In relation to employee entitlements, even where we charge the customer a component for entitlements the employee doesn't actually receive that money until it falls due. So the money comes into our bank account and can get consumed for other things.
We protect that money by creating a "provision" account in the balance sheet. Similar to the "provision for depreciation" we create against assets. But writing off asset value into a "provision" account doesn't mean that cash is actually reserved or available to replace the asset when it reaches the end of its life.
In the same way there might not be cash in reserve to pay out entitlements if many fall due at once.
So we absolutely cannot assume that recovering entitlements in advance is any protection against a significant cash and/or debt impact in the event of substantial layoffs.
SKE Price at posting:
$1.34 Sentiment: Buy Disclosure: Held
