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Thread: Michele Bachmann announces presidential campaign

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    Re: Michele Bachmann announces presidential campaign

    Quote Originally Posted by apdst View Post
    So, a reserve account can be set up for anything?
    Well, not anything. There has to be some justifiable business reason to set up a reserve account. Hence why virtually all reserve accounts are generally related to sales as there may be issues of returns, repairs and bad debts. Furthermore, the amounts allocated have to have some reasonable assumptions. You can't allocate a $200 million into bad debt allowance when your total sales are $250 million for the year. Note this treatment doesn't exist for tax. The amounts unspent on the reserve purpose within 2.5 months of year end you allocate into reserves are added back to taxable income. It's called an M-1. But that's neither here nor there.
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    Re: Michele Bachmann announces presidential campaign

    Quote Originally Posted by obvious Child View Post
    Well, not anything. There has to be some justifiable business reason to set up a reserve account. Hence why virtually all reserve accounts are generally related to sales as there may be issues of returns, repairs and bad debts. Furthermore, the amounts allocated have to have some reasonable assumptions. You can't allocate a $200 million into bad debt allowance when your total sales are $250 million for the year. Note this treatment doesn't exist for tax. The amounts unspent on the reserve purpose within 2.5 months of year end you allocate into reserves are added back to taxable income. It's called an M-1. But that's neither here nor there.
    The reserve has to be spent in the same year it's rat-holed away?

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    Re: Michele Bachmann announces presidential campaign

    Quote Originally Posted by apdst View Post
    The reserve has to be spent in the same year it's rat-holed away?
    Within 2.5 months of the year end for tax or it just gets added back to taxable income. But not for GAAP. GAAP lets you carry that reserve potentially indefinitely.
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    Re: Michele Bachmann announces presidential campaign

    Quote Originally Posted by obvious Child View Post
    Within 2.5 months of the year end for tax or it just gets added back to taxable income. But not for GAAP. GAAP lets you carry that reserve potentially indefinitely.
    Is GAAP still valid? Earlier, you made it sound as if GAAP was no longer used.

    The part that I don't understand, is that if you have to spend the reserve, anyway, what's the tax advantage of having a reserve?

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    Re: Michele Bachmann announces presidential campaign

    Quote Originally Posted by apdst View Post
    Is GAAP still valid? Earlier, you made it sound as if GAAP was no longer used.
    Most of the world uses IFRS or International Financial Reporting Standards which differ from US GAAP in several significant ways which I'm not going to go into right now. The US is currently working on convergence with IFRS to make US GAAP essentially the same. That was projected to be done in 2014. IMO that ain't happening as there are a whole host of more important things to do. However, the SEC does allow filings of 10K and 10Q to be done under IFRS. Dual reporting if you will.

    The part that I don't understand, is that if you have to spend the reserve, anyway, what's the tax advantage of having a reserve?
    There is no tax advantage. There's a financial reporting advantage. Investors do not like jumping earnings. Which was the whole reason for smoothing. Corporations would stock income away in reserves to show a smooth rise in earnings over time and when bad years came, they'd reclass reserves as income saying that their early estimates were off to maintain that smooth rise. This is in a basic way fraud.

    Tax and GAAP are two different things. 10Ks are financial reporting for corporations. 1120 is tax reporting for corporations. Reserves allow firms to properly allocate away capital for liabilities in the future at the same time they can store income for rainy days. Basically a firm could in theory, put enough income into reserves to turn a GAAP profit into a GAAP loss, thus proving that Shewolf is indeed correct that a profitable firm could "lose" money.
    Last edited by obvious Child; 06-26-11 at 02:11 AM.
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    Re: Michele Bachmann announces presidential campaign

    Quote Originally Posted by SheWolf View Post
    They hear loss and think it means net operating loss....
    Yeah, you know, kinda the way real people talk about profits and losses. If a company is losing money they are not profitable. It is so easy a concept that anyone could understand it.
    Enough of this.

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    Re: Michele Bachmann announces presidential campaign

    Quote Originally Posted by Misterveritis View Post
    Yeah, you know, kinda the way real people talk about profits and losses. If a company is losing money they are not profitable. It is so easy a concept that anyone could understand it.
    Enough of this.
    Real people???

    If real people talk about losses and profits like they don't understand the difference, then "real people" are ignorant and "real people" don't know how to use economic terminology. Losses and profit are not interchangeable terms. They do not have the same meaning.

    I really don't understand how that's a difficult concept.

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    Re: Michele Bachmann announces presidential campaign

    Apogee Enterprises Inc.'s (APOG) fiscal first-quarter loss narrowed more than expected on a surprisingly strong gain in revenue, the industrial-glass products maker's first top line increase in more than two years.

    Apogee 1Q Loss Narrows On First Sales Gain In Years - WSJ.com

    A company can have a loss and gain revenue, and even do it in the same quarter...

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    Re: Michele Bachmann announces presidential campaign

    Quote Originally Posted by SheWolf View Post
    Real people???

    If real people talk about losses and profits like they don't understand the difference, then "real people" are ignorant and "real people" don't know how to use economic terminology. Losses and profit are not interchangeable terms. They do not have the same meaning.

    I really don't understand how that's a difficult concept.
    You are out of touch.

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    Re: Michele Bachmann announces presidential campaign

    Quote Originally Posted by Misterveritis View Post
    You are out of touch.

    translation: you are not a True Believer.
    __________________________________________________ _
    There are two novels that can change a bookish fourteen-year old's life: The Lord of the Rings and Atlas Shrugged. One is a childish fantasy that often engenders a lifelong obsession with its unbelievable heroes, leading to an emotionally stunted, socially crippled adulthood, unable to deal with the real world. The other, of course, involves orcs.... John Rogers

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