week 4 topic 1 review post minimum of 150 words apa format

week 4 topic 1 review post minimum of 150 words apa format

Clinton

In the story by Globe and Mail, the debate is about whether the balance sheet is properly representing the value of a business, is the business understated, undervalued, or should the name be placed on the balance as an asset to the business. The balance sheet understates the true value of a business, because it only allows a business to use the name as an asset, if they have the franchise rights, in other words if the entity was created internally such as corporations like Microsoft, McDonald’s,  or even General Motors. They have the rights to declare the value of the franchises but not the brand name.

While some financial assets are accounted at their market value every quarter, the productive assets, of most companies are placed on the balance sheet at their historical cost, which is easily verifiable via contracts or invoices, and depreciated over time. Accounting rules prohibit outright the listing of intangible assets that are internally developed such as the brands listed above, on a balance sheet. This is calling for a need to reassess the laws that runs counter to decades of accounting theory - and worries many analysts and accountants, who see the value in the rules that create today's balance sheets. Brand Finance CEO David Haigh calls it "clear evidence that both producers and users of financial statements want to see a radical change in the antiquated way intangible assets are reported (Globe and Mail, 2016)”.

With IFRS Standard 3, this is similar to the U.S. and Canadian accounting principles standards and rules of GAAP, when one business acquires another, it must calculate a fair market value on the acquired trademarks, and intangible assets and list them on the balance sheet. The rules, however, apply only to the acquired intangible assets, not to ones developed by a company.  The biggest problem consists of the factor that financial transparency decreases the more management estimates, as a result, the further we get away from the historical cost the greater the volatility, and the more the agendas begin to appear in the financial reports of the entities. In the end, the answer isn’t new accounting standards it is just a better understanding of the existing accounting standards.Declaring the Brand Name as an asset on the balance sheet is declaring the value before the service has been completed, or is opened to inaccurate financial accounting through the use of opinions instead of remaining neutral facts. 

805. Business Combinations> 20 Identifiable Assets and Liabilities, and any Non-controlling Interest > 05 Overview and Background

This Subtopic provides guidance on one aspect of the acquisition method (as described in paragraph 805-10-05-4)—the recognition and measurement of all of the following:

• a.  Identifiable assets acquired
• b.  Liabilities assumed
• c. Noncontrolling interests, if any, in the acquiree

Reference:

Cutting to the heart of financial reporting; Adding intangible assets such as brand power to a company's book value requires remaking decades of accounting theory. (2016, May 24). Globe & Mail [Toronto, Canada], p. B10. Retrieved from http://link.galegroup.com/apps/doc/A453152454/OVIC?u=lirn99776&xid=99ffef75

FASB. (2017). Home>Broad Transactions> 805 Business Combinations> 20 Identifiable Assets and Liabilities, and Any Noncontrolling Interest> 05 Background. Retrieved from: https://asc.fasb.org/viewpage?ovcmd=goto&codification_text=805-20-05-04&codification_submit=GO+TO