Thanks tectol ... I can now see some potential in how there could be profits held on the balance sheet. Nonetheless, it is an interesting situation and although I am not an expert on European GAAP and loathe that the FASB caved on mark to market accounting, (should Canada follow suit I will give up my status of professional accountant) I can at least theorize on how this exists. Its pretty complex accounting but I would be interested in others thoughts ifthey agree.

If the average cost of the gold exceeded the lowest price from the time they acquired their entire gold holdings it is conceivable that as part of mark to market accounting would result in a writedown (unrealized loss) thus negatively affecting the profitability (debit to realized losses from gold as part of mark to market) in the year of the reduction and recognizing a credit to the balance sheet with writedown a market value of gold (credit to unrealized gain on gold sales).

Should the gold then be sold at the price equal to the revised lower price (caused on the books by mark to market). Investment sales would be creditted and cash debitted reflecting the proceeds of the sale at the lower price. The amount of gold sold would need to be reduced and there would be a credit for the original avg cost of the gold a debit for the cost of investments sold that are equal and the elimination of the balance related to the quantity of gold sold with a debit to the unrealized gold sales account and a credit affecting an account on the income statement I will call prior sales of gold.

The affect is neutral to the income statement in the year of the gold sales since a loss was pre-reconized due to the mark to market rule, since the removal of gold from the balance sheet resulted in a larger debit that the sale itself but the difference is made up from the account I called prior sales of gold. It clears the balance sheet adequately of the gold and closes the liability associated with the prior loss.

If however prior or simultaneous with the actual sale of the gold the price went equal or higher the following would happen.

Equal

a reversal of the prior loss would occur and removed from the balance sheet with a debit to unrealized gains on gold sales (the liability account) and a credit to an account I will call mark to market adjustment that affects the income statement.

This eliminates the prior loss when the value of the gold achieves amarket value once again equal to its historical cost.

no further gain could be recognized regardless of the market value of the gold that would exceed its original average historical cost.

at the time of disposition if iut occured siultaneous with it being Greater

would essentially be the same as above however the sales and cash accounts would be greater and athe remianing gain would then be realized on the P&L.

PERSONAL POSITION

I am dubious about the possibility the avg cost of the gold held was purchased anywhere close to the values of the last few years hence there should be nothing on the balance sheet recognizing any form of further potential gain as a result in a prior mark to market write down.

Any thoughts?

orgy