Setting up a joint venture with Ports of Auckland has led to a higher than expected profit prediction for the Northland Port Corporation.
Last month the Port Corp announced a predicted profit of $4.5 million for the 15 months to the end of June 2003, but that surplus figure has been increased to more than $7 million, company chairman Mike Daniel said.
Mr Daniel said since the earlier profit indication was given to shareholders, the company's associate, Northport Ltd, had established a joint venture agreement with the Ports of Auckland.
The agreement is to form a new company, North Tugz Ltd, which will provide marine towage services on the Whangarei Harbour.
The accounting gain from the deal would give about an extra $2.2 million to the Northland Port Corp's profits.
"With this inclusion and reflecting ongoing positive trading conditions, the company's anticipated profit for the period to June would likely now be in excess of $7 million," Mr Daniel said.
He said the gain in profit resulted from the accounting treatment of the formation of the towage joint venture which was necessary to comply with the relevant accounting standard.
Mr Daniel said the company had reluctantly complied with accounting standard FRS 25, which insists that the gain arising from the "paper profit" be recognised through the profit and loss account to be reported as earnings.
"It is difficult to understand the authors of accounting standards (to be) so unflinching in their determination to recognise a profit resulting from a non- cash transaction between related parties, which in turn creates a large goodwill item to be written off in the newly-formed company," he said.
"Neither item is recognised as assessable or deductable by the Inland Revenue Department. In the 80s such transactions were variously and disparagingly described by the profession as paper profits, created with mirrors and carried out by companies keen to inflate profits in order to elevate the share price."
- NORTHERN ADVOCATE (WHANGAREI)
Northport raises profit forecast
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