit. While we suspect this number will grow dramatically in the future, in the old days, the present value of NOL's was generally considered to be about 15 cents on the dollar but the rates were then 40%+ .Now I would guess about 12% and any in case of very little value in a Court proceeding. Also never had the question answered about the differences between operating loss carryforwards and capital loss carryforwards. I believe there is a distinction and its somewhat important to whatever survives KKD.
According to the tax footnote on page 57 of the 2004 Annual Report, KKD had Federal tax loss carryfowards. Assuming a 35% federal rate the carryforward would be 9,241,000 / .35 or $26,400,000.
Expense capitalization candidates in first half fy05:
Original fy04 capex budget ($55 million):
Actual fy04 capex ($83 million, exclusive of buybacks):
Anything that is money out the door in producing an asset, cost of materials, cost of labor or allocated overhead (see IRC section 263a that specifies which costs to allocate for tax depreciation) is to be capitalized and depreciated. Overstatement can occur if too much overhead or unrelated overhead is allocated, which is the line we think KK has crossed.
Now, what's to stop kkd from pounding everything under the sun into the pp&e account; this is, as I've written before, is a perfect way to hide expenses which had nothing to do with pp&e.
Given the liberal tax accounting for depreciation, it doesn't even appear that kkd would be penalized (by paying higher taxes on more earnings) by pursuing such a strategy.
Aside: Perspicuator, I'm going to have to look closely at what you've said. While I have previously written about the ability to capitalize expenses in this way, I had not considered that this might have been the principal way that they got it past the auditors.