From Managerial Perspective, what approach would you choose in Application of New Accounting Standard in your organization?
Aprroach in Application of New Accounting Standard in your organization?
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If I understand your question, any application of a standard or law would have several components, all around protecting the business.
In no particular order:
Is the application within the acceptable definition of the regulation
Is the application increasing our value
Is the application minimizing current and future risk
Can I as the CFO defend the application convincing to a reasonable party (think jury).
And, just because I can defend and have abided by the previous ground rules, is what I've done ethical.
Example: Capitalization of assets. One can decide on a reasonable dollar amount at which to capitalized assets. Let's say computer equipment. But what is the threshold. And what if I want to capitalize everything that will be in service for more than 1 year.
So I start capitalizing cables, speakers and camera, all under $100 (and probably under $25 each. It isn't as far as I know against the rules. But from the perspective of raising EBITDA, it is very effective.
But is it ethical, because at the end of the day you have an asset number that is wholly without value.
This is the conundrum that I leave for you to decide.