Author Topic: SYTE - Enterprise Diversified  (Read 141754 times)

Sportgamma

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Re: SYTE - Sitestar
« Reply #480 on: August 12, 2018, 12:08:01 PM »
Not really on topic, but I think this is the first time that I come across a filing where a business segment is recording negative revenue. It seems kind of silly that asset managers have to accrue performance fees on the income statement like that.

If an investor would pull out of a fund at a loss, it's not like the asset manager would have to pay the investor the negative performance fee. Here's a question: If an investor pulls out at a loss, does the asset manager record revenues as the negative performance fees are wiped out of the accrual fees?
« Last Edit: August 12, 2018, 01:51:43 PM by Sportgamma »


John Hjorth

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Re: SYTE - Sitestar
« Reply #481 on: August 12, 2018, 12:21:48 PM »
Sportgamma,

It's most likely a consequense of a [x + y] fee agreement with the limited partners involved. While using accrual accounting, this may be a logical consequense in a given quarter [it is for 2018Q2 isolated, not for 2018H1 here], related to x, from an accounting perspective.

Interesting question. You're very observant.
« Last Edit: August 12, 2018, 12:27:43 PM by John Hjorth »
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Tim Eriksen

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Re: SYTE - Sitestar
« Reply #482 on: August 12, 2018, 01:16:00 PM »
The negative revenues is due to the large investment in the Alluvial fund declining during the quarter.  Instead of being reported as other income it is reported under Asset Management segment along with management fees.  While a negative quarter may happen in the future due to inventive accruals, Alluvial had not surpassed the 6% hurdle for this year.

Sportgamma

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Re: SYTE - Sitestar
« Reply #483 on: August 12, 2018, 02:46:55 PM »
The negative revenues is due to the large investment in the Alluvial fund declining during the quarter.  Instead of being reported as other income it is reported under Asset Management segment along with management fees.  While a negative quarter may happen in the future due to inventive accruals, Alluvial had not surpassed the 6% hurdle for this year.

Hi Tim,

Interesting. Thank you for the clarification. You would think that even though there is a fee sharing agreement in place, losses and gains from the seed investment itself would be accounted for as comprehensive income. I assume that they will pay capital gains taxes on any realized profits from the seed investment, right? Just thinking aloud here.

Tim Eriksen

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Re: SYTE - Sitestar
« Reply #484 on: August 12, 2018, 09:20:11 PM »
The negative revenues is due to the large investment in the Alluvial fund declining during the quarter.  Instead of being reported as other income it is reported under Asset Management segment along with management fees.  While a negative quarter may happen in the future due to inventive accruals, Alluvial had not surpassed the 6% hurdle for this year.

Hi Tim,

Interesting. Thank you for the clarification. You would think that even though there is a fee sharing agreement in place, losses and gains from the seed investment itself would be accounted for as comprehensive income. I assume that they will pay capital gains taxes on any realized profits from the seed investment, right? Just thinking aloud here.

It used to be that way but not now due to the new tax rules.  Pretty sure US companies do not get a lower rate on capital gains than income.   

globalfinancepartners

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Re: SYTE - Enterprise Diversified
« Reply #485 on: August 13, 2018, 05:58:12 AM »
Tim is right.  Same change that affected Berkshire's reporting starting in January.  Not sure it had anything to do with the tax bill per se, but was a change announced to GAAP before the tax bill passed.  I think it was telegraphed as early as 2016.

And yes, corporations pay the corporate income tax rate on capital gains.  There are different rates on dividend income depending on what percentage of the investee they own, what type of corporation the owner is (insurance company, etc), and other complications.