Wally Findlay Galleries International, Inc. and Subsidiaries - Page 23

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          lease would have been $289,050.  If at the end of FY 1984 WFGI's            
          officers had believed the lease to be worth about $250,000 at               
          current exchange rates and they had correctly predicted the level           
          of exchange rates as of September 30, 1987, when the lease was              
          ultimately assigned, they would have expected the disposition of            
          the lease to yield $378,000; if they had anticipated that the               
          exchange rate would return to its historic levels, they would               
          have expected approximately $100,000 more ($464,200 at 5.0 FF per           
          U.S. dollar).                                                               
               Exchange rates also affected the French subsidiary's ability           
          to repay the intercompany debts out of current cash flows.                  
          According to the consolidated financial statements for the Wally            
          Findlay Group, the French subsidiary's cumulative loss on                   
          currency exchange transactions between FY 1981 and FY 1984 was              
          $562,000, a loss of repayment capacity corresponding to more than           
          half of the intercompany account balance by the end of FY 1984.             
          At the rate of exchange prevailing at that time, to pay off this            
          balance required FF 9,854,270.  If the franc returned to a level            
          of 5.0, only FF 5,307,125 would have been needed.  These                    
          numerical exercises are intended only to suggest how important              
          exchange rate expectations would have been for a reasonable                 
          determination of the collectibility of the intercompany debt.               
               There is no evidence that the officers of WFGI incorporated            
          any explicit exchange rate forecast into their assessment of the            





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