The Lemon Fool

This is a company I have previously invested in profitably so I was interested in the recent results after the price had fallen quite a long way from its peak.

Anyway on the face of it the results were excellent and they reported a substantial increase in net profit.

However, when it came to the cashflow it was actually quite poor and the main culprit appears to be "Purchase of intangible assets including staff costs capitalised".

Now I am aware of the concept of capitalising development costs and then amortising them over their useful life but what on earth is staff costs capitalised? It's not one I have come across before.

Does anyone know?

WickedLester wrote:Now I am aware of the concept of capitalising development costs and then amortising them over their useful life but what on earth is staff costs capitalised? It's not one I have come across before.

On face of it, they have incurred the usual expenses of running the Company and then in effect pretended that they have used the money to buy assets. As you say, it makes profits look good, but doesn't improve cash flow. At sometime in the future they may incurr a stonking loss if they are forced to conclude that the intangibles are next to worthless.