Every publicly traded company is subject to the same financial accounting standards, meaning these concepts have important real-world applications. The standards these companies must follow are not uniformly applied to all companies, the majority of accountants said.
In the case of these two companies, Glenwood has proven that they can do this a little better than Eads. The difference in the ending balances of total equity is simply from the differences in net income.
Net persistent income (loss) attributable to. l) i) Interest Expense - Expenses associated with Molson Coors' borrowings to finance their operations. Not part of the business of Molson Coors Long-term notes receivable - Not part of the company's assets.
Golden Enterprises uses the indirect method because they must adjust net income from accrual basis to cash basis in their statement of cash flows. The addition of depreciation expense accounts for most of the difference between net income and income from operations.
Under the percentage-of-sales approach, annual bad debt expense is estimated as a portion of net credit sales for the prior period. So Pearson wrote off £20 of accounts receivable during the year, reducing the provision account. Pearson's counterclaims provide a provision for bad and doubtful debts and expected future sales proceeds.
I believe the account aging method is more accurate because it breaks down the numbers further and looks at them in a more unique way than the sales process percentage. e). Balance 'end of year' 76. Provision for 'bad' and 'doubtful' debts. Tighter credit standards can cause managers to lose sales, so this should be avoided. An accountant should be comfortable with the balance of the allowance for bad and doubtful accounts because this is not far from the calculation of the age of the accounts (76 versus 74.19) and the percentages shown in the table used are based on historical data.
The mistakes GAC was making are especially significant under Nick's ownership because of a loan agreement with the bank that requires GAC to maintain a current ratio of 1.00 or greater. At this point, Nicki would need some sort of cash investment to increase current assets enough to maintain the current ratio of 1.00. Their loan agreement with the bank requires a current ratio of 1.00 or higher, otherwise they will be required to complete an external audit annually.
By reducing accounts receivable, GAC reduces their current ratio by reducing their total current assets. Failure to do so will overstate accounts receivable and understate inventory (current assets), thus inflating the current ratio. To bring the current ratio back to the required 1.00, Nicki would need to contribute at least $6,930 in cash to the company.
The company must decide on the depreciation method (straight-line, double-declining, sum-of-years figure). Waste Management Corporation changed their useful life numbers for their garbage trucks (along with several other deceptive practices) to change depreciation expense and therefore inflate net income. Waste Management was also able to force accounting firm Arthur Andersen to report incorrect opinions on the company's fraudulent financial statements, allowing the fraud to continue into the future.
Ultimately, both Waste Management and Arthur Andersen ended up in enough trouble to wipe out any benefits from the fraudulent activities. By managing earnings, Waste Management was able to boost the overall perception of their company's profitability. There were also four individual partners within Arthur Andersen who received additional penalties for their involvement in the waste management scandal.
However, during the closing of the deal, Construct made some mistakes that would come back to haunt them in the future. The agreement consisted of BigMix agreeing to pay for any future environmental liabilities if they arise in connection with the contamination of the land transferred to the agreement. Not only was BigMix liable for any future liabilities, the amount and likelihood of potential liabilities were unknown.
IFRS would require the recording of the liability for the same reasons as the liability in 2008. It counted as a remedial investigation and feasibility study along with other corrective actions and it was under government oversight through the EPA. Under IFRS, a contingent asset can be reported in the statements as long as the realization of the contingent asset is virtually certain, which is the case for Construct.
Rite Aid as a parent company guarantees the debt of some of its subsidiaries to allow these entities to acquire the financing they need. The first is the effective interest method, which is the more accurate of the two methods. US GAAP requires the use of the effective interest method of amortization for this reason.
Comparing these differences to the company's total interest expense ($515,763 in FY 2009), Rite Aid's argument appears to be valid as these amounts would not be considered material. Senior debts are those that are more important to the company's capital structure. I believe that Rite Aid is unlikely to be able to meet its long-term obligations when they come due.
Treasury stock consists of all of a company's own stock that it buys back from the market and holds. Under the cost method, the purchase of treasury stock is reported at cost, and all subsequent entries are reported at the historical purchase cost. When the company decides to sell the treasury shares they bought, they will credit treasury shares at the historical price and will increase a paid-in capital on treasury shares if the sale price is greater than the purchase price.
If the selling price is lower, the company will cover the loss by reducing the paid-in capital in excess of its own shares until this account is emptied, drawing the remainder from retained earnings. This means that own shares are debited at cost, and all subsequent entries are charged at original cost. Treasury stock is a contra capital account that represents a distribution to owners and is not held to increase profits.
On the same note, the returns of trading securities are related to the hope that the market price will rise after the securities are purchased. Held-to-maturity securities are those held until the maturity date and not sold in the open market. Available-for-sale securities are intended for sale after a specified time but before the maturity date.
If the value of trading securities has risen (or fallen) during the year, the company must report these gains (losses) on the income statement. For available-for-sale securities, changes in value are recorded as accumulated other comprehensive income and reported on the balance sheet. The amortized cost will be greater or less than the nominal value equal to the unamortized discount/premium and will converge with the nominal value at maturity.
Under the gross method, Groupon would record the entire amount received from its customers as revenue, and then count the amount sent to the producer/provider of goods/services as cost of sales. Using the two methods results in significantly different amounts for revenue and cost of sales. However, its website stated that, "Merchant is the issuer of the coupon and is fully responsible for all goods and services it provides to you." The SEC saw this as Groupon admitting that it was not the primary obligor in the transactions.
Gross profit percentage is a measure of how well management generates revenue from cost of sales. The $14.9 million difference is due to Groupon's use of the gross method for originally recognizing revenue, and its subsequent use of the net method when the SEC determined it was the most appropriate method for their business model . However, Groupon's website stated: "The Merchant is the issuer of the voucher and is fully responsible for all goods and services it provides to you." This statement makes it seem as if Groupon is merely an intermediary between the customer and the merchant, who appears to be the actual primary debtor who must deliver goods or services in the future.
The differences between the figures in the profit and loss account and the tax return lead to deferred tax assets and deferred tax liabilities. This creates a deferred tax liability, because the taxable income in the coming years will be greater than the book result, which will lead to higher taxes. In contrast, a deferred tax asset results from a difference that causes taxable income to exceed book income in the year of incorporation, leading to larger deductions and a smaller tax liability in future years.
Deferred tax assets are temporary differences that result in a company paying more tax in the original year, resulting in future deductible amounts. It is necessary if it is more likely than not that some or all of the deferred tax asset will not be realized. The difference between book and tax depreciation costs resulted in a deferred tax liability.
As the sponsor of the fund, the employer must decide which type of pension to offer to its employees. The risk and performance of the fund rests with the employee, as they must choose how the contributions will be invested. Interest cost - interest cost is determined by multiplying the beginning of the year balance of the projected benefit obligation and the repayment rate.
Actual pension return - the increase in the pension fund from interest, dividends and changes in the fair value of the scheme's assets. The unexpected return will be the amount that causes the net effect of the return on the pension expense to be the expected return. It is cash that comes out of the separate accounting unit set up for the PBO fund.
