As promised in the previous article, I have looked through Somero's accounting policies going back to the 2009 accounts to assess them for consistency and to look for any abnormalities in general. I am pleased to say that there is little to report and as such the majority of this article will be used to have a quick look at Somero's current balance sheet instead.
Historical Accounting Policy
I think it is safe to say that the accounting policy disclosures have literally been copy and pasted from year to year, with the exception of a couple of changes in formatting. Policy has not just remained consistent but, as far as I can tell, is completely unchanged since at least 2009. I have not looked back any further than that but feel the value added in doing so would be limited. I am really satisfied to see that the company has simply adopted a conservative, 'off the shelf' type of accounting policy and has committed to consistently reporting within that framework. You would expect nothing less from what is, essentially, quite a simple business and any changing policy or unusual accounting for revenue in particular would have been a huge red flag for me. From our perspective as investors, this makes year on year comparisons incredibly simple and gives us added faith that the management team are happy to report the results of the business as they are, whether good or bad.
Liquidity
With little more to say on the matter, I will move on to Somero's balance sheet now. All in all, I am quite impressed and the balance sheet appears strong. With 20% of total assets in cash, and 61% in current assets as a whole, the position appears to be quite liquid. You may think, at first, that the increase in debtors and inventories is a sign of trading weakness (indeed, it sometimes is), but given the enormous growth in revenue over the same period I think that the increase is not at all unreasonable. A current ratio of 3.27 and a quick ratio of 2 add further weight to the idea that the company is highly liquid and that it shouldn't have any problem at all in meeting it's short term liabilities.
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