Commsoft defends ASX query

On Friday Commsoft announced it had written off more than A$4 million in bad and doubtful debts, and reported an operating loss before abnormals and tax of A$2.4 million.

In its query the ASX has referred to an announcement last December headed "Commsoft Right on Target at Half Year", in which the company said it was achieving average compound revenue growth of greater than 30% per quarter.

Although the company had made a A$700,000 provision for bad and doubtful debts, CEO Geoff Wilding said in the statement that "the directors believe that the trade receivables at the balance date are fully recoverable".

The ASX asked Commsoft when it first became aware that its latest interim operating result would be a loss and, if it was earlier than March 16th and no earlier announcement had been made, why the information was not released to the market at an earlier time.

In a response to the questions Commsoft's chief financial officer has told the exchange that the accounts were presented to the board on February 26th this year, but the board questioned the level of collection of trade receivables.

"Accordingly, the directors requested a detailed investigation be undertaken in recognition policies. That investigation was completed last week and the results were then presented to the directors," says Mr Duncan.

"As a result of the investigation, the directors resolved to adopt more aggressive and conservative provisioning for doubtful debts. The provision now in place is $4,208,000."

Mr Duncan says until the results of the investigation were received, the Commsoft board did not have sufficient information to decide whether an adjustment needed to be made to either the provision for doubtful debts or the revenue recognition policies.

"Therefore, in accordance with the ASX Guidance Note on continuous disclosure, disclosure was not required until the relevant information was obtained last week."

Mr Duncan says the company first became aware of its operating result for the interim period shortly prior to the announcement last Friday.

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