Please enable JavaScript.

Coggle requires JavaScript to display documents.

Ch. 23 Notes to the F/S - Coggle Diagram

- - - - Alternative accounting methods are allowed under GAAP
        
        These choices impact items in the financial statements such as COGS and Current Assets.
  - - - The adjustment to mark STI to fair value creates unrealized holding gains and losses, which affect income.
  - - - Practices are usually Industry Specific:
        
        Manufacturing - Time of Shipment
        
        Merchandising/Wholesale- Point of Sale
        
        Construction/Long term projects
        
        Services industry; As service is provided, or over time for subscription services
  - - - Under GAAP, companies must adjust their inventory to lower of cost or market. (LCM)
        
        This rule follows the conservatism principle
  - - - Depreciation on the F/S is usually straight - line depreciation.
        
        For tax purposes companies usually use MACRS. This allows companies to record much higher deprecation.
- - - - If there is a small chance, but somewhat unlikely, the liability is only disclosed in the notes.
        
        If the chances of having to settle the liability are remote the company does not have to disclose or record a liability.
  - - - That means it is tested for impairment, but not amortized
        
        Companies must disclose extensive information about goodwill and impairment testing.
  - - - Segment reporting can help desegregate information in the financial statements.
        
        Segments might be defined by geographic area, by product line, by subsidiary industries, etc.
        
        For example a company may be doing very well in one area of their business, but struggling in another area. Segment reporting can help disaggregate data to see this.
        
        Firms are required to disclose segment information for segments or divisions for which they keep separate financial information.