Accounting MusingsPosted: February 17, 2014
Some random thoughts on accounting:
Ever want to record an asset you don’t own, revenues you won’t receive and expenses you won’t pay and not go to jail? Just do a sale-leaseback and then fail the sale-leaseback accounting requirements. The resulting accounting takes you into the surreal. It might even make you long for a new leasing standard that would eliminate all of the sale-leaseback rules.
If the direct method of cash flow presentation is so much better than the indirect method, why do the rules require you to also present the indirect method in the footnotes when you use the direct method on the cash flow statement? Shouldn’t it be the other way around?
If I can start recognizing revenue for cash I haven’t received and won’t receive unless I deliver other services in the future (under the proposed revenue recognition standard) will they finally allow me to recognize probable contingent gains for cash I haven’t received, but for which I don’t have to do anything but wait for the cash to be delivered? I mean the whole argument is we should represent unbiased economic outcomes –if I have to recognize probable contingent loses but I can’t recognize probable contingent gains, it doesn’t sound unbiased to me.
I wish users who think every lease is just a form of financing would go talk to someone who rents a house and then someone else who bought it and makes a mortgage payment. Maybe it’s me, but I think the house lessee and the house buyer think very different about their “asset” and their financing liability.
In a world of matrix reporting and real time access to reports that allow you to drill-down to the lowest level of detail in seconds, who is the Chief Operating Decision Maker and more importantly what “report(s)” do they look at so you can decide what segments you have to report?
What strange accounting results have you encountered in your career?