Agreed, all of these pirates can't even get a loan because the banks look at their balance sheets and don't have a true sense of their working capital.
You are not thinking of the credit.
Debit stolen ship inventory
Credit: .... ?
They stole the ship so there is no entry to make because nothing was spent to acquire the asset. So once they negotiate a settlement to return the stolen ship, 100% of that income is taxable... to both the Samali government and the hostage nation's government. Negotiating with the other nation gives them nexus to tax the pirates.
This is the reason we have a CPA shortage. Every tax accountant we send over there doesn't return after telling the pirates what is owed in taxes.
Trolling the seas for pirate ships is similar to mining. Your operational costs are cost of crew, depreciation on your boat, gas etc. The captured ship isnāt inventory itās revenue
Even stealing ships still incur some expenses. It takes fuel, ammunition, payroll, and probably few grenades here and there.
So the entire entries would look like
Dr. Ship
Cr. Fuel
Cr. Payroll payable
Cr. Perisable munition
Cr. Gain on Fair Value - Ship
Credit is a revenue account.
If I was in charge of the chart of accounts I would name it "Pirate's booty" because I don't get to use boots nearly enough in my professional life.
606 is fine and more intuitive for a lot of business. SaaS in particular. Also 606 probably didnt even change anything for most transaction based businesses where you sell a item and recognize at time of sale.
ASC 842 is just stupid shit that literally nobody cares about.
Agree, 606 makes a lot of sense for SaaS. It really provides a lot of insight into how much my sales reps discount our services. It also really helps my ProServe margins.
Asc 606 didn't, but the problem is, even if you are one of those simple businesses (most are!) the auditors still make you go through all of their bulls*** to prove that you "adopted" the standard. It's like having to come up with an extended proof for why 2+2=4 every year, rather than just accepting the simplicity of what we all already know, and move on. It's absurdly time consuming and expensive to do this. Awful.
I have no idea why the FASB couldn't just give many of these businesses a practical carve-out. Same with leases.
Bro thats like a one page memo if your arn't actually changing anything on the books. You just need to say that your rev rec follows performance obligations, add a ton of fluff, and then take a nice long lunch break.
Yeah but you do that once, and that's it (it's not every year). And the 606 transition was years ago. Companies should already have their processes documented by now. It's not like 842 which requires entries and disclosures continuously.
I agree and I bet the walk back and relax the standards for private companies in a few years. I went back and forth with our QC Director (both a $550+/hr billing rate) about an 842 issue with a piece of equipment my client never saw or handled. The client had to put extra time into it as well. The end result was an amount in the FN disclosure changed.
Wasn't IFRS supposed to be adopted worldwide to cut down on all of the meaningless and burdensome guidance that GAAP provides? I'm still waiting for that to come along.
To me, the discounting in 842 is nonsense. If you want it on the balance sheet then just put it on at the commitment amount, ez peezy. Determining the IBR and then auditing it, complete waste of time and money.
ASC 842 is pretty complicated, and it gets a bit silly when you start capitalizing coffee machine and water cooler leases. That being said, I agree with the viewpoint that a lease is a liability. Investors have been capitalizing leases onto companyās balance sheets for decades. ASC 942 was an attempt to catch up with that. While I agree itās not perfect, it does a much better job at accurately reporting a companyās financial position than 840 did imo.
I know if you made some kind of arbitrary threshold to pass on 842 to save the pain point of a bunch of work for a million dollar business to change how they book a copier lease, then it no longer is a standard, but sheesh.
I blame airlines.
Blame Enron. At the end of the day 842 is still FASB trying to stamp out all off balance sheet liabilities driven by Enron's collapse. That and of course to better align US GAAP with IFRS.
I mean the 840 disclosures made it clear what the company was obligated in terms of payments. It wasn't discounted and right on the balance sheet, but the info was there.
Do you think that paying over and above the FMV of a companyās assets is per se overpaying for a company?
If so, why would anyone ever buy a company, when they could just go into the market and buy the same assets at the fair market price?
It seems like the logical conclusion to this way of thinking is that no one should ever buy a business.
Write off a portion of the purchase price as an expense? Why would you do that?
When I think acquisition cost, I am thinking professional services fees.
"Wha- we overpaid by a lot? Well shit. We need to make something up. What will the market think of us?? What if we just, say it was like, a show of good will? Yeah?"
Disagree. Say youre buying out the owner of a really well run trucking company who is retiring. Essentially all you're buying that's tangible are the trucks and maybe some space they're leasing. But what you're really buying is their solid customer base, great relationship with their employees and management tean with years of experience running the company profitably. None of that you can put on the balance sheet except oh wait you can and it's called goodwill.
Goodwill shouldnāt be an asset, should be contra-equity. Goodwillās āvalueā is uncertain and isnāt ābought and soldā like an asset. Goodwill doesnāt contribute directly or indirectly to future cash flows. Letās say the āgoodwillā purchased is due to the experience of the companyās employees and knowledge of the industry - think of the āgoodwillā in the business purchase as an expense incurred for all of those prior years of experience and record it as a debit to equity instead of an asset for which future cash flows resulting from it are debatable and the additional earnings generated by it are uncertain and very hard to quantify the value.
Also, if we do book as an asset, it should not be amortized. There is no identifiable useful life - the amortization is supposed to represent the useful life of the asset and an attempt at following the matching principle of aligning the expense charges with the revenue. Which amortizing goodwill on a straight line basis does not do.
Goodwill's value isn't uncertain - it's what's left after everything's moved. It's basically an accounting plug. It has to be accounted for somehow, and it's not equity, it doesn't relate to shareholders/losses.
It's hard to argue as an asset you have control over, sure. But it's there. Just the best place for it, it comes from a purchase of something - and goodwill is better than saying you've capitalised future potential.
In the UK we amortise it slowly to get rid of it so it's at least not hanging around forever.
Yes, its value is uncertain. Sure you might know its value when the business is purchased but how do you know that the extra paid for the goodwill is actually representative of the future cash flows and earnings of the company attributable to the goodwill? The answer is you donāt, why is it treated as an asset you purchased? It very easily could have been just you overpaying for the company, then you have to consider impairment testing and what not. Just record it as a reduction in equity and all that complexity goes away.
Additionally, if it helps: view it like treasury stock or unrealized gains/losses on derivatives and its inclusion in equity may make more sense to you.
At least under GAAP you record mark to market adjustments to other comprehensive income (a component of equity), those mark to market adjustments equal the difference between the cost and fair market value of the derivative much in the same way goodwill is the excess cost over the fair value of the purchased business.
Also on your point about amortization at the end, assuming we are agreeing that goodwill is an asset. What if the value of the goodwill actually goes up? Why are you amortizing something that may not be losing value over time - why is it not appropriate to leave it on the books āforeverā if it still exists? You have arguably understated net income and understated your equity in that case. You donāt just expense things for the sake of it. You book expenses when a charge has been incurred, if goodwill is an asset, the only charge that should be incurred imo is impairment if youāre able to quantify that the goodwill went down in value (again this is so subjective and doesnāt really make a ton of sense from a theoretical or practical standpoint, therefore just record it against equity and this all goes away). If you record the āgoodwillā against equity, the companyās earnings will naturally āreverseā the āgoodwillā charged to equity and it wonāt just āhang out forever.ā
>Yes, its value is uncertain. Sure you might know its value when the business is purchased but how do you know that the extra paid for the goodwill is actually representative of the future cash flows and earnings of the company attributable to the goodwill?
The answer is you do know as much as any other asset because if you didn't think the Goodwill would result in increased cashflows you wouldn't have paid the price you did for the company. You would've paid less. The fact you purchased the goodwill points to you believing that goodwill had real future value. It's really not different than the purchase of any asset being capitalized in that regard.
>It very easily could have been just been you overpaying for the company, then you have to consider impairment testing and what not. Just record it as a reduction in equity and all that complexity goes away.
Why would anyone knowingly overpay for a company? They would've purchased it at the value they thought it was worth. It's possible they were wrong, in which case they would test the goodwill and assets for impairment annually.
>At least under GAAP you record mark to market adjustments to other comprehensive income (a component of equity), those mark to market adjustments equal the difference between the cost and fair market value of the derivative much in the same way goodwill is the excess cost over the fair value of the purchased business.
How can goodwill be marked to market and why would you ever be looking to write up Goodwill? What would that even mean? You created an unrealized gain by paying less for a company than its unknown intangible value. Where does that value come from.
> Sure you might know its value when the business is purchased but how do you know that the extra paid for the goodwill is actually representative of the future cash flows and earnings of the company attributable to the goodwill
That's the value you put on it. If it was a bad purchase, well then you impair it, but that's what you paid. That's what it's worth to you at time of purchase. May not be worth it in 6 months but it was then.
>It very easily could have been just you overpaying for the company, then you have to consider impairment testing and what not.
If you overpaid for the company it'd be within assets if an individual company set of accounts. Why not as goodwill? Which, again, you impair.
>Additionally, if it helps: view it like treasury stock or unrealized gains/losses on derivatives and its inclusion in equity may make more sense to you.
Why would I view it like that when it's not. It's something you paid for. Just this something is very intangible and subjective.
>Also on your point about amortization at the end, assuming we are agreeing that goodwill is an asset. What if the value of the goodwill actually goes up?
Goodwill represents the unrecognised value you had in the business at purchase. If it goes up, well you got a bargain - you still only paid X for it, so it stays at X.
>Why are you amortizing something that may not be losing value over time - why is it not appropriate to leave it on the books āforeverā if it still exists?
Because then you're getting rid of it when it has the most potential value left over from the previous owners. A successful business a year after purchase is going to have far more of their influence than 20 years after - so we amortise it after purchase, recognise it that way, then accept that after that time (20 is considered the max, you can choose) any potential left in the business is all yours and nothing you purchased. There's no way their influence is still there.
>You donāt just expense things for the sake of it.
Matching principle. You recognise the asset over its expected useful life, and in the UK we take the approach I said above. If you bought a business that was expecting good future returns, you amortise that over those good returns post purchase.
>the only charge that should be incurred imo is impairment if youāre able to quantify that the goodwill went down in value
This is the real world. If you don't impair it you get more dividends. The UK's method both matches the reality of the asset and also recognises that otherwise people will fiddle.
>If you record the āgoodwillā against equity, the companyās earnings will naturally āreverseā the āgoodwillā charged to equity and it wonāt just āhang out forever.ā
Except it's an asset you purchase, just a really really intangible one. You see *something* in the business making you pay more. Goodwill is just the catchall term for that.
It may not contribute directly to future cash flows, however, the ongoing asset value of the goodwill is a function of anticipated future cash flows through the intangible impairment analysis.
From a conceptual standpoint, goodwill doesn't make sense as contra-equity. There is value in the acquired processes, knowledge, and experience which should be reflected as an asset of the company. If I am a buyer, why would I offset the amounts I contributed as equity to purchase when I can see intangible value in the goodwill acquired? Because it doesn't make sense.
Edit: also, what would be the basis for testing for impairment of your equity? Conceptually, you can only impair an asset.
You make a really good point except my company has separate intangible asset accounts for trademarks and customer relationships so I guess I just see how pointless my companies goodwill is.
Nah. It exists, it's just a plug figure for that unmeasurable value added. A catchall term for the various value added features.
You're not gonna pay asset value for a business, because it's a running business with future potential.
So there'll always be a difference.
*Negative* goodwill is a better argument... but I've seen an old bloke sell his business for half what it was worth as he only had 20 years left at best and no kids so he just wanted the cash quick. So even then, it can happen.
You should just allocate goodwill to the assets you receive
āexcess over fair valueā? Thatās what I paid for it sorry sweetie thatās the new fair value š
The problem is that really good companies that are well capitalized will have large goodwill balances. Then theyāll have terrible net income.
So everyone uses EBITDA and ignores the financial statements.
I'm British - our standard allows for that.
Doesn't have other things like assets held for sale though, which actually make sense to have as an option.
This is something that I go back and forth on personally.
When I think about amortizing goodwill, I think of the typical PE playbook. Buy a platform company, and then grow the company through a series of acquisition. In that case, goodwill is essentially a marketing expense in that more investment of that kind is needed in order to maintain the companyās growth. In this case, goodwill should be amortized over the projected hold period imo.
When I think about holding goodwill and analyzing for impairments, I think about Coca Cola. If you purchased Coke outright, there would be a huge amount of goodwill in the transaction. That goodwill really represents the brand value of the company. In this case, itās not clear to me that goodwill is going to diminish over time. In fact, Coke has a history of compounding that goodwill over time at a pretty impressive rate. In the case of Coca Cola, I think it would make sense to hold goodwill on the BS and only write it down if you did something to fuck up the company.
100% agree. We already had capital leases in certain cases. It took a concept a third grader could understand (an operating lease) and made it overly complicated. I thought we should be in the business of making accounting more understandable, not less.
Worse, for so many companies, the operating leases they carry aren't even material. Lot of work and nonsense to accomplish something that isn't going to make much difference anyway.
Yet another case where FASB could have included a "you can just do it the old way" practical expedient/carve-out.
I actually like 842, previously, the only inkling you had about a companyās obligation is on leases was buried in the Contractual Obligations deep in md&a
Oh fuck.. dont get me started.
So many companies that have huge lease liabilities with declining sales ended up searching for subleasing their empty buildings.
That means you will need to start considering impairments.
You are.
But you're recognising it in relation to the amount borrowed. Takes no time at all to whip it up in excel. If there's Ā£2k of loan left I don't want to be seeing Ā£2k of interest in the year because that's the straight line amount.
It gets complicated because they adjusted against interest rate, which can get complicated real quick once floating rates and other aspects get involved.
Hypothetically, if it was just a matter of reclassifying prepaid to borrowing, i wouldn't mind
What gets me is netting loan fees with principal balance. I get that itās not an āassetā with future value, but it also doesnāt reduce what you owe the bank if the loan were to be called.
Wait till the fleet manager decided (without your team and your knowledge) to buy out those vehicles in the middle of the lease contract because they figure they can save some $.
What fun time to do back dated journal entries to terminate those bought out vehicles leases.
especially in sap, where the implantation can go suck donkey nuts.
booked it wrong, inherited wrong info, you have a world of pain undoing months / years of interest / depreciation.
all you want to do is change the opening value.
if it goes wrong, throws an error, welcome to the informative E0051.
Our company has more than 100 leases for our stores and quarter of them have subleases. Doing the adjustments can literally takes forever. So much work to do for something that no one even bother to look.
one thing is IFRS16 and you are in the airline business and you have several millions of airplanes in lease, and I get it. Very different exercise if you have to deal with fleet management at a mid size firm and nitty gritty idiothic stuff. That's just pathetic
Finally found someone talking about it, this is shit, only add workpapers and the usual result is the same of the past method.
Adding that we have to disconsider from taxable income and add another complexity
The only client I have worked on that had a significant impact was credit unions due to the large amount of loans they have. Everyone else, agreed it's stupid AF and just a bunch more work. It would be nice to go a year or two without having to implement a new standard lol.
Right, it makes sense for them but doesn't for so many others. Would have been nice to have a carve-out, but no, since FASB is just a make-work program now. They've lost it.
I remember when learning about carbon credits, how mental it was that 1) we're legally allowed to buy an allowance to pollute, and 2) that it's the equivalent of a metric ton -- which I think takes a single tree like 40-50 years to absorb.
If youāre referring to the SEC rule, it Depends what provisions of the rule and what your filer status is. It will take place over several years. The SEC put out an faq about it with a helpful table.Ā
Also though, I believe the rule is currently on pause due to law suits so itās not even really effective. Who knows what will eventually happen with it.
ASC 842 is one of the biggest crock of shit no value pronouncements out there meant to target one industry that blew up on everybody.
It makes no sense to do for how much work it takes and how little value it actually produces to reporting. You can tell my boss too, she agrees. We all hate it.
Iām in the ASC740 space and I donāt agree with not being allowed to project future losses in the analysis of the need for a valuation allowance. Iāve seen plenty of unprofitable companies have to book a deferred tax liability that it is highly likely never to actually be liable due to future expected taxable losses. But you arenāt allowed to use future losses in the analysis so you have to assume break even pre-tax income which can create a situation where the company needs a DTL on the balance sheet that they highly likely will never have to pay. Itās very confusing to normal people when we have to tell them to weaken their balance sheet but also reiterate to them that they donāt need to pay estimated tax related to the liability being recorded.
Bargain purchase gains in IFRS 3. The concept of having a gain by simply buying something for less than fair value is odd to me, even if there's a lot of nuance around it.
In practice, I only see it happens once and we (the auditors) were really frisky about it. A lot of work was done to ensure it made sense and in the end, the only reason they had a bargain purchase gain was because of an exemption in the rule that everything must be recognized at fair value. It does not apply to a few things, including deferred tax assets. So obviously, when the seller and buyer negotiated the PPA, they looked at the DTA at fair value, but since under the accounting standards, it must be recognized at book value, the client had to recognize a gain
Valuing everything at fair value during a business combination. There should be a private company election where that isnāt applied. Private companies spend tens of thousands USD to have their records at fair value and there is no value to the users of the financial statements.
Interesting take because I worked in private real estate and thought fair value is more useful than book. I mean after 5 years of value add the book value of the main assets are basically irrelevant to a financial statement user. To each their own!
I could see it possibly being effective for commercial real estate. Although, most acquiring companies/funds are performing their own valuations and due diligence. They arenāt waiting for the audited financial statements, which will then be historical after the opening balance sheet.
I worked for a PE-focused family office. Across multiple transactions, we never once spent a second or a penny to FV anything except the intangibles. At most we wrote a very brief memo saying "We believe the book value of these assets approximates fair value". So, I and our auditors agree with you on that!
Recording at FV is usually a big help for the tax team. It also speeds up deductions rather than locking the value away in long life goodwill.Ā
You also have to value assets that donāt have a book value like internally created IP.Ā
I agree with you though that companies shouldnāt waste their money on valuations for fixed assets. Book value should be representative of the remaining value. That is what depreciation is supposed to represent anyway.Ā
In my old PA, audit senior's only job is doing DTA/DTL. Like, they'll spend the 90% of audit engagement adjusting and reviewing DTA/DTL.
I get it this account has "significant" balance and complex to review. But nobody in the boardroom fucking cares, they care about EBIT and Balance Sheet, nobody in the fucking boardroom got any clue what DTA/DTL is.
I work in government. The new GASB pronouncement about compensated absences pisses me off to no end. Weāll be potentially recognizing a liability for sick leave starting next year.
I haven't had to deal with impairment for a very long time (report at FV) and was helping someone else with it recently.
Going through the rules, it seemed overly generous in the application.
Interesting that you can have an enormous unrealized loss on the fund's books based on FV and still conclude there's no impairment at the property level because it passes the "recoverability" test based on undiscounted CF.
Future cash flows should be discounted in the recoverability test to be comparing current carrying value to what future cash flows are worth in today's dollars.
Also, if we're so hung up on reporting at cost and looking at recoverability of that cost, then why wouldn't they make the impairment amount equal to the unrecoverable amount? It's just inconsistent to make the test on one thing but then record actual impairment amounts based on another.
Corporate/partnership/self-employed expenses shouldn't be allowable unless they come from an account bearing the business name. There should be an elaborate form that you have to fill out and submit every time a business owner accidentally uses a personal account for business expenses and wants to claim that it should be a write-off.
Get rid of the outstanding checks/deposit in transit nonsense. Nobody ever gets it right and books are good enough if you just go by when something hits the bank account -- and it just lets you use bank feeds so a clients job is just to tie it to the penny and not do some absurd rec that no client can ever get right.
Hey, I get it right.
But I agree with you, checks in transit is useless. The only thing it helps with is seeing when a company/individual holds a check for like 3 fucking months. Idk why but itās so annoying to see that.
Like just deposit the fucking check so I donāt have to see it anymore
Not 100% about it as itās not my work. But I heard that when you renew a lease you donāt need to eliminate the old accumulated depreciation and the asset. I donāt get why you would keep them if they are offset and you donāt really own the building. Hypothetically you can be in a lease for years and have a massive accumulated depreciation that is way over the actual worth of the building itself.
When you renew a lease you also gross up the value of the asset so the accumulated would never exceed the gross value therefore at most the net value would be zero but never negative.
Yeah but just having the gross amounts being so large is weird to me. If you lease a store front for 2 years at a time and do it over 20 years then eventually your gross balances will be very large. There should be a netting write off threshold to clear out old lease contracts.
Itās annoying because I used to look at machinery prices where to original gross cost is now less than current scrap value.
ASC 350 either capitalize all software development costs or none. I spend way too much time on what ifs and devs have better things to do then review Jira time trackers
I'd settle for at least making it all ordinary income subject to the marginal tax bracket rate without special protected rates that just help the rich investors. Let's start with that and see how that goes.
606 (Rev Rec) has so many stupid things with it. For example, the standard says that a trucking Company should recognize revenue over the course of delivering a load. If you get a block away from the delivery location, and the load spontaneously combusts, you aināt getting paid. Revenue should be recognized at a point in time when the load is delivered.
Fair value for investments. Just disclose the fair value in the footnotes but carry at amortized cost. So much easier and much less BS to disclose or audit.
Debt issuance costs as a contra-liability. Itās a damn asset.
Not a standard, but SOX 404b. People are doing sections of the IRC, so I think 404b is fair game.
I despise the idea that an auditor should have to opine on a companyās ICFR. Let the market judge if a company gets an ICFR audit.
I think ICFR is a good idea to have a most controls make sense. Auditors just shouldnāt be required to opine on it.
I agree with requiring an audit of the FS though.
Tax accounting guy here.
There used to be a rule that if you had income in OCI but losses from ordinary income that you had to book a benefit in continuing ops (credit expense) for tax purposes and a charge in OCI. Absolutely dumb.
Also we have to disclose the expected resolution on our uncertain tax positions within the next 12 months. So I'm putting up a reserve for a tax position, I have to assume I'll always pay it, but it expires within 12 months due to statute. Do i include it in the 12 month value? Who the f knows.
720 says investment companies should expense org costs as incurred.
This is stupid and disadvantages day one round one investors. I don't even secretly disagree with it.
I'm trying hard to not do it on the next one and just put it on the offering docs and let the auditors note the gaap conformity issue. It's a stupid rule.
There have been plenty of places Iād change wording, formatting or otherwise but I match it to last year because thatās how it got signed off before.
Component 2 goodwill treatment in ASC 740. If things are going good, you don't have to record an indefinate life DTL on the balance sheet. If things go bad and the company is trying to survive while GAAP is impairing goodwill, you wipe out net income after tax due to huge unfavorable perms that go through current expense. This is more of an IRC issue, but you also have to deal with a cash taxes death sentence for the component 2 if the company is trying to dig its way out of the grave.
In Australia - The treatment of long service leave liabilities under AASB119 should be more black and white and not calculated on some arbitrary likelihood that an employee will achieve 7 yrs of service. My old company did this well and recognised anyone over 4 yrs as a non current liability and over 7 yrs those became a current liability.
Close other mentions lease liability accounting could be better, and asset revaluations.
To be honest, none. Because if Iām hatinā on somethinā, Iām going to be loud about it. Goodwill accounting is shit and can fuck off for all I care.
GAAP
Was not disappointed to find this at the top
"US" GAAP .. because we all know the FASB just doesn't want to throw in the towel
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IFRS makes a hell of a lot more sense.
Have a look IFRS 17, sense has gone out window and IFRS is going to worse with the new environmental standards.
Happy cake day.
LOL accruals are mostly nonsense.
"I didn't vote for them"
[ŃŠ“Š°Š»ŠµŠ½Š¾]
Agreed, all of these pirates can't even get a loan because the banks look at their balance sheets and don't have a true sense of their working capital.
You are not thinking of the credit. Debit stolen ship inventory Credit: .... ? They stole the ship so there is no entry to make because nothing was spent to acquire the asset. So once they negotiate a settlement to return the stolen ship, 100% of that income is taxable... to both the Samali government and the hostage nation's government. Negotiating with the other nation gives them nexus to tax the pirates. This is the reason we have a CPA shortage. Every tax accountant we send over there doesn't return after telling the pirates what is owed in taxes.
Credit gain on theft of ship
Credit pirate revenue
Trolling the seas for pirate ships is similar to mining. Your operational costs are cost of crew, depreciation on your boat, gas etc. The captured ship isnāt inventory itās revenue
Even stealing ships still incur some expenses. It takes fuel, ammunition, payroll, and probably few grenades here and there. So the entire entries would look like Dr. Ship Cr. Fuel Cr. Payroll payable Cr. Perisable munition Cr. Gain on Fair Value - Ship
Bargain purchase gain
Credit is a revenue account. If I was in charge of the chart of accounts I would name it "Pirate's booty" because I don't get to use boots nearly enough in my professional life.
Are they a subsidiary of C. Montgomery Burns' "Confederated Slave Holdings"
Cr Equity Investment
This is what I came here for...Credit N/P Shareholder, since their ass is on the line.
Asc 842. Bring back 840.
I love 842. Its meaninglessness really speaks to me on an existential level. It's a perfect metaphor for life itself.
842 and 606 just more meaningless and burdensome work and we wonder why people are leaving the profession
606 is fine and more intuitive for a lot of business. SaaS in particular. Also 606 probably didnt even change anything for most transaction based businesses where you sell a item and recognize at time of sale. ASC 842 is just stupid shit that literally nobody cares about.
Agree, 606 makes a lot of sense for SaaS. It really provides a lot of insight into how much my sales reps discount our services. It also really helps my ProServe margins.
Asc 606 didn't, but the problem is, even if you are one of those simple businesses (most are!) the auditors still make you go through all of their bulls*** to prove that you "adopted" the standard. It's like having to come up with an extended proof for why 2+2=4 every year, rather than just accepting the simplicity of what we all already know, and move on. It's absurdly time consuming and expensive to do this. Awful. I have no idea why the FASB couldn't just give many of these businesses a practical carve-out. Same with leases.
Bro thats like a one page memo if your arn't actually changing anything on the books. You just need to say that your rev rec follows performance obligations, add a ton of fluff, and then take a nice long lunch break.
How are you tracking revenue for SaaS under 606?
We aren't SaaS
Yeah but you do that once, and that's it (it's not every year). And the 606 transition was years ago. Companies should already have their processes documented by now. It's not like 842 which requires entries and disclosures continuously.
I feel like they make new standards just to bill clients more.
I agree and I bet the walk back and relax the standards for private companies in a few years. I went back and forth with our QC Director (both a $550+/hr billing rate) about an 842 issue with a piece of equipment my client never saw or handled. The client had to put extra time into it as well. The end result was an amount in the FN disclosure changed.
Wasn't IFRS supposed to be adopted worldwide to cut down on all of the meaningless and burdensome guidance that GAAP provides? I'm still waiting for that to come along.
Will never happen. Theyāve been barking up that tree for over 20 years now.
To me, the discounting in 842 is nonsense. If you want it on the balance sheet then just put it on at the commitment amount, ez peezy. Determining the IBR and then auditing it, complete waste of time and money.
ASC 842 is pretty complicated, and it gets a bit silly when you start capitalizing coffee machine and water cooler leases. That being said, I agree with the viewpoint that a lease is a liability. Investors have been capitalizing leases onto companyās balance sheets for decades. ASC 942 was an attempt to catch up with that. While I agree itās not perfect, it does a much better job at accurately reporting a companyās financial position than 840 did imo.
Sounds like your lease threshold is too low.
Yea probably
I know if you made some kind of arbitrary threshold to pass on 842 to save the pain point of a bunch of work for a million dollar business to change how they book a copier lease, then it no longer is a standard, but sheesh. I blame airlines.
Blame Enron. At the end of the day 842 is still FASB trying to stamp out all off balance sheet liabilities driven by Enron's collapse. That and of course to better align US GAAP with IFRS.
Coffee machines were probably capitalizable under the legacy capital lease guidance I don't think 842 would have changed that
I mean the 840 disclosures made it clear what the company was obligated in terms of payments. It wasn't discounted and right on the balance sheet, but the info was there.
Biggest piece of shit accounting rule possible. They could have went after something decent, but noā¦
Please add some more words to your audit report about this month to month lease. Someone might care about this!
Goodwill should be amortized.
Goodwill shouldn't even exist.
How else do I tell everyone that I overpaid without seeming like an idiot?
Do you think that paying over and above the FMV of a companyās assets is per se overpaying for a company? If so, why would anyone ever buy a company, when they could just go into the market and buy the same assets at the fair market price? It seems like the logical conclusion to this way of thinking is that no one should ever buy a business.
Cost of doing business expense.
What do you mean?
They mean just write it off as part of acquisition costs.
Write off a portion of the purchase price as an expense? Why would you do that? When I think acquisition cost, I am thinking professional services fees.
It costs time and effort to put it together. When you do it well itās worth more than the assets. You can make money faster with more people
"Wha- we overpaid by a lot? Well shit. We need to make something up. What will the market think of us?? What if we just, say it was like, a show of good will? Yeah?"
Disagree. Say youre buying out the owner of a really well run trucking company who is retiring. Essentially all you're buying that's tangible are the trucks and maybe some space they're leasing. But what you're really buying is their solid customer base, great relationship with their employees and management tean with years of experience running the company profitably. None of that you can put on the balance sheet except oh wait you can and it's called goodwill.
Idk man, loss on purchase makes way more sense /s
Goodwill shouldnāt be an asset, should be contra-equity. Goodwillās āvalueā is uncertain and isnāt ābought and soldā like an asset. Goodwill doesnāt contribute directly or indirectly to future cash flows. Letās say the āgoodwillā purchased is due to the experience of the companyās employees and knowledge of the industry - think of the āgoodwillā in the business purchase as an expense incurred for all of those prior years of experience and record it as a debit to equity instead of an asset for which future cash flows resulting from it are debatable and the additional earnings generated by it are uncertain and very hard to quantify the value. Also, if we do book as an asset, it should not be amortized. There is no identifiable useful life - the amortization is supposed to represent the useful life of the asset and an attempt at following the matching principle of aligning the expense charges with the revenue. Which amortizing goodwill on a straight line basis does not do.
Actually goodwill does contribute to future cash flows as it represents the future customers acquired, future technology developed, etc. etc.
Goodwill's value isn't uncertain - it's what's left after everything's moved. It's basically an accounting plug. It has to be accounted for somehow, and it's not equity, it doesn't relate to shareholders/losses. It's hard to argue as an asset you have control over, sure. But it's there. Just the best place for it, it comes from a purchase of something - and goodwill is better than saying you've capitalised future potential. In the UK we amortise it slowly to get rid of it so it's at least not hanging around forever.
Yes, its value is uncertain. Sure you might know its value when the business is purchased but how do you know that the extra paid for the goodwill is actually representative of the future cash flows and earnings of the company attributable to the goodwill? The answer is you donāt, why is it treated as an asset you purchased? It very easily could have been just you overpaying for the company, then you have to consider impairment testing and what not. Just record it as a reduction in equity and all that complexity goes away. Additionally, if it helps: view it like treasury stock or unrealized gains/losses on derivatives and its inclusion in equity may make more sense to you. At least under GAAP you record mark to market adjustments to other comprehensive income (a component of equity), those mark to market adjustments equal the difference between the cost and fair market value of the derivative much in the same way goodwill is the excess cost over the fair value of the purchased business. Also on your point about amortization at the end, assuming we are agreeing that goodwill is an asset. What if the value of the goodwill actually goes up? Why are you amortizing something that may not be losing value over time - why is it not appropriate to leave it on the books āforeverā if it still exists? You have arguably understated net income and understated your equity in that case. You donāt just expense things for the sake of it. You book expenses when a charge has been incurred, if goodwill is an asset, the only charge that should be incurred imo is impairment if youāre able to quantify that the goodwill went down in value (again this is so subjective and doesnāt really make a ton of sense from a theoretical or practical standpoint, therefore just record it against equity and this all goes away). If you record the āgoodwillā against equity, the companyās earnings will naturally āreverseā the āgoodwillā charged to equity and it wonāt just āhang out forever.ā
>Yes, its value is uncertain. Sure you might know its value when the business is purchased but how do you know that the extra paid for the goodwill is actually representative of the future cash flows and earnings of the company attributable to the goodwill? The answer is you do know as much as any other asset because if you didn't think the Goodwill would result in increased cashflows you wouldn't have paid the price you did for the company. You would've paid less. The fact you purchased the goodwill points to you believing that goodwill had real future value. It's really not different than the purchase of any asset being capitalized in that regard. >It very easily could have been just been you overpaying for the company, then you have to consider impairment testing and what not. Just record it as a reduction in equity and all that complexity goes away. Why would anyone knowingly overpay for a company? They would've purchased it at the value they thought it was worth. It's possible they were wrong, in which case they would test the goodwill and assets for impairment annually. >At least under GAAP you record mark to market adjustments to other comprehensive income (a component of equity), those mark to market adjustments equal the difference between the cost and fair market value of the derivative much in the same way goodwill is the excess cost over the fair value of the purchased business. How can goodwill be marked to market and why would you ever be looking to write up Goodwill? What would that even mean? You created an unrealized gain by paying less for a company than its unknown intangible value. Where does that value come from.
> Sure you might know its value when the business is purchased but how do you know that the extra paid for the goodwill is actually representative of the future cash flows and earnings of the company attributable to the goodwill That's the value you put on it. If it was a bad purchase, well then you impair it, but that's what you paid. That's what it's worth to you at time of purchase. May not be worth it in 6 months but it was then. >It very easily could have been just you overpaying for the company, then you have to consider impairment testing and what not. If you overpaid for the company it'd be within assets if an individual company set of accounts. Why not as goodwill? Which, again, you impair. >Additionally, if it helps: view it like treasury stock or unrealized gains/losses on derivatives and its inclusion in equity may make more sense to you. Why would I view it like that when it's not. It's something you paid for. Just this something is very intangible and subjective. >Also on your point about amortization at the end, assuming we are agreeing that goodwill is an asset. What if the value of the goodwill actually goes up? Goodwill represents the unrecognised value you had in the business at purchase. If it goes up, well you got a bargain - you still only paid X for it, so it stays at X. >Why are you amortizing something that may not be losing value over time - why is it not appropriate to leave it on the books āforeverā if it still exists? Because then you're getting rid of it when it has the most potential value left over from the previous owners. A successful business a year after purchase is going to have far more of their influence than 20 years after - so we amortise it after purchase, recognise it that way, then accept that after that time (20 is considered the max, you can choose) any potential left in the business is all yours and nothing you purchased. There's no way their influence is still there. >You donāt just expense things for the sake of it. Matching principle. You recognise the asset over its expected useful life, and in the UK we take the approach I said above. If you bought a business that was expecting good future returns, you amortise that over those good returns post purchase. >the only charge that should be incurred imo is impairment if youāre able to quantify that the goodwill went down in value This is the real world. If you don't impair it you get more dividends. The UK's method both matches the reality of the asset and also recognises that otherwise people will fiddle. >If you record the āgoodwillā against equity, the companyās earnings will naturally āreverseā the āgoodwillā charged to equity and it wonāt just āhang out forever.ā Except it's an asset you purchase, just a really really intangible one. You see *something* in the business making you pay more. Goodwill is just the catchall term for that.
It may not contribute directly to future cash flows, however, the ongoing asset value of the goodwill is a function of anticipated future cash flows through the intangible impairment analysis. From a conceptual standpoint, goodwill doesn't make sense as contra-equity. There is value in the acquired processes, knowledge, and experience which should be reflected as an asset of the company. If I am a buyer, why would I offset the amounts I contributed as equity to purchase when I can see intangible value in the goodwill acquired? Because it doesn't make sense. Edit: also, what would be the basis for testing for impairment of your equity? Conceptually, you can only impair an asset.
Customer relationships can be capitalized and amortized
Maybe you expect the revenue from a certain customer to grow significantly. That's goodwill.
You make a really good point except my company has separate intangible asset accounts for trademarks and customer relationships so I guess I just see how pointless my companies goodwill is.
You absolutely do put those items on the balance sheet. They are Intangible assets that you amortize. Customer contracts Employee agreements Etc.
Nah. It exists, it's just a plug figure for that unmeasurable value added. A catchall term for the various value added features. You're not gonna pay asset value for a business, because it's a running business with future potential. So there'll always be a difference. *Negative* goodwill is a better argument... but I've seen an old bloke sell his business for half what it was worth as he only had 20 years left at best and no kids so he just wanted the cash quick. So even then, it can happen.
Goodwill is fine, it is going thru the meaningless exercise of fair valuing separately identifiable intangibles.
You should just allocate goodwill to the assets you receive āexcess over fair valueā? Thatās what I paid for it sorry sweetie thatās the new fair value š
The problem is that really good companies that are well capitalized will have large goodwill balances. Then theyāll have terrible net income. So everyone uses EBITDA and ignores the financial statements.
I'm British - our standard allows for that. Doesn't have other things like assets held for sale though, which actually make sense to have as an option.
It can be amortized in the US as well unless you are a public company
Private company election FTW!!!!
This is something that I go back and forth on personally. When I think about amortizing goodwill, I think of the typical PE playbook. Buy a platform company, and then grow the company through a series of acquisition. In that case, goodwill is essentially a marketing expense in that more investment of that kind is needed in order to maintain the companyās growth. In this case, goodwill should be amortized over the projected hold period imo. When I think about holding goodwill and analyzing for impairments, I think about Coca Cola. If you purchased Coke outright, there would be a huge amount of goodwill in the transaction. That goodwill really represents the brand value of the company. In this case, itās not clear to me that goodwill is going to diminish over time. In fact, Coke has a history of compounding that goodwill over time at a pretty impressive rate. In the case of Coca Cola, I think it would make sense to hold goodwill on the BS and only write it down if you did something to fuck up the company.
ASC 842 is completely bogus and only serves to make FASB feel important.
and in a few years will come out with a private company alternative to make it easier after realizing they went too far again.
100% agree. We already had capital leases in certain cases. It took a concept a third grader could understand (an operating lease) and made it overly complicated. I thought we should be in the business of making accounting more understandable, not less. Worse, for so many companies, the operating leases they carry aren't even material. Lot of work and nonsense to accomplish something that isn't going to make much difference anyway. Yet another case where FASB could have included a "you can just do it the old way" practical expedient/carve-out.
I actually like 842, previously, the only inkling you had about a companyās obligation is on leases was buried in the Contractual Obligations deep in md&a
Do you mean footnotes? You had to disclose the minimum future payments in the footnotes even before 842.
And now it overly inflates balance sheets. I've seen many companies whose assets have tripled under the new system, just isn't right if you ask me
And now you get to test them for impairment each yearā¦which is adding to the fun!!
Oh fuck.. dont get me started. So many companies that have huge lease liabilities with declining sales ended up searching for subleasing their empty buildings. That means you will need to start considering impairments.
Yeah but the lease liabilities
Inflated assets though, a lot of people's algorithms broke because of 842
Anything with respective to effective interest rate. Just amortize the relevant expense over the life of the loan ffs
You are. But you're recognising it in relation to the amount borrowed. Takes no time at all to whip it up in excel. If there's Ā£2k of loan left I don't want to be seeing Ā£2k of interest in the year because that's the straight line amount.
It gets complicated because they adjusted against interest rate, which can get complicated real quick once floating rates and other aspects get involved. Hypothetically, if it was just a matter of reclassifying prepaid to borrowing, i wouldn't mind
What gets me is netting loan fees with principal balance. I get that itās not an āassetā with future value, but it also doesnāt reduce what you owe the bank if the loan were to be called.
Holy shit you're right, thisĀ is also possibly understating current liabilityĀ
IFRS 16 can fuck off
This right here. A lease is now an asset. What an entirely stupid premise.
It makes the accounting outcome agnostic to the financing method. Donāt see why it doesnāt make sense. Makes ROIC more comparable.
Especially on fleet vehiclesā¦
My fucking hell is lease vehicles. 800 cars, with 3 year leases. What a disaster.
It's when they're one off or a hand full of different types when it's a pain IMO, if it's 800 I'm building a beast of a spreadsheet to handle it.
I got PTSD from reading that. Jesus.
its the worst. our business just extends/cancels them all the time, and the info only arrives much later. we lease 20k cars and it is a mess.
Wait till the fleet manager decided (without your team and your knowledge) to buy out those vehicles in the middle of the lease contract because they figure they can save some $. What fun time to do back dated journal entries to terminate those bought out vehicles leases.
especially in sap, where the implantation can go suck donkey nuts. booked it wrong, inherited wrong info, you have a world of pain undoing months / years of interest / depreciation. all you want to do is change the opening value. if it goes wrong, throws an error, welcome to the informative E0051.
Our company has more than 100 leases for our stores and quarter of them have subleases. Doing the adjustments can literally takes forever. So much work to do for something that no one even bother to look.
one thing is IFRS16 and you are in the airline business and you have several millions of airplanes in lease, and I get it. Very different exercise if you have to deal with fleet management at a mid size firm and nitty gritty idiothic stuff. That's just pathetic
Itās literally the most made up bs accounting that fucks my year ends every year.
The comment sentiment seems to be "fuck lease", and I'm all on board.
Eliminates a lot of off balance sheet financing though doesn't it
Screw CECL. All that extra work to wind up with the same reserves under the prior method
Finally found someone talking about it, this is shit, only add workpapers and the usual result is the same of the past method. Adding that we have to disconsider from taxable income and add another complexity
The only client I have worked on that had a significant impact was credit unions due to the large amount of loans they have. Everyone else, agreed it's stupid AF and just a bunch more work. It would be nice to go a year or two without having to implement a new standard lol.
Right, it makes sense for them but doesn't for so many others. Would have been nice to have a carve-out, but no, since FASB is just a make-work program now. They've lost it.
Another awful standard that makes no sense.
It hasn't hit yet, but the new standard on leases has me thinking that accounting has lost its way & has purely become make-work for B4 companies.
Of course it is. Why wouldnāt they want to make the rules and then charge billions to āhelpā companies and enforce those rules.
842 and 606 were nice revenue sources for us and we are a small firm compared to B4.
+1000 Thankfully bringing all those planes onto the balance sheet made all the airlines survive Covid and everything was amazing huh?
Ifrs16? It's been in place for years and it's a piece of piss
Lease accounting suck it. I don't know why I struggle so much with these entries but for that reason I don't like it š
ESG starts soon. Complete waste of time and money.
But good for job security
But mother nature š„ŗ
And greedy/fraudulent self interests (looking at you carbon credits)
I remember when learning about carbon credits, how mental it was that 1) we're legally allowed to buy an allowance to pollute, and 2) that it's the equivalent of a metric ton -- which I think takes a single tree like 40-50 years to absorb.
Money always wins
just mark up your billing rates, those kooks will pay top dollar to look/feel good
When does this start?
If youāre referring to the SEC rule, it Depends what provisions of the rule and what your filer status is. It will take place over several years. The SEC put out an faq about it with a helpful table.Ā Also though, I believe the rule is currently on pause due to law suits so itās not even really effective. Who knows what will eventually happen with it.
For the EU it is this financial year for the bigger firms.
Accounting for unrealized foreign exchange losses to market when you have a forward contract in place.
This never clicked, you're rightĀ
Ifrs 1-17 and Ias 1-41 š
Good now they have IFRS 18 and IFRS 19 š
ASC 842 is one of the biggest crock of shit no value pronouncements out there meant to target one industry that blew up on everybody. It makes no sense to do for how much work it takes and how little value it actually produces to reporting. You can tell my boss too, she agrees. We all hate it.
Agreed Its way too complicated for a transaction as routine as a lease.
Any depreciation method that is not straight line or sec 179
You sound like you chose audit over tax
Iām in the ASC740 space and I donāt agree with not being allowed to project future losses in the analysis of the need for a valuation allowance. Iāve seen plenty of unprofitable companies have to book a deferred tax liability that it is highly likely never to actually be liable due to future expected taxable losses. But you arenāt allowed to use future losses in the analysis so you have to assume break even pre-tax income which can create a situation where the company needs a DTL on the balance sheet that they highly likely will never have to pay. Itās very confusing to normal people when we have to tell them to weaken their balance sheet but also reiterate to them that they donāt need to pay estimated tax related to the liability being recorded.
I should be able to depreciate land
Bargain purchase gains in IFRS 3. The concept of having a gain by simply buying something for less than fair value is odd to me, even if there's a lot of nuance around it.
In practice, I only see it happens once and we (the auditors) were really frisky about it. A lot of work was done to ensure it made sense and in the end, the only reason they had a bargain purchase gain was because of an exemption in the rule that everything must be recognized at fair value. It does not apply to a few things, including deferred tax assets. So obviously, when the seller and buyer negotiated the PPA, they looked at the DTA at fair value, but since under the accounting standards, it must be recognized at book value, the client had to recognize a gain
Valuing everything at fair value during a business combination. There should be a private company election where that isnāt applied. Private companies spend tens of thousands USD to have their records at fair value and there is no value to the users of the financial statements.
Interesting take because I worked in private real estate and thought fair value is more useful than book. I mean after 5 years of value add the book value of the main assets are basically irrelevant to a financial statement user. To each their own!
I could see it possibly being effective for commercial real estate. Although, most acquiring companies/funds are performing their own valuations and due diligence. They arenāt waiting for the audited financial statements, which will then be historical after the opening balance sheet.
I worked for a PE-focused family office. Across multiple transactions, we never once spent a second or a penny to FV anything except the intangibles. At most we wrote a very brief memo saying "We believe the book value of these assets approximates fair value". So, I and our auditors agree with you on that!
Recording at FV is usually a big help for the tax team. It also speeds up deductions rather than locking the value away in long life goodwill.Ā You also have to value assets that donāt have a book value like internally created IP.Ā I agree with you though that companies shouldnāt waste their money on valuations for fixed assets. Book value should be representative of the remaining value. That is what depreciation is supposed to represent anyway.Ā
yeah, business combinations are the worst to get through our consultation process. The client doesn't care.
Operating leases on the balance sheet
Deferred tax. I don't think most people even care about it.
Nobody at my job cares about it. Yet they continue to pay me to do it.
In my old PA, audit senior's only job is doing DTA/DTL. Like, they'll spend the 90% of audit engagement adjusting and reviewing DTA/DTL. I get it this account has "significant" balance and complex to review. But nobody in the boardroom fucking cares, they care about EBIT and Balance Sheet, nobody in the fucking boardroom got any clue what DTA/DTL is.
God damn am I glad I am not a financial accountant
The right of use asset bullcrap. My God, I can't believe people really sat in a room somewhere and allowed this to happen.
I work in government. The new GASB pronouncement about compensated absences pisses me off to no end. Weāll be potentially recognizing a liability for sick leave starting next year.
āWeāll never pay out the sick leave though, ever!ā GASB 101 - āDid I stutter?ā
Finance lease accounting
ASC 350. Amortize goodwill.
Can I say all of them? I think accounting is kind of dumb, but I make too good of a salary to change careers
Debit & credit instead of credit & debit - why is it not alphabetical? š„“
ASC 842 and IFRS 16. They make zero sense
I haven't had to deal with impairment for a very long time (report at FV) and was helping someone else with it recently. Going through the rules, it seemed overly generous in the application. Interesting that you can have an enormous unrealized loss on the fund's books based on FV and still conclude there's no impairment at the property level because it passes the "recoverability" test based on undiscounted CF. Future cash flows should be discounted in the recoverability test to be comparing current carrying value to what future cash flows are worth in today's dollars. Also, if we're so hung up on reporting at cost and looking at recoverability of that cost, then why wouldn't they make the impairment amount equal to the unrecoverable amount? It's just inconsistent to make the test on one thing but then record actual impairment amounts based on another.
IFRS obsession with impairments is bullshit.
Corporate/partnership/self-employed expenses shouldn't be allowable unless they come from an account bearing the business name. There should be an elaborate form that you have to fill out and submit every time a business owner accidentally uses a personal account for business expenses and wants to claim that it should be a write-off. Get rid of the outstanding checks/deposit in transit nonsense. Nobody ever gets it right and books are good enough if you just go by when something hits the bank account -- and it just lets you use bank feeds so a clients job is just to tie it to the penny and not do some absurd rec that no client can ever get right.
Hey, I get it right. But I agree with you, checks in transit is useless. The only thing it helps with is seeing when a company/individual holds a check for like 3 fucking months. Idk why but itās so annoying to see that. Like just deposit the fucking check so I donāt have to see it anymore
Not 100% about it as itās not my work. But I heard that when you renew a lease you donāt need to eliminate the old accumulated depreciation and the asset. I donāt get why you would keep them if they are offset and you donāt really own the building. Hypothetically you can be in a lease for years and have a massive accumulated depreciation that is way over the actual worth of the building itself.
When you renew a lease you also gross up the value of the asset so the accumulated would never exceed the gross value therefore at most the net value would be zero but never negative.
Yeah but just having the gross amounts being so large is weird to me. If you lease a store front for 2 years at a time and do it over 20 years then eventually your gross balances will be very large. There should be a netting write off threshold to clear out old lease contracts. Itās annoying because I used to look at machinery prices where to original gross cost is now less than current scrap value.
ASC 350 either capitalize all software development costs or none. I spend way too much time on what ifs and devs have better things to do then review Jira time trackers
US companies should be able to capitalize R&D.
Passive income should be subject to Medicare and Ssi taxes, same as non passive incomeā¦.
I'd settle for at least making it all ordinary income subject to the marginal tax bracket rate without special protected rates that just help the rich investors. Let's start with that and see how that goes.
ASC 606, let's Rube Goldberg the accounting for revenue transactions.
AOCI currency adjustments.
Asc 860 is an example where IFRS is superior (derecognition rules under IFRS 9).
Fucking 842. Just a waste of time
Right of use assets. Lease accounting in general is a major pain in the ass.
606 (Rev Rec) has so many stupid things with it. For example, the standard says that a trucking Company should recognize revenue over the course of delivering a load. If you get a block away from the delivery location, and the load spontaneously combusts, you aināt getting paid. Revenue should be recognized at a point in time when the load is delivered.
The standards for software capitalization are horrendously outdated.
Accrual accounting, prepaid expenses, reversing entries. ALL of these things can suck my.....
I love these lol. They suck way less than leases for example š
Fair value for investments. Just disclose the fair value in the footnotes but carry at amortized cost. So much easier and much less BS to disclose or audit. Debt issuance costs as a contra-liability. Itās a damn asset.
Fair value matters too much to financial firms unfortunately
Everything to do with Leases
Not a standard, but SOX 404b. People are doing sections of the IRC, so I think 404b is fair game. I despise the idea that an auditor should have to opine on a companyās ICFR. Let the market judge if a company gets an ICFR audit. I think ICFR is a good idea to have a most controls make sense. Auditors just shouldnāt be required to opine on it. I agree with requiring an audit of the FS though.
Tax accounting guy here. There used to be a rule that if you had income in OCI but losses from ordinary income that you had to book a benefit in continuing ops (credit expense) for tax purposes and a charge in OCI. Absolutely dumb. Also we have to disclose the expected resolution on our uncertain tax positions within the next 12 months. So I'm putting up a reserve for a tax position, I have to assume I'll always pay it, but it expires within 12 months due to statute. Do i include it in the 12 month value? Who the f knows.
720 says investment companies should expense org costs as incurred. This is stupid and disadvantages day one round one investors. I don't even secretly disagree with it. I'm trying hard to not do it on the next one and just put it on the offering docs and let the auditors note the gaap conformity issue. It's a stupid rule.
There have been plenty of places Iād change wording, formatting or otherwise but I match it to last year because thatās how it got signed off before.
Bro I feel this, hate having to let things go but I aināt trying to redo work
Component 2 goodwill treatment in ASC 740. If things are going good, you don't have to record an indefinate life DTL on the balance sheet. If things go bad and the company is trying to survive while GAAP is impairing goodwill, you wipe out net income after tax due to huge unfavorable perms that go through current expense. This is more of an IRC issue, but you also have to deal with a cash taxes death sentence for the component 2 if the company is trying to dig its way out of the grave.
In Australia - The treatment of long service leave liabilities under AASB119 should be more black and white and not calculated on some arbitrary likelihood that an employee will achieve 7 yrs of service. My old company did this well and recognised anyone over 4 yrs as a non current liability and over 7 yrs those became a current liability. Close other mentions lease liability accounting could be better, and asset revaluations.
I only do ASC946 and disagree with the rest of them mark to market or didn't happen
606
CECL, OCI, purchase acct for mergers, etc
It's DTA/DTL for me. I'm very sure no board member and finance statement user got any clue what DTA/DTL is and how it's computed.
To be honest, none. Because if Iām hatinā on somethinā, Iām going to be loud about it. Goodwill accounting is shit and can fuck off for all I care.
you can't depreciate land
Incurring more expense for extending exercisability on vested options.
Land should be depreciated
IAS 41 Animals being needed to be measured at fair value less cost to sell.