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by wisty
5578 days ago
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Most of the hard problems are to do with depreciation, and the legalities of how you classify them. For example, Police departments have dogs. Dogs are assets. If all government departments are told to use accrual (rather than cashflow), they need to depreciate assets. So the account needs to figure out how dogs depreciate. Should you assume that a dog has a useful life of 10 years, and loses 10% of its initial value every year? Or that it exponentially decays, as it gets older and less able to sniff bad guys? Or should it only be 5 years? What do you do if a dog ends up working long past its expiry date? It can be tricky to come up with sensible numbers. Especially when accountants don't have domain knowledge, and people who do don't like speaking to them. |
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I would generalise that to say that all the hard problems in accounting are ones of classification.
Does sale X fall in 2010 or 2011?
Do we book the inventory when we order it, when it is delivered to our warehouse, when it is delivered to our shop, or all three? And if we use some combo, how do we combine them in LIFO calculations?
We've just donated $100,000 to Fashionable Cause, a charitable foundation founded by Irish rockstar Nobo and in exchange he will wear our platform shoes exclusively. Do we book this under philanthropy or marketing? If philanthropy, do we consider it part of the overhead cost for the shoes sold?
And so on and so on.
Most of the big bucks in accounting comes from coming up for clever excuses as to why something should be categorised in a certain way.