TheGrandWazoo
Veteran Member
There is that reason but there's another (linked) reason as well why zombie firms persist.GrandWazoo - my understanding of accountancy is rather more basic than yours, I think you have answered an important question, I have been puzzled for some time why for instance, First South Yorkshires annual accounts have shown a loss for several years (there are other examples around the country), clearly not just a short term 'blip'.
I guess political sensitivities play a part too, however it looks like the looming end of covid support will force operators to make (or at least threaten) service cuts, cynics might say provide an acceptable reason?
I used to work for a large business that had a subsidiary that was losing £5m a year. You'd close it down except the exit liabilities (e.g. redundancy, asset writedowns, property dilapidations - the cost of restoring buildings back to the standard that the landlord had initially leased them at, etc) were £40m. For some years, the CEO simply didn't want to face into that bad news. Only when a new CEO came around was a sale agreed at a knock-down price, with a consequent goodwill writedown of £30m but he had the justification that it was the old regime and he was sorting it out.
Remember when First finally decided to get shot of Greyhound, they had to face into a goodwill writedown (twice) and it cost Tim O'Toole his job.