Continuing Case: Annual Report Project
Using the most recent annual report of the company you have chosen to study and that you have accessed online at the company’s website, identify in the first note to the financial statements (usually labeled: Significant Accounting Policies) an accounting policy that illustrates each of the following:
1. Recognition
2. Valuation
3. Classification
1.
Company name: M Corp.
Recognition:
Revenue is recognized in the following situations:
a) When persuasive evidence exists.
b) Delivery has occurred.
c) Fee is fixed or determined and collectability is assured.
Revenue for retail products are recognized when the products are shipped or made available.
2.
Valuation:
Assignment of monetary value to a business transaction is known as Valuation. GAAP states that all the business transactions should be recorded at the Fair Value.
Assets and liabilities are valued at Fair Value.
As per the Summary of “Significant Accounting Policies in the Notes to the Financial Statements in the annual report” following points can be identified:
a) Inventories are recorded at cost or market value whichever is lower.
b) Using retail inventory method in retail products and weighted average cost method in specialty products.
c) Cost method is used the distribution centers.
d) Account and other receivables are recorded at cost.
e) Fixed assets are stated at cost and depreciation is charged by straight-line method.
f) A fair value based method is used for the valuation of Goodwill, and its not amortized.
3.
Classification is a process of assigning the transactions to their appropriate accounts or categories. Following are the classification made by the company:
a) Cash and cash equivalents include cash and temporary investment with 3 or less than 3 month maturity period.
b) Temporary investments classified as cash equivalent includes the short-term market funds, time deposits, commercial papers and debt securities.
c) Short-term investments with a maturity period more than 3 months but less than 12 months are shown separately. Under the head current asset.
d) Goodwill is separately valued and classified from the other intangible assets.
Continuing Case: Annual Report ProjectUsing the most recent annual report of the company you have chosen...
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