There is that ancient maxim, Cui bona? to whom is it a benefit? It often makes sense to shift profit from one year to another by various means, and provisioning is one of them. In such situations, one should ask, cui bona?
Generous provisioning shifts cash outflow from a period into a later period if it reduces tax payments, so in that case the company is better off on a time-value-of-money basis. Qui bona? the company.
Management may prefer to exaggerate bad years when they would miss performance bonuses anyway, and make qualifying for a bonus in the following year easier. Also, if a bad year can be blamed on some said-to-be uncontrollable event, management can look good in the following year by time-shifting a slice of NPAT to the next year. Qui bona? management.
An incoming manager can always blame earlier management for legacy problems in his first year, and hence be tempted to time-shift6 profit to a later year. Reversing over provisioning in the subsequent year is one method of time-shifting profit. In respect to some impairments, the advantage is to reduce depreciation and amortisation of impaired assets later. Revenue recognition and other tricks can also effect time-shifting. Qui bona? management, in terms of kudos for effecting the perceived turnaround, and in terms of bonuses if their eligibility is articulated to reward the time-shifting of NPAT.
TGA's situation is not good, but it might be a bit better than it has been depicted.
Time-shifting can work in both directions, and the previous management indulged in puffing profits, and then they decamped. I suspect that those who held TGA shares, sold them before the turd hit the fan, but after they no longer were obliged to inform the market that they had changed their holdings. Provisioning was too low, goodwill impairment was too low, and the retail-profit recognition of consumer leases was shifted to being upfront, rather than the earlier spread over the lifetime of the leases. This was done, IMO, to cover up losses occasioned by a string of bad initiatives. Qui bona? the management then in control.
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