The concept of ‘matching’ is one of the basic principles of accrual-basis accounting. It requires companies to match expenses (efforts) with revenues (accomplishments) whenever it is reasonable or practical to do so. This concept applies when companies make advance payments for expenses that will benefit...
Goodwill shows up on a company’s balance sheet when the company has been acquired in a business combination. It represents what is left over after the purchase price in a merger or acquisition is allocated to the company’s tangible assets, identifiable intangible assets, and liabilities....
Working capital is the difference between a company’s current assets and current liabilities. For a business to thrive, its working capital must be greater than zero. A positive balance enables the company to meet its short-term cash flow needs and grow. But too much working capital...
Change-in-control events — like M&A transactions — do not happen every day. If you are currently in the market to merge with or buy a business, you might not be aware of updated financial reporting guidance that took effect in November 2014. The changes provide...
Most businesses report financial performance using GAAP. But the income-tax-basis format can save time and money for some private companies. Here is information to help you choose the financial reporting framework that will work for your situation. The basics GAAP is the most common financial reporting standard...
Whether it is hard hats and drills on a jobsite, iPads in an office, or RFID readers in a warehouse, small tools and equipment have a tendency to disappear at many companies. The cost of lost, damaged, and stolen items can quickly add up, consuming...
The use of so-called ‘profits interest’ awards as a tool to attract and retain skilled workers has increased as more companies are being structured as LLCs rather than as corporations. But accounting complexity has caused some private companies to shy away from these arrangements. Fortunately,...
In financial reporting, investors and business owners tend to focus on four key metrics: 1) revenue, 2) net income, 3) total assets, and 4) net worth. But, when it comes to gauging short-term financial performance and creditworthiness, the trump card is cash flow. If a business...
Technology is altering the traditional approach to internal audits. Instead of reviewing reams of paperwork, today’s auditor is learning to use electronic records. In turn, going paperless facilitates a concept known as ‘continuous auditing,’ where internal auditors continually gather data to support their procedures. Here...
Business assets are generally reported at the lower of cost or market value. Under this accounting principle, certain assets are reported at fair value, such as asset retirement obligations and derivatives. Fair value also comes into play in mergers and acquisitions transactions. That is, if one...