E&Y reasoned this as it creates an exception to the general rule of reserving for expected future product returns at the gross sales price and deferring the recognition of an equal amount of revenue. This justification is invalid. The company’s customers are not “ultimate customers,” but are wholesalers that sold their product to retailers. In addition, Medicis’s returns were not returns of products in exchange for products of “the same kind, quality, and price,” but of unsalable product for
Some information may be reliable such as the historical cost of an asset 20 years ago, but obviously it won’t be relevant because there is more recent information from 20 years ago. Conversely, information, such as forecasts of future profits, may be relevant but cannot be measured with an acceptable degree of reliability to be included in general purpose financial reports. What are Accounting Standards? The AASB accounting standards are a set of rules that companies listed on the
Thus, J&L’s operating margin was exposed to the volatility of fuel prices. In order to stabilize operating margin, J&L has two options. One is to enter fixed-price contracts with its fuel suppliers, however, it does not work, because fuel suppliers tend to walk away when fuel prices rise and J&L will be left with unattractive options. The other (and the only available) option is to hedge by purchasing derivatives. Argument against hedging The most important argument against hedging this type of risk is that a corporation needs to, in exchange for hedging, (i) give up the upside of commodity prices going down (in futures, swaps and collar) or (ii) pay premiums (in options) or (iii) both.
Since NeedsSpace neither has the option to renew the lease nor the ability to negotiate for renewal, it is probable that WeHaveIt will want the premise restored back to its original condition. Hence, there will be a loss from the removal of the leasehold improvements when the lease expires in ten years. Leasehold improvements in operating leases are amortized over the shorter of (1) the useful life of the assets, or (2) the lease term that is deemed reasonably assured at the date the leasehold improvements are purchased (ASC 840-10-35-6). In this lease, the useful life of the assets is the same as the length of the lease term. Therefore, NeedsSpace should amortize the leasehold improvements over ten years.
GAAP necessitates the accounting information to contain qualitative characteristics on which stakeholders can trust. The nations of Australia, Brazil, England, Mexico, and Singapore use the International Financial Reporting Standards (IFRS) as the authoritative accounting standard (Schroeder, Clark, & Cathey, 2011). The financial statements between the US and the other nations are not comparable, in my opinion, because of the differences, overall, in reporting and recording the accounting information. A US company does have the option to generate a second set of financial statements in compliance to IFRS for users in other nations to compare the financial information. The GAAP and IFRS have similarities and differences for the financial reporting.
This is because according to Elliot (1986), it stated that historical cost assumes money holds a constant purchasing power. The specific price-level changes (shifts in customer preference and advances in technology), inflation, and fluctuation in exchange rates for currencies that happen in the modern economy cause this assumption less valid. Furthermore, historical cost does not consider the changes in price. In times of rising prices, the companies tend to overstate the profits and distribution of the profits to the shareholders will cause trouble to the company. This is because the historical cost does not
For example in traditional accounting system, waste like scrap and rework institutionalized and acceptable part of the operation but in TQM waste are not allowed as TQM emphasis on continues improvement (Hoque and Alam, 1999). Therefore, organizations may require to implement a more comprehensive costing methods such as Activity Based Costing (ABC) in order to provide more accurate information about cost in general and COQ to management (Fons, 2012). ABC initially allocates costs to the activities that are the real source of the operating cost and afterwards assigns the cost of those activities only to the services or products that are essentially enquiring the activities, so the value added and non-value added activities can be determine (AccountingCoach, 2016; Tsai, 1998). So, ABC is a multidimensional and process oriented cost measurement which supports calculating and observing of COQ created in all of company parts (Andrijašević,
Opportunity costs (amortized over ten years) are accounted because the Jell-O building and agglomerator could potentially provide future income in the form of Jell-O expansion. In the new financial evaluation, test-market expenses are omitted because they are sunk costs that cannot be recovered regardless of the final Super project decision. Additionally, overhead expenses that are related to the creation of the new Super product are included, but those expenses not associated with the project are eliminated. Because the cannibalization of
In identifying the true contribution of the incremental cash flow, several factors must be considered. First, the costs of launching and continuing to operate the project are weighed against any income that the project generates. Assuming that the initial return is greater than the costs of launching and operating the project, a state of positive incremental cash flow exists. This is the ultimate goal for the business, since it serves as a strong indicator that the project is a viable source of revenue and has the potential to be integrated into the basic operations of the company. The cash flow statement should not include interest expense or dividends.
1. What is the most compelling justification for attempting to calculate a return on marketing investment? a. The most compelling justification for attempting to calculate a Return on Marketing Investment (ROMI) is the discontent with traditional metrics, which does not allow managers to assess the future performance of their firm at any moment. While the traditional accounting methods are good to measure past performance and financial stature, it does not allow for managers to see the impact or value that marketing has on the bottom line.