CCP's consolidated financial statement for 2013 is now very public. Here's the discussion thread at FHC. Look at it for more than about a minute and you're going to quickly discover that CCP lost about 21 million USD in 2013. This is very unusual for CCP, which has generally been a profitable company. What happened that caused them to take such a massive loss?
Look a little deeper and you'll find that the primary hit is on the assets side of the balance sheet, specifically in research and development, which took a massive hit between 2012 and 2013. You'll find that on page 5. Without that, CCP had a great year, bringing in about 10 million USD more revenue in 2013 compared to 2012. So what happened in R&D that caused a potential profit to turn into a massive loss?
Investigating that sends you to page 6, where you discover that retained earnings and development cost both took massive hits and that's the source of the loss. That sends you to notes 12 and 16, on pages 22 and 26, respectively.
On page 22, you'll find CCP taking a 21.4 million USD "derecognition" hit. The note for that says the following:
During the year the company assessed its capitalized development assets and determined that a portion of those assets would likely not have future economic benefits. IAS 38 requires that such assets should be derecognized and removed from the balance sheet. The expense related to the derecognized assets are presented as part of research and development expense in the statement of comprehensive income.Translated into English: "We've decided that some of the code that we capitalized development costs for is no longer likely to be a future income source." As code goes from "something that a programmer is working on" to "something that's going to generate revenue for our business", you capitalize it, i.e. turn it into a capital asset that's going to generate revenue in future balance sheets. CCP is saying that the opposite is happening for some of their code.
Therefore, that same 21.4 million USD then disappears as an equity asset on page 26. This essentially "writes these costs off the books" and indicates that CCP no longer regards this code as a capitalized asset.
Do I know what's going on? Yes. Can I talk about it? No, the NDA prevents it. Do I think CCP was dumb dumb dumb to release their financials before making the appropriate announcements? YES. But I still can't talk about it.
However... search my blog for the word "capitalized" and you'll find this post. I will say nothing more, except that CCP's financial position is a lot more solid in 2014 than it was in 2011 when I wrote that.
Let's hope that CCP makes an actual announcement of their plans, and soon, shall we? Cripes.