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  "documentTitle": "Chinook Therapeutics Inc (KDNY)",
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  "authorName": "Carson C. Block",
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  "presentationDate": "2023-06-07 00:00:00",
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  "notes": "The slide highlights a discrepancy in accounting treatment between two joint ventures to suggest financial manipulation.",
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      "text": "The application of fair value accounting for the SanReno JV is a convenient mechanism by which Chinook can inflate its revenues and decrease its expenses, minimizing its near-term losses and setting itself up for potential future profit inflation.",
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      "text": "The $41.2 million valuation for SanReno, equaling approximately 25% of the non-current assets, makes the balance sheet appear larger.\nThe fair value method avoids recognizing proportionate losses.\nThe fair value method avoids disclosing details about SanReno’s financial performance, e.g. cash, total assets and equity, revenue and profit, thereby preventing Chinook’s investors from seeing that SanReno had little to no operations during the reporting years 2021 and 2022 – while Chinook booked $44.4 million of total revenue from the joint venture.",
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      "text": "The Sairopa JV, where Chinook holds a 36% stake, stands out in sharp contrast. There, Chinook recognizes it has significant influence and reports the JV as an equity investment, including its share of losses. The benefits of treating SanReno as an unrelated party and valuing the investment at fair value are obvious:",
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      "text": "The application of fair value accounting for the SanReno JV is a convenient mechanism by which Chinook can inflate its revenues and decrease its expenses, minimizing its near-term losses and setting itself up for potential future profit inflation. Chinook and its partners on the SanReno board benefit as SanReno’s cash and non-cash transfers to Chinook are counted as Chinook’s income and profit.",
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      "kind": "paragraph",
      "text": "f. Extent of ownership by an investor in relation to the concentration of other shareholdings (but substantial or majority ownership of the voting stock of an investee by another investor does not necessarily preclude the ability to exercise significant influence by the investor).",
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      "text": "As of December 31, 2022, we own a 36 % interest in Sairopa. We determined that we have the ability to exercise significant influence over Sairopa but do not have a controlling interest. Therefore, the investment in Sairopa was accounted for using the equity method. Judgment regarding the level of influence over each equity method investment includes considering key factors such as ownership interest, representation on the board of directors, and participation in policy-making decisions. — Chinook 2022 10-K pg. 113",
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      "text": "57 Chinook 2022 10-K pg. 113, “As of December 31, 2022, we own a 36 % interest in Sairopa. We determined that we have the ability to exercise significant influence over Sairopa but do not have a controlling interest. Therefore, the investment in Sairopa was accounted for using the equity method. Judgment regarding the level of influence over each equity method investment includes considering key factors such as ownership interest, representation on the board of directors, and participation in policy-making decisions.”\n58 Chinook 2022 10-K pg. 83",
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