Financial Accounting Assignment 3
Please be sure that for the financial accounting assignments that you are you focusing on the interpretation of the information as that is the real assignment here. Don't just list out what is happening and give those details as your answer. Use those details as support for your interpretation and I think you will find you are learning more about the topics at hand!
Also, always be sure you are relating these back to either the financial position of the companies, any GAAP rules that apply to the situation or a combination of both! Doing either or both of those (which ever applies to the question at hand) will show me you have gained at least a basic understanding of financial accounting!
For the Sears Company, provide a brief detail of the one-time charges included in the income statement.
What do these charges inform the reader regarding the ongoing survival of the company?
Since sale of assets are included in all four of the most recent year financial statements what does this inform the reader?
One-time charges are temporary and while it may show a temporary gain or loss on the income statements of the company for one year, it does not necessarily reflect on the ongoing survival of them company. The ongoing survival of a company is better represented by the revenues, cost and expenses, and shareholders holdings or the non-one-time charges listed on the Consolidated Statements of Cash Flows.
In the Sears Income Statement there are quite a few one-time charges listed including tax benefit resulting from other comprehensive income allocation, gain on sales of investments, amortization of deferred gain on sale-leaseback, settlement of Canadian dollar hedges, deconsolidation of Sears Canada cash, proceeds from Sears Canada rights offering, Lands' End, Inc. pre-separation funding, separation of Lands' End, Inc., and the effect of exchange rate changes on cash and cash equivalents. Each of these adjustments to reconcile net loss are one-time charges that affect the company’s value for one year but not every year. Another thing to note is that consistently throughout the years listed most of these values are negative assets.
Due to the fact that the sale of assets is included in four of the most recent years financial statements and the fact that it is negative, it is indicative that they are having financial issues. The gain on the sales of assets are constantly in the negative in the hundreds of millions of dollars and the basic loss per share is decreasing constantly year over year. This shows that this is not a healthy growing company and there are big problems that are happening.
For the GE revenue recognition footnote. Can you decipher what this company is attempting to explain to the readers of the financial statements?
For the Disney revenue recognition footnote compare the two different footnotes presented and explain the difference between the two and your opinion on why this footnote has changed so significantly in the last 10 years.
The two Disney revenue recognition footages that are presented are drastically different. The revenue recognition in earlier days was based on the simple rule of “recognize when received.” Today, revenue recognition standard goes by updated guidelines in accordance with U.S. GAAP and FASB ASC606 “Revenue from Contracts with Customers.” This new standard calls for clarity, transparency, and consistency.
In 2005, Disney’s revenue recognition process was simple. As commercials are aired broadcast advertising revenues are recognized, as theme park tickets are used, the advance park ticket sales are recognized, as movies play, the revenue is recognized based on the amount of tickets that are sold and so on. With the new GAAP and FASB guidelines the process drastically changed, and it was no longer about revenues simply being recognized as acquired.