Friday, October 2, 2009

Accounting at its Finest: $17 Million 'Gem of Tanzania' Actually Worth $160

Looks like U.S. banks are not the only ones cooking their books these days. Banks penchant for holding assets at valuations far exceeding their market value has just traveled across the pond to the U.K.
CNBC is reporting that a now bankrupt U.K. company, called Wrekin Construction, has been holding a $160 ruby on its books at $17 million.
An enormous precious stone listed on a now bankrupt company's books for the value of 11 million pounds ($17.4 million) is probably not worth more than 100 pounds, British media reported Friday.
The "Gem of Tanzania," once believed to be a huge uncut ruby that one of its owners declared as cursed, was listed on the balance sheet of now bankrupt UK company Wrekin Construction as its most valuable asset and had been keeping the firm alive for years.
Valuation documents at the time stated that it was worth 300,000 pounds, but when Unwin's company Wrekin Construction went bankrupt in March, its accounts listed the gem as being worth 11 million pounds, the paper said.
But now the rock is believed to be just a large lump of anyolite, a low-grade form of ruby.
"A two kilo lump of anyolite is probably worth about 100 pounds. A valuation of 11 million pounds would be utterly bonkers," Marcus McCallum, a jewel dealer from Hatton Garden in London, told the Financial Times.
Wow! Talk about stuffing it to the creditors! And what in the world is a construction company doing buying gems? That itself should have set off auditor alarm bells.

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