THE SOUTHLAND FROZEN' MEAT CO.'S BALANCE-SHEET AND RESERVE ACCOUNTS.

Southland Times, Issue 17655, 12 February 1916, Page 3

THE SOUTHLAND FROZEN' MEAT CO.'S BALANCE-SHEET AND RESERVE ACCOUNTS.

To the Editor. Sir.—As Mr J. K. Watson's letter of 10th in your issue of to-day lias not left me the last word as he said, I must reply shortly. Referring to the Bank of Australasias liquid Assets, Air Watson states that they and a .Reserve Fund are not s;. nonymous terms. It is hopeless to argue with a man who holds these views in this ease, as liquid Assets are a Keserve Fund and tlie very best too, therefore it is not neeessary tf> create another; but at the present time the Company has not got these liquid assets so the position lias to lie faced. The flank very properly argues Hint if its hank fails, every other hank will fail toil, and the whole of its premises in Australia, .New Zealand, and London (and the others too, of course) worth now as a going concern £ 1 .ILIO.OfIO would not lie worth more than ffh,:;:;:; Ss Sd, down to which ligure they have written it in their balance-sheet. “Shareholder" in the last paragraph of his letter of Oth also in your issue of to-day, hits the nail on the tiead when lie says "Why did the Company write down its Capital? (many' years ago). Simply because it was lost." .Inst so, ,\ow ten years ago I stated that the Southland Frozen Aleat Company (or any other company) would be quite justilicd in again writing up its Capital if a succession of good years of trade returned and were likely to remain, provided that the assets ns a going concern were of fair market value at the time.

Well, let us suppose that that time bus now come, seeing that the present balance-sheet shows an earned profit of over £20.000 and that the property, plant, buildings, machinery, etc., etc., are worth the £123,712 His Id shown on the credit side of the balance-sheet; why not write up the Capital by making a present of the sum of £35,239 stated as a reserve on the debtor side to the present shareholders (they are entitled to It) in the form of one fully-paid-up share without any further liability for every two shares they now bold, making the total paid-up Capital (leaving out shillings and pence) £106,000 instead of *68,000?

The financial position and liability ,would not be one penny the worse, but If the shareholders are wise they will from now onward set aside yearly out of earned profits—after writing down reasonable depreciation and paying a reasonable dividend —such sum as they can afford —presuming that additions, alterations, repairs, etc., to plant and buildings are paid for out of revenue and debited to charges account —and invest it in gilt-edged securities bearing Interest, but liquid enough to easily raise money on at short notice If needed. They can call it a Reserve Fund or not as they please. The credit side of the balance-sheet will soon show what it is, and that the term liquid assets and reserve funds are synonymous, notwithstanding Mr .1. E. Watson to the contrary. This is beyond dispute. I don't ask or expect the shareholders to act on my opinion only, or even that contained in the last paragraph of the letter of "Shareholder,” which is very similar to my own: but I do say in all earnestness and with the best wishes lor the future welfare of their Company, ftet rid of the objectionable and misleading item ‘‘Reserves” on the debtor .side of the balance-sheet until they can show a liquid asset on the credit side to cover it.

I am not a shareholder but woirid be very glad to see the holders get the paid-up scrip I have suggested, because they have waited long for it, and as I have had a similar experience extending over a good many years too, I am in a position to speak feelingly on the subject. In conclusion, let me tell Mr Watson as a friend that his health is of more importance to him and his than the Company he is so interested in, and that 1 hope he will on no account attend ttie annual meeting to-morrow, and just let ethers do the work in the meantime. — •1 am, etc., WILLIAM HANDY SIDE. Feb. XL