Measuring “fair value” for financial reporting purposes
The balance sheet usually reflects the historic cost of assets and liabilities. But certain items must be reported at “fair value” under U.S. Generally Accepted Accounting Principles (GAAP). Here’s a closer look at what fair value is and which balance sheet accounts it affects. Fair value vs. fair market value Accounting Standards Codification (ASC) […]
Benchmarking receivables
Accounts receivable represents a major asset for many companies. But how do your company’s receivables compare to others? Here’s the skinny on receivables ratios, including how they’re computed and sources of potential benchmarking data. Starting point A logical starting point for evaluating the quality of receivables is the days sales outstanding (DSO) ratio. This […]
Create a strong system of checks and balances
The Securities and Exchange Commission (SEC) requires public companies to evaluate and report on internal controls over financial reporting using a recognized control framework. Private companies generally aren’t required to use a framework for the oversight of internal controls, unless they’re audited, but a strong system of checks and balances is essential for them […]
3 financial statements you should know
Successful business people have a solid understanding of the three financial statements prepared under U.S. Generally Accepted Accounting Principles (GAAP). A complete set of financial statements helps stakeholders — including managers, investors and lenders — evaluate a company’s financial condition and results. Here’s an overview of each report. 1. Income statement The income statement […]
How auditors evaluate fraud risks
Assessing fraud risks is an integral part of the auditing process. Statement on Auditing Standards (SAS) No. 99, Consideration of Fraud in a Financial Statement Audit, requires auditors to consider potential fraud risks before and during the information-gathering process. Business owners and managers may find it helpful to understand how this process works — […]
Evaluating going concern issues
Financial statements are generally prepared under the assumption that the business will remain a “going concern.” That is, it’s expected to continue to generate a positive return on its assets and meet its obligations in the ordinary course of business. But sometimes conditions put that assumption into question. Recently, the responsibility for making going […]
Cooking the books
What’s the most costly type of white collar crime? On average, a company is likely to lose more money from a scheme in which the financial statements are falsified or manipulated than from any other type of occupational fraud incident. The costs frequently include more than just the loss of assets — victimized companies […]
IFRS vs. GAAP: Some public companies want a choice
U.S. public companies are required to report their financial results using U.S. Generally Accepted Accounting Principles (GAAP). But, since 2007, hundreds of foreign companies listed on U.S. stock markets have been able to report financial results using International Financial Reporting Standards (IFRS) instead of GAAP. The Securities and Exchange Commission (SEC) is currently considering […]
Is annual financial reporting enough?
Businesses generally issue year-end financial statements to let investors and lenders evaluate their financial health. But proactive stakeholders — including the company’s CEO and board of directors — may want more than one “snapshot” per year of financial results. Interim statements let stakeholders know how a company is doing each quarter or month, but […]
FASB approves one-step impairment test for goodwill
In January, the Financial Accounting Standards Board (FASB) issued updated guidance to simplify goodwill impairment testing for public companies and private companies that haven’t taken advantage of the simplified reporting option for goodwill. Here are the details. The basics Goodwill shows up on a company’s balance sheet when it buys another business at a […]
