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  "documentTitle": "IQE plc (IQE)",
  "authorId": "51_Muddy_Waters",
  "authorName": "Carson Block",
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  "sourceTypeSlug": "short_seller",
  "sourceTypeLabel": "Short seller",
  "presentationDate": "2018-02-08 00:00:00",
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  "notes": "This is a research note page detailing forensic accounting concerns regarding IQE's relationship with CSC.",
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      "text": "We believe the accounting IQE used to avoid recognizing any loss, and the resulting non-recognition, are highly aggressive.",
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      "text": "Despite CSC having lost many millions of pounds since inception, IQE recognized no share of the loss in its financials. We believe the accounting IQE used to avoid recognizing any loss, and the resulting non-recognition, are highly aggressive.",
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      "text": "However, even if we agreed that IQE could zero out its equity investment account, we believe IQE should still recognize CSC losses because of the preferred shares it owns. IQE's view apparently is that because it has classified the preferred shares as a financial receivable, it no longer has an account reflecting an equity investment in CSC.",
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      "text": "However, as we pointed out above, £7.286 million of the contra-account seems to have been unrealized gains from licensing revenue... which we believe should not be a contra-account to an equity investment.",
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      "text": "We assume that IQE has a valid technical argument to avoid consolidating CSC, but we see this as a triumph of form over substance. In its response to ShadowFall, IQE stated that although it has significant influence on its joint ventures, it “does not have control”.",
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      "text": "Under the equity accounting method, a 50% shareholder in CSC would normally recognize its pro rata share of the loss at CSC. IQE appears to have avoided recognizing any loss by creating in 2015 contra-accounts to its £12.0 million equity investment account.",
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      "kind": "title",
      "text": "Issue 5 – We see CSC as likely non-substantive and an alter ego of IQE",
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      "text": "Accounting Issue 4 – IQE’s failure to recognize CSC losses is highly questionable",
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