ACCOUNTING AND TAX

An old law designed to protect the rights of individuals has recently been haunting many companies.

States have begun enforcing unclaimed property laws zealously, much to the dismay of CFOs, controllers, and tax departments who would rather be focusing attention on business than on tracking down the whereabouts of owners of unredeemed gift certificates and credit balances. While each transaction reviewed by an auditor may be small, the resulting overall assessments can exceed several million dollars. Such assessments provide a strong incentive for states to pursue an unclaimed property audit and an even stronger incentive for companies to avoid one. 
 

The retail method is dead—done in by the widespread use of computers! Or, to put it more gently, the retail method of accounting for inventories has outlived its usefulness.  

For ages, retailers used only the cost method to value their inventories. That is, they equated their inventory with the actual cost of the merchandise it held. But as retailers grew and the number of items they sold expanded, and their volumes increased, many retailers became totally overwhelmed by the annual chore of counting out and costing their inventories.

To ease this burden, the retail method was introduced. It was a more economical way of measuring inventory without physically counting every item in stock. Today, however, with computers doing much of the number crunching that had been so time-consuming, the retail method is in resurgence. It is a "hot" topic at many conferences and is seen as a potential source of significant savings for many companies.

Excerpt from Tax Update Written for Big Five Firm
FASB 131: New Accounting Rule Requires More Information from "Segmented" Companies

In June of 1997, the Financial Accounting Standards Board (FASB) issued a new rule requiring companies to disclose more information about the various segments they operate. For example, a company that operates a department store, mail order business, and specialty chain will have to report on each, not just the aggregate.  

Why the New Rule?

The accounting profession had dealt with reporting information on various business segments back in 1976, with the issuance of FASB 14, "Financial Reporting for Segments of a Business Enterprise." Over the ensuing years, however, the SEC and the security analyst community were not happy with the extent of disclosure about different segments. These groups felt they were not getting enough information, as too many companies were saying they had "only one business."