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assets shown on the balance sheet for FY 1984 was $26,228. To
the extent that the balance sheet may have understated the amount
that could be realized upon the sale of the subsidiary or its
assets by more than $26,228, a portion of the intercompany debt
could have been recoverable.
WFGI's auditors opined that in the event that the French
subsidiary had been liquidated at the end of FY 1984, it would
have incurred additional liquidation liabilities of approximately
$200,000. Assuming this estimate to be correct, any
understatement of asset values on the balance sheet would have to
have been very large in order for sale of the subsidiary's assets
at the end of FY 1984 to have yielded enough to repay any of the
intercompany debt. Prompt liquidation, however, was only one of
the scenarios contemplated by WFGI's officers at the time, and
the least desirable. During and after FY 1984 they were actively
promoting the sale of the French subsidiary or the group as a
whole. There was sufficient expression of interest from
prospective buyers to support a reasonable expectation that
liquidation could be avoided. To have assumed that the
additional liabilities estimated by their auditors were
inevitable would not have been consistent with the expectations
driving the marketing efforts.
There are reasons to question whether the financial
statements accurately reflect the capacity of the French
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