June 22, 2018

House Lannister’s Balance Sheet (Unaudited) Isn’t Looking So Hot

On April 24th, Game of Thrones premiered its 6th season on HBO and fantasy literature nerds everywhere shook their fists in the air at George R.R. Martin.

For those of you who imagine me to be a duplicitous ‎villain not worthy of the Mother’s mercy, you won’t be surprised to learn that House Lannister is where my loyalties lie. I don’t have time to get into it here, so save your breath.

What we will get into is this House of Lannister Balance Sheet and its footnotes that was compiled by FloQast. This is the first financial statement that I’ve seen out of Westeros and since House Lannister is the wealthiest (some say otherwise), it seems like a good place to start as any, even if it’s only a compilation. Take a gander:

As you can see, House Lannister’s financial position is looking pretty dire. There’s liquidity trouble, monster debt and cratering equity. It’s a classic story of everything going wrong all at once. The gold mines are not producing like they once were so naturally, there’s less gold on hand. The lack of mining production has also resulted in a hefty write-down of their property — including gold mines and Casterly Rock — which is explained in Note 9. That’s all made far worse by the Iron Bank of Braavos calling in 10% of the note due, explained further in Note 14.

And just in case your professional skepticism alarms are screaming at you, FloQast submits quite a bit of evidence for you to use in case you feel like applying some audit procedures:

For audit purposes, here are many of the facts we used from the show to drive our calculations. Check out the Game of Thrones wiki if you want to go to the next level.

  •     100 Gold Dragons can buy 12 barrels of expensive wine
  •     The Lannisters maintain a 60,000 troop army
  •     Their gold mines once produced a ton of gold and are no longer producing
  •     The Lannisters control large portions of the Westernlands [sic]
  •     In Season 1 we learn the Lord Baratheon is 3M Gold Dragons in debt to the Lannisters
  •     Tyrion Lannister states they owe millions of Gold Dragons to the Iron Bank of Braavos
  •     The Iron Bank has called in 10% of the principal balance
  •     The Lannisters only have enough gold to cover half of the requested payment
  •     The Lannisters say “A Lannister always pays his debts” a lot…

Personally, I feel like an audit would be a fool’s errand as there would certainly be a scope limitation on a lot of the Lannister assets. However, considering the obsession level that some have with the show, there may be enough evidence to provide some level of assurance. A review, perhaps? 

In any case, who’s to say they won’t turn things around? It’s only one new gold mine away from a serious windfall of liquidity. But also, by the end of Season 4, it’s clear that Tommen Baratheon — son of Cersei and grandson of Tywin Lannister — will wed Margaery of House Tyrell. I’d think that that this would be disclosed as a subsequent event, however, there’s no guarantee that the Lannisters will be able to tap into the Tyrell’s vast wealth, so perhaps they opted for a conservative presentation here.

In any case, I’m sure some of you will have opinions and analysis on this. Enjoy.

[FloQast]

Earlier:
Here's Your Authoritative Guide for Likening Game of Thrones to Public Accounting

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Kroeker Gets Cranky With the AICPA’s Private Company Accounting Ideas

Apparently SEC chief accountant James Kroeker does not appreciate the AICPA’s disapproval of the FAF’s new proposal to set up a Private Company Standards Improvement Council, calling the disapproval “a clear threat to the independence of the FAF.”

Accounting Today has the entire story but the short version is that Kroeker went off at Monday’s Standard & Poor’s Accounting Hot Topics Conference in New York, calling the AICPA’s resolution “egregious.”

In case you forgot, at last month’s fall meeting of AICPA Governing Council, members overwhelmingly approved a resolution that sent the Financial Accounting Foundation (FAF) a strong message: either FAF moves to adopt the Blue Ribbon Panel on Standard Setting for Private Companies’ (the Panel) recommendations for a separate board— which is the AICPA’s preference— or the AICPA will consider other options.

At that time, the AICPA made it clear that if FAF continued to pursue its current proposal, the AICPA board of directors would look at other solutions for addressing the needs of private companies. This could include creating a separate standard setting body to develop private company generally accepted accounting principles (PCGAAP) or a comprehensive private company-specific basis of accounting that would deliver meaningful, lasting improvement to private company financial reporting consistent with the Panel’s recommendations.

Maybe Kroeker should go hang with the AICPA and cuddle up to watch the upcoming webcasts that outline FAF’s proposal?

We’re not sure why Kroeker is so butthurt, nor why he would dare take on 350,000 CPAs by calling their wishes “egregious” but that’s a different matter entirely.