Critical and Significant Accounting Policies

Critical and Significant Accounting Policies After Enrons scandal, accounting world underwent dramatic changes. Lots of acts were proposed or released. On May 10, 2002, the Securities and Exchange Commission (which is SEC) proposed a document, that Disclosure in Managements Discussion and Analysis about the Application of Critical Accounting Policies. One year later, SEC released final rule No.72, Interpretation: Commission Guidance Regarding Managements Discussion and Analysis of Financial Condition and Results of Operations. First one introduces the framework for critical accounting policies; second one describes how to actually interpret critical accounting policies in the section off Managements Discussion and Analysis (MDA). However, even till now, people are still in confusion of the differences between those accounting policies: critical accounting policies or estimates and significant accounting policies, a way to actually and precisely disclose these two. In a more efficient way, I will go through the definition of these two accounting policies first. After that, I will introduce the intent of these two, why we use them. The last but not least, I will use a 10-K form from Apple Inc. to make an example, how we present their contents and formats appropriately. Definitions In the accounting standard codification, Financial Accounting Standards Board (which is FASB) has a definition to significant accounting policies, which is Accounting principles and methods are judged by the appropriate circumstances to present fairly financial position, according to GAAP make financial statement. (Codification, 235-10-05-3) This is very general presentation of financial statement. While, in contrast to significant accounting policies, the critical accounting policies and estimates are defined by SEC, which is Critical accounting built on assumption about uncertain matters, including period and affect Companys financial condition (SEC, 2002). It is very obvious, that just from the definition of latter: the critical accounting policies and estimates describe only uncertainties of future changes that also have material impacts. The Differences of Disclosure Intent The information of significant accounting policies is important and essential for entities financial statement users. The significant accounting policies and estimates, which is vital part of the entities financial statements, disclose fairly financial position, etc. (Codification, 235-10-50-1). Meanwhile, they are a major component of the financial statements as well. They interpret what accounting policies the entity is currently adopting. FASB also states that, the significant accounting policies can affect entitys financial position, and can be used for making economic decisions (Codification, 235-10-05-4). Because of Enron scandal, Securities and Exchange Commission intends to give more information of the entity to investors. The quality of corporate disclosures needs to be improved. I believe the intent of critical accounting policies is to disclose the accounting policies needed management judgments and estimations with the uncertainties. The critical accounting policies are the vital components in note of the managements discussion and analysis. SECs FR-60 interpreted as followed: Financial position may imply precisions, continuities and certainties that can be rapid changed in the financial status and operating environment. Thus, even general accepted accounting principles (GAAP) maybe more or less fail to present important information if it is not appropriate accompanied or clear analytic disclosed to facilitate an investors understanding of the companys financial condition, and the possible changes in the operating condition (SEC, 2001). According to above information, we should be aware of that, not only the definitions are different, but also the intents of using these two accounting policies are substantially distinct from each other. FASBs purpose of significant accounting policies cannot be served for SECs critical accounting policies and vice versa. Contents Presentation The significant accounting policies defined by FASB for the applications of accounting principles and methods have a wide range of general description. In contrast of that, critical accounting policies and estimates that proposed by SEC only estimate some of the substantially uncertain and material accounting policies. FASB specifies the disclosure of significant accounting policies should identify the accounting principles and the methods that will materially affect the financial position, and results in different operations, or cash flow. They include judgments, whether principle appropriate between revenue and asset cost during current or future period (Codification, 235-10-50-3). In this paper, I used Apple annual report as an example. In the Form 10-K/A of Apple Inc. (filed in Jan 25, 2010) include presentation and preparation, fair value measurements, financial instruments, inventories, property plant and equipment, asset retirement obligations, goodwill, foreign currency translation and remeasurement, revenue recognition, shipping costs, allowance for doubtful account, warranty expense, software development cost, income taxes, stock-based compensation, advertising costs, earnings per common share, comprehensive income, segment information. For example, Apple disclosed inventories item at (LCM) lower the of cost, or market, calculated with FIFO (first-in, first-out) method. In recognition item, the Company recognizes revenue when delivery has occurred or any persuasive evidence of an agreement exists. Moreover, in revenue recognition item, for multiple-element arrangements which may include tangible products that contain software that is essential to the ta ngible products functionality and undelivered software elements that relate to the tangible products essential software, the Company allocates revenue to all deliverables based on their selling prices (Form 10K/A, 2009). Before application, there are requirements that the critical accounting estimates should meet: at the made time of accounting estimates, the uncertain assumption; another is, any kinds of estimates used during current period and changes made in the estimate should impact the financial condition materially. There three elements that are involved in the accounting estimation: the first is to understand the accounting estimates; the second is to give a clearer comprehending to the financial condition for normal investors; the third is to disclose management discussed development (SEC, 2002). Furthermore, the critical accounting policies and estimates should be as the supplements of notes of financial statements, but not duplicate any related information that already presented. The critical accounting polices disclosure should provide relevance information deeply (SEC, 2003). From the secs intention, accountants should take strongly responsibility for the risk of estimates and changes. Moreover, accountants should be able to explain how they came out with the results and estimates. If last year a bank made a lot of relative new loans, so the report would look good. But if many of those borrowers later failed to pay, then this years report would look very bad. So for the next year, the bank management will be required to estimate how many borrowers would fail to pay, maybe a percentage, and put it in the notes of MDA. In the last years Form 10-K/A of Apple Inc. the critical accounting policies and estimates are related to inventory valuation and inventory purchase commitments, revenue recognition, income taxes, valuation of marketable securities, warranty costs, allowance for doubtful accounts along with the legal and other contingencies. In the section of inventory valuation, Apple Inc. emphasize the critical accounting estimate as followà ¯Ã‚ ¼Ã… ¡ The Company must order components for its products and build inventory in advance of product shipments. The Company records a write-down for inventories of components and products, including third-party products held for resale, which have become obsolete or are in excess of anticipated demand or net realizable value. The Company records accruals for estimated cancellation fees related to component orders that have been cancelled or are expected to be cancelled. Consistent with industry practice, the Company acquires components through a combination of purchase orders, supplier contracts, and open orders based on projected demand information. These commitments typically cover the Companys requirements for periods ranging from 30 to 150 days. (Form 10K/A, 2009à ¯Ã‚ ¼Ã¢â‚¬ ° The inventory item that disclosed in the significant accounting policies is very straightforward and simple, like lower cost or market cost. However, here the company estimates the future inventory by forecasting, and later, if the consumers or markets demand changed, which is unpredicted, the company would write-down the records, when it needed. Also, in revenue recognition section analyzes the possible reductions to revenueà ¯Ã‚ ¼Ã… ¡ Management was making estimates based on historical experience. If a greater proportion of customers redeem the incentives other than estimated, the Company would record credits to revenue, which would have a decrease on revenue.à ¯Ã‚ ¼Ã‹â€ Form 10K/A, 2009à ¯Ã‚ ¼Ã¢â‚¬ ° Although, the revenue reduction is estimated by historical records, the future market condition may change, for example, the incremental price protection obligations incur. The additional reduction to revenue would be resulted in. Additionally, the company gave an estimation of unspecified software upgrade revenue: if the Companys ESP for the software upgrade rights related to iPhone would have been fluctuated either higher or lower, the Companys net sales of year 2009, would have decreased or increased up to $50 million as compared to that of last year (Form 10K/A, 2009). Furthermore, compare with just one sentence in significant accounting policies, the allowance for doubtful accounts section in the critical accounting and estimates presents the very detailed information. Besides the historical experience, the company also considers about the future economic environment, the financial condition. If there is a deterioration of financial condition, the company will have to adjust the allowance accounts, which means the adjustments are going to be made. The formats The formats of two accounting policies are significant different, because one is by FASB, and another is by SEC. The significant accounting policies are disclosed in the notes of the financial statement of item 8 in form 10-K. Under FASB codification: the disclosure format of significant accounting policies is in a summary of significant accounting policies at the very beginning of the notes of the financial statements (Codification, 235-10-50-6). Normally, there is a boilerplate of the disclosure for the significant accounting policies. Compare to the boilerplate formatted significant accounting policies, the critical accounting policies and estimates are normally presented in plain language. The disclosure format should be clear, that the investor could understand easily (SEC, 2002). With a different disclosure place, the critical accounting policies and estimates are only disclosed in MDA. Conclusion After studying both accounting policies, I find out the significant accounting policies and critical accounting policies and estimates are substantially generated by separate individuals with different disclosure purposes. Furthermore, as the supplementary of significant accounting policies, critical accounting policies and estimates normally describe some needed adjustments, if the future economic environment and customers or market financial conditions change. Post Enron period, SECs has taken a very clear-cut stand, for fear of more accounting scandals, by providing more contents about how the uncertainties, assumption, approximation and estimation would affect the companys financial statement in critical accounting policies.

Regard to the play Essay

The 1st act of any play is more than just an exposition. It shows the strengths and weaknesses of the playwright clearly. Comment on this in regard to the play. There are certain aspects the playwright has to keep in mind when he writes the first act of his play. Usually, most of the first acts of plays are as already mentioned, expositions. The writer introduces the protagonist, the antagonist, the setting of the time. Moreover, not only does he set the mood for the rest of the play but he also starts building some dramatic tension between his characters and starts giving us hints about what is going to happen next. But apart from all this, the most difficult thing the playwright has to do in the first act is make it interesting and gripping. This is extremely significant because if the first act of the play is not gripping enough, the readers won’t like to go ahead. This situation is just like how, on a bad foundation, any kind of structure won’t last long and so nothing can be built upon it. So, the dramatist is supposed to catch the reader’s interest and then retain it too, making the first act almost like a mini play in itself. To make the first act attention-grabbing, the dramatist must introduce a conflict – between characters, between situations – and thus build the dramatic tension of the play. This is similar to what Ibsen did in doll’s house. He not only made the readers meet Nora Helmer but he also showed changes in her character in the first act itself. At the outset, Nora was very frivolous and perky but later in the act, she seemed a much more mature woman than one perceived before. Thus Ibsen, as a writer, managed to take his readers through all the subtle nuances in Nora’s character. This came out as Ibsen’s major strength. He showed Nora as silly yet sensible, lying yet truthful, making her character a complete rollercoaster for the readers in the first act itself. The other characters he introduced were torvald and mrs. linde. Where both these characters came to be very linear, Mrs. Linde’s role was more than just Nora’s friend. She was a foil which Ibsen introduced to make us understand Nora in a much better way by contrasting her with Mrs. Linde. Therefore, as one can see, Ibsen took so much pain, put in so much effort, only for making us relate to Nora in as much depth as possible. This was also Ibsen’s another strength which came up in the first act. It was his asset because he knew that his protagonist is unconventional since she is going to walk out on her husband and children for something which people in that time thought to be very trivial – self-respect. Therefore, he recognized the fact that he must do something to make his readers relate with Nora’s emotions and so he used the techniques of contrasting – by using mrs. linde as foil, foreshadowing – by hinting in Nora’s dialogues about what is going to happen later in the play and showing and telling and thus created such an act where if nothing, at least he left the readers curious about Nora and wanting to know more about her and about what happened to her, if not curious about the rest of the play.

Two Film Versions of Shakespeares Romeo and Juliet

Romeo and Juliet is a timeless, classic love story written by the incomparable William Shakespeare. Many of Shakespeare’s works are considered literary classics, but none are more loved than Romeo and Juliet. This play masterfully tells the love story of two teenagers in Elizabethan England. The title characters Romeo and Juliet are members of two feuding families, Romeo is a Montague and Juliet is a Capulet. There are different stylistic ways of portraying Romeo and Juliet, and the two most popular film versions portray two very different styles of this one play. Zeferellis Romeo and Juliet was made in the 1970s, and is the film version most commonly shown in high school classrooms. The newest film version of this play is Baz Luhrmanns†¦show more content†¦One such scene was the infamous balcony scene. Zeferelli stuck to the classical interpretation, while Luhrmann did not. In Zeferelli’s version Juliet was on the balcony outside her bedroom calling rhetorical ly, Romeo, Romeo where fore art thou Romeo? Romeo appears and climbs up the balcony, and they share a couple of small kisses before he departs. However, in Luhrmanns version of the play, events occurred slightly differently. Juliet is walking by the pool, when Romeo startles her and they both fall in the pool. Their conversation then takes place in the pool. In between getting interrupted by a nosy security guard they share several passionate kisses. nbsp; Another significant scene that was portrayed differently in the two versions was the suicide scene. Zeferelli’s version is once again almost exact to what we read in the book. Romeo sees what he perceives to be a dead Juliet lying in her family’s tomb, and distraught by the sight he drinks poison. When Juliet awakens from her sleep she finds Romeo dead, and stabs herself with his knife. 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The film sold millions at the box office and was well received by critics such as Paul Matthews who said that Romeo and Juliet was a, radical invention of a classic text. Although the film was released to late in the year to receive any awards, William Shakespeares Romeo + Juliet was and always will be considered a classic. The reason for the films success was because the film was madeRead MoreComparing the Starts of Two Film Versions of Romeo and Juliet1744 Words   |  7 PagesStarts of Two Film Versions of Romeo and Juliet Romeo and Juliet is a timeless, classical love story written by the unmatched author, William Shakespeare. Many of Shakespeare’s works are considered literary classics, but none are more loved, well known than Romeo and Juliet. This play masterfully tells the love story of two teenagers in Verona, Italy. The title characters, Romeo and Juliet, are members of two feuding families. Romeo is a Montague and Juliet is a Capulet

6 Things To Know About How To Buy a Telescope

Telescopes give skygazers a great way to see magnified views of objects in the sky. Buying that first (or second or fifth) telescope is an exciting moment, so its a great idea to be fully informed before heading out to the stores.  Theres a lot to learn and a telescope is a long-term investment, so its important to learn the terminology. In addition, its always good to know what types of objects are of interest. Some people mainly want to observe planets, while others are into deep sky objects. Those targets help determine which telescope to get. A telescope with eyepiece (lower end), finderscope,and a good mount are important for long-term enjoyment of stargazing.   Andy Crawford/Getty Images Power Is Overrated A good telescope is not JUST  about the â€Å"power†. If a telescope ad touts claims about 300X or other numbers about the â€Å"power† the scope has, watch out! High power sounds great, but, there’s a catch. High magnification makes an object appear larger, which is important. However, the light gathered by the scope is spread over a larger area which creates a fainter image in the eyepiece. So, its important to keep that in mind. Also, high-powered scopes have specific requirements for eyepieces, so its a good idea to check out what eyepieces work best with a given instrument. Sometimes, lower power provides a better viewing experience, particularly if observers are checking out objects that are spread out across the sky, such as clusters or nebulae.   Telescope Eyepieces: Power is Not the Only Object Any new telescope should have at least one eyepiece, and some sets come with two or three. An eyepiece is rated by millimeters (mm), with smaller numbers indicating higher magnification. A 25mm eyepiece is common and appropriate for most beginners. As mentioned above, a telescope’s power or magnification is not the best indicator of a good scope. As with the whole, so the parts. A higher power eyepiece does not necessarily mean better viewing. It may allow you to see details in a small cluster, for example, but if its used to look at a nebula, it will only show a part of the object. So, high- and low-power eyepieces each have their place in observing, depending on what interests the stargazer. Its also important to remember that while a higher magnification eyepiece may provide more details, it may be harder to keep an object in view. To get the steadiest seeing in such cases, its important to use a motorized mount. Remember: a lower-power eyepiece makes it easier to find objects and keep them in view. Lower magnification eyepieces require less light, so viewing dimmer objects is easier. Refractor or Reflector Telescope:  Whats the Difference? The two most common types of telescopes available to amateurs are refractors and reflectors. A refractor uses two lenses. The larger of the two is at one end; its called the objective. On the other end is the lens the observer looks through, called the ocular or the eyepiece. A reflector gathers light at the bottom of the telescope using a concave mirror, called the primary. There are many ways the primary can focus the light, and how it is done determines the type of reflecting scope. Telescope Aperture Size Determines the View The aperture of a scope refers to the diameter of either the objective lens of a refractor or objective mirror of a reflector. The aperture size is the true key to the power of a telescope. Its ability to gather light is directly proportional to the size of its aperture and the more light a scope can gather, the better the image an observer will see. At this point, many beginners just think: I’ll just buy the biggest telescope I can afford. Unless they can afford to invest in their own observatory as well, they should probably not go too big when it comes to an instrument. A small scope that can be transported easily will probably get used a lot more than a larger one that takes some effort to haul around. Typically, 2.4-inch (60-mm) and 3.1-inch (80-mm) refractors and 4.5-inch (114-mm) and 6-inch (152-mm) reflectors are popular for most amateurs. Telescope Focal Ratio. The focal ratio of a telescope is calculated by dividing aperture size into its focal length. The focal length is measured from the main lens (or mirror) to where the light converges to focus. As an example, a scope with an aperture of 4.5 inches and focal length of 45 inches, will have a focal ratio of f/10. While a higher focal ratio does not always mean a higher quality image, it often means as good an image for similar cost. However, a higher focal ratio with the same size aperture means a longer scope, which can translate into a telescope someone has to wrestle with a bit more to get into a vehicle for transport to a viewing area.   Get a Good Telescope Mount is worth the money.   The mount for a scope is just as important as the tube and optics. Most people don’t think of that when they decide to buy a scope unless theyve done their homework. The mount is a stand that holds the telescope steady. It is extremely difficult, if not impossible, to view a distant object if the scope is not very steady and wobbles at the slightest touch (or worse, in the wind!). So, its important to invest in a good, solid telescope mount.   There are basically two types of mounts, altazimuth and equatorial. Altazimuth is similar to a camera tripod. It allows the telescope to move up and down (altitude) and back and forth (azimuth). The equatorial is designed to follow the movement of objects in the sky. Higher end equatorials come with a motor drive to follow the rotation of the Earth, keeping an object in the field of view longer. Many equatorial mounts come with small computers, which aim the scope automatically. Caveat Emptor, Even for a telescope. Yes, let the buyer beware. This is as true today as it ever has been in the past. It also applies to the purchase of a telescope. Just as with any other product, it is almost always true that you get what you pay for. A cheap department-store scope will almost certainly be a waste of money.   The truth is that most people do not need an expensive scope, and its better to buy the best one for the budget. However, its also important to avoid getting suckered in by cheap deals at stores that dont specialize in scopes.   Being a knowledgeable consumer is key. Read everything about scopes, both in telescope books and in articles online about what is really needed for stargazing. Go to astronomy club meetings and do a little parasitic viewing (of course, always ask permission), and ask for advice about telescopes. Most members love to give advice, and theres no better way to experiment with different models of instruments. Edited and updated by Carolyn Collins Petersen.