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Balance Sheet
A balance sheet summarizes a firm’s financial position at “a specific point in time.” Explain why the phrase, “a specific point in time,” is important. What can change?
The phrase emphasizes that the net value of the company is shown at a specific point in time and it may change later on. The changes can be due to increase in cash on hand from profits or investors’ infusion; damaged merchandise, materials, equipment or facilities; payment of taxes or regulatory penalties.
List two or three typical assets that a business may have and two or three typical liabilities.
Assets can be cash, finished goods, collectibles from customers, etc. Liabilities can be back loans, payables to suppliers and taxes due.
(“Balance Sheet”)
Income Statement
What are COGS?
Cost of Goods Sold. All direct costs that are necessary to produce a product or render a service.
Baking ingredients
Baker’s wages
Electricity for kitchen and equipment
Rental of bakeshop
Gasoline for truck in buying ingrdients
Would COGS be different for a home based business than for a brick-and-mortar retail store?
There would usually be no costs for goods or materials in home-based businesses.
How do operating expenses differ from cost of goods sold?
Operating expenses are indirect costs that are not involved in the manufacture of goods or in the provision of services. They are usually for product development, marketing, sales and administration.
How does revenue differ from net income?
Revenue less COGS, operating expenses and taxes is net income.
(Cobb)
FASB
Provide a brief overview of the board’s mission.
The mission is to set high standards for financial accounting and reporting that will benefit investors, other stakeholders and users of financial report.
Who are the current members of the FASB? What are their qualifications?
Russell G. Golden
Previously Technical Director of FASB and partner at Deloitte & Touche LLP
James L. Kroeker
Previously Deputy Managing Partner of Deloitte and Chief Accountant of the Securities and Exchange Commission
Christine Ann Botosan
Previously, Professor of accounting at the David Eccles School of Business at the University of Utah
Daryl E. Buck
Previously, Senior Vice President & Chief Financial Officer of Reasor’s Holding Company
R. Harold Schroeder
Previously, Partner at Carlson Capital, L.P., a Dallas-based money manager
Marc A. Siegel
Previously, Director of Research at the Center for Financial Research & Analysis (CFRA)
Lawrence W. Smith
Previously, Director of Technical Application and Implementation Activities of the FASB and Partner with KPMG
(“About FASB”)
What are the key advantages associated with making the proposed switch?
It is an international standard that will facilitate international business for MNC’s and among countries. It is more flexible as it provides guidance rather than setting rules. (Rouse)
What are the major challenges associated with making the proposed switch?
The conversion is voluminous with increases in financial disclosures, internal controls, material changes in previously reported results and new metrics for business performance. There is much conversion to be done and there might not be enough professionals that have both accounting expertise and project management skills.
(“IFRS”)
Works Cited
Cobb, Janice. "A4 The Income Statement: Revenues and Expenses". YouTube, 6 Aug. 2014. Web. 5 July 2016. <https://www.youtube.com/watch?v=XmZK7HqOuuA>.
"Balance Sheet explained for Regular People!". YouTube, 22 Mar. 2008. Web. 5 July 2016. <https://www.youtube.com/watch?v=emBEVDzFwXM>.
"About FASB". FASB, n.d. Web. 5 July 2016. <http://www.fasb.org/jsp/FASB/Page/SectionPage&cid=1176154526495>.
Rouse, Margaret. "IFRS (International Financial Reporting Standards)". WhatIs.com, Mar. 2011. Web. 5 July 2016. <http://whatis.techtarget.com/definition/IFRS-International-Financial-Reporting-Standards>.
"IFRS – Converging into a Global Standard Challenges and Opportunities". KPMG, n.d. Apr. 2008. Web. 5 July 2016. <http://www.kpmg.com.br/publicacoes/audit/IFRS/ifrs_convergindo_site_ingles_2506.pdf>.
