Overview of inventory reporting methods
It’s critical to report inventory using the optimal method. There are several legitimate options for reporting inventory — but take heed: The method you choose ultimately affects how much inventory and profit you’ll show and how much tax you’ll owe. The basics Inventory is generally recorded when it’s received and title transfers to the company. […]
Beware of accounts deceivable
More than half of financial statement frauds involve sales and accounts receivable, according to the Committee of Sponsoring Organizations of the Treadway Commission. (COSO is a joint initiative of five private sector organizations that develops frameworks and guidance on enterprise risk management, internal control and fraud deterrence.) But why do fraudsters tend to target accounts […]
Related-party transactions: Think like an auditor
Issues between related parties played a prominent role in the scandals that surfaced more than a decade ago at Enron, Tyco International and Refco. Similar problems have arisen in more recent financial reporting fraud cases, prompting the Public Company Accounting Oversight Board (PCAOB) to unanimously approve a tougher audit standard on related-party transactions and financial […]
Evaluating cyberthreats
How much does a data breach cost? The average total cost of a data breach has risen to roughly $4 million, according to a 2016 survey of IT security professionals by the Ponemon Institute (a research center dedicated to privacy, data protection and information security policy). That figure has grown 29% from 2013. The study […]
Substantial doubt: It’s a matter of opinion
Auditors reconsider the “going concern” assumption every time they audit your financial statements. When your company’s long-term viability is doubtful, it may cause the auditor to issue a qualified audit opinion. Depending on the level of uncertainty and the underlying reasons, a qualified opinion could raise a red flag that your company is under financial […]
The basics of pushdown accounting
Both public and private companies can elect to use “pushdown” accounting when there’s a merger, acquisition or other change-in-control event. What does this mean — and when might this alternative reporting method be advantageous? Understanding your options Pushdown accounting refers to the practice of adjusting an acquired company’s standalone financial statements to reflect the acquirer’s […]
What’s missing from your GAAP balance sheet?
You can’t always take a balance sheet at face value, because it may omit certain valuable assets and costly future obligations. Here are some examples of items that may not be reported on a company’s balance sheet and a closer look at the rules for recording contingent losses under U.S. Generally Accepted Accounting Principles (GAAP). […]
Could online crowdfunding work for you?
On May 16, new guidance went into effect that allows companies to raise as much as $1 million a year through regulated online portals as long as the companies have submitted annual financial reports to the Securities and Exchange Commission (SEC). They don’t have to actually register with the SEC. Such “crowdfunding” offers could be […]
Understanding the statement of cash flows
The statement of cash flows highlights the sources and uses of cash. It’s arguably the most misunderstood and underappreciated part of a company’s annual report. Here’s an overview of how this statement is organized and what the Financial Accounting Standards Board (FASB) has recently done to make it more user-friendly. Cash flows from operations The […]
