2013년 11월 29일 금요일

About 'us gaap accounting standards'|Evolution of US Generally Accepted Accounting Principles - 1930 to 2004







About 'us gaap accounting standards'|Evolution of US Generally Accepted Accounting Principles - 1930 to 2004








I               am               sure               you               have               all               heard               tales               of               accountants               "cooking               the               books".

You've               also               heard               tales               of               management,               along               with               accountants,               playing               "numbers               games"               by               reorganizing               accounting               records               to               smooth               earnings.

In               some               cases,               the               changes               are               blatantly               illegal.

A               good               example               of               this               is               the               WorldCom               scandal               in               which               the               company               capitalized               line               expenses.

This               fraudulently               boosted               their               balance               sheet               by               increasing               assets.

In               addition               the               move               also               fraudulently               boosted               their               income               statement               because               there               were               less               expenses               reported.

What               if               I               told               you               that               companies               and               accountants               can               play               numbers               games               and               make               changes               that               boost               profits               regularly?

Would               you               be               surprised?

(Probably               not.)               Would               you               also               be               surprised               if               I               told               you               there               are               ways               of               playing               these               number               games               that               are               totally               LEGAL?

Yes,               you               heard               me               right.

Sometimes               a               company               can               just               make               some               changes               in               they               way               they               handle               their               transactions.

As               long               as               the               changes               they               make               are               in               accordance               with               generally               accepted               accounting               principles,               they               are               completely               legal.
               Think               about               it:               if               accounting               was               straight               forward               and               cut               and               dry,               we               would               have               no               need               for               CPAs.

I               have               a               vested               interest               in               the               need               for               CPAs,               because               I               am               one.

The               truth               of               the               matter               is               that               many               transactions               are               not               cut               and               dry.

You               actually               need               all               these               accounting               rules               and               disclosures.

United               States               GAAP               is               also               among               one               of               the               world's               more               conservative               set               of               accounting               standards.

This               means               that               typically               a               company's               profits               will               be               lower               when               they               report               under               our               standards               than               they               would               reporting               under               other               sets               of               standards.
               Take               Bank               of               America.

Last               week,               the               US               Government               told               them               that               they               needed               to               raise               $34               BILLION               in               capital.

This               directive               came               after               the               results               of               the               Bank               Stress               Test               which               tested               how               banks               would               fare               with               10%               unemployment               and               a               22%               further               decline               in               home               prices.

However,               Bank               of               America               posted               a               $4.2               Billion               first               quarter               profit.

This               means               that,               at               least               on               paper,               Bank               of               America               earned               $4.2               billion               during               the               first               three               month               period               in               2009.

Seems               like               they               are               doing               pretty               good.
               Are               they               really               doing               as               good               as               they               say?

Probably               not.

A               vast               majority               of               these               profits               are               due               to               accounting               changes.

Basically,               the               profits               are               illusionary               profits.

I               like               to               equate               this               to               smoke               and               mirrors.

Reuters               had               a               really               good               article               this               morning               that               explained               in               greater               detail               the               accounting               changes               that               banks               are               using               to               boost               their               profits.
               Basically,               the               banks               are               using               "credit               value"               adjustments               to               book               gains.

Using               an               example               in               the               Reuters               article,               a               bank               could               have               a               $100               debt               that               currently               trades               for               $60.

They               can               reduce               the               value               of               their               debt               to               the               amount               it               currently               trades               for               -               and               book               a               gain               as               an               offset.

How               can               they               do               this?
               If               you               have               basic               accounting               knowledge               you               know               that               at               the               very               basic               level,               expenses               and               assets               are               debit               balances,               whilst               revenues               and               liabilities               are               credit               balances.

You               also               know               that               debits               =               credits.

Your               books               must               balance.

To               make               the               accounting               entry               to               reduce               the               value               of               the               debt               from               $100               to               $60,               you               would               need               to               debit               the               liability               (debt)               account               by               $40.

You               would               also               need               to               have               a               credit               entry               for               $40               to               make               the               entry               balance.

Your               choices               for               a               credit               are:               revenue               or               liability.

Hmm.

I               wonder               which               one               the               bank               will               choose!
               What               can               we               learn               from               this?

Simple.

If               you               are               invested               in               the               stock               market               you               need               to               know               how               to               read               a               financial               statement.

You               also               have               to               have               a               basic               understanding               of               accounting               principles               and               what               information               you               can               get               from               reading               the               financial               statement               disclosures.

You               can't               just               take               a               press               release               stating               "XYZ               company               earned               $40               billion               last               year"               and               then               invest               in               them               without               knowing               the               entire               situation.
               I               don't               think               people               understand               the               lesson               I               just               mentioned.

As               of               Friday,               bank               stocks               were               trading               up               despite               the               fact               that               our               government               feels               many               of               them               are               ill-prepared               to               weather               the               storm.
               Resources:
               Bank               of               America               Press               Release               
               Reuters






Image of us gaap accounting standards






us gaap accounting standards
us gaap accounting standards


us gaap accounting standards Image 1


us gaap accounting standards
us gaap accounting standards


us gaap accounting standards Image 2


us gaap accounting standards
us gaap accounting standards


us gaap accounting standards Image 3


us gaap accounting standards
us gaap accounting standards


us gaap accounting standards Image 4


us gaap accounting standards
us gaap accounting standards


us gaap accounting standards Image 5


  • Related blog with us gaap accounting standards





    1. techbays.wordpress.com/   08/31/2008
      ... could be using the standard in 2014. More from Businessweek...Policy Tagged: | financial accounting , accounting rules , FASB , GAAP , IASB , US-GAAP
    2. accountinghistory.blogspot.com/   10/25/2011
      ...standards were set. Read about the history of US accounting standards in the article “ The Evolution of U.S. GAAP: The Political Forces Behind Professional Standards...
    3. accountinghistory.blogspot.com/   07/05/2011
      ... in US GAAP from 1930 to 2004. The focus...practice or in the way that accounting principles or standards were set. ...
    4. xbrlusa.wordpress.com/   03/30/2011
      ...transition? US GAAP ...XBRL US until...Financial Accounting Foundation...Accounting Standards Board...2011 US GAAP taxonomy. New accounting standards have...
    5. xbrl.squarespace.com/   04/15/2011
      ... lots of things to check out including: View the US GAAP taxonomy components by accounting standards codification . A sample/prototype application for showing you how to grab pieces...
    6. ifrsusa.wordpress.com/   03/19/2009
      ... current on global accounting standards convergence. Staying current...standards and ”stable” US GAAP standards should be...
    7. acc500.blogspot.com/   09/11/2008
      ...Standards In the US, accounting standards are set by... as GAAP - generally ...representation of the way that account transactions...
    8. xbrl.squarespace.com/   10/30/2012
      ... about the world and our knowledge of it. The US GAAP Taxonomy was built by the accounting standards setter, the FASB. It was built by...
    9. spicaalmilia.wordpress.com/   06/28/2007
      ...more likely to change their type of accounting system from one focused...more likely to use international standards (US GAAP or IAS). Considering...
    10. financialexecutives.blogspot.com/   10/04/2011
      ... Private Co Standards Improvement Council To Modify GAAP For Private Co’s...also: Plan to Simplify US Private Company Accounts by Helen Thomas in the...



    Related Video with us gaap accounting standards







    us gaap accounting standards Video 1








    us gaap accounting standards Video 2








    us gaap accounting standards Video 3




    us gaap accounting standards































    0 개의 댓글:

    댓글 쓰기