You'll have to explain this one slowly. FR have lost 130million protecting their share portfolio but this is OK as they may be able to declare any rise as profit at some future date. Sounds a little thin to me.
Ok my friend
FR will originally have the value of the investment in EI shares in FR Balance sheet at overall price they bought at on stock exchange.
Valuation always known because you find out share price and they have to state number of shares held. Now they record it at its Current value based on share price on a particular day.
If share prices rises then you can state increase in value in Reserves (profits etc from previous years) NOT in Yearly Profit. This is a way to stop companies to fiddling a Years profit by messing with another companies share price to go get them to go up just as its year end is reported. Guinness takeover of Distillers in 80's was along this line but with different circumstances.
If share price collapses as with EI and likely never to recover (thats a judgement call) you have to include the drop in value in calculating the Yearly Profit as Loss in Value of the investment in year it occurs, FR having put 93 Million already as a loss and as suggested probably 130 Million in Q4. If rises again you put positive back into reserves never in yearly profit. Just a way to prevent companies fiddling profit....think it dates back to Robert Maxwell in the 1970's.
Reality is this happens all the time as many companies own shares in others.
Cash or no cash they are 130million less well off facing declining consumer demand and all these new aircraft to pay for. I appreciate your defending Mr O'Leary but are you sure he hasn't just screwed the pouch royally?
Its only important if a company were going to sell the shares and as they are already paid for then the drop in value has no impact on cash a company has.
Kind of like your house going up in value or down in value it has little impact if you paid in cash for it and not thinking of selling it......you no richer or poorer depending on what the value is month by month, you may feel richer or poorer but until sell it has no impact.
Could impact if company needed to sell shares to get cash but loss in value already reported so you know roughly what they would get..
Apologies if make it sound too easy but just trying to answer and have revised it given Aloue comments..