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Michele Bachmann announces presidential campaign

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.
 
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?
 
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?
 
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.
 
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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.
 
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.
 
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... :2wave:
 
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.
 
You are out of touch.

You guys said I didn't know anything about economics, but I do. And it's not only me, the other poster has more experience than I do in finance and business, and he happens to agree with me.

We know what we are talking about... and you say that means we are out of touch. This conversation was about a business article. I am not sure what you think we are out of touch with.
 
translation: you are not a True Believer.

Are we out of touch because we know too much about economics compared to than the average poster.... lol
 
Are we out of touch because we know too much about economics compared to than the average poster.... lol

Stop trying to take the sugar out of the koolade.:mrgreen:
 
Are we out of touch because we know too much about economics compared to ...
Yes. That sums it up. When normal people say a company is losing money they mean it is not profitable. You adjust your meaning to fit whatever you want it to fit. You are out of touch.
 
Yes. That sums it up. When normal people say a company is losing money they mean it is not profitable. You adjust your meaning to fit whatever you want it to fit. You are out of touch.

Somebody was interpreting a business article... The article didn't say the company wasn't making a profit, the other poster assumed that. Business articles are written by business people... I didn't read that article to mean the company isn't making a profit, and the company stock is trading and investors are profiting. Business journalists have standards and ethics to follow. They can't simply write a company isn't profitable based on the definitions you guys are using.
 
I've now heard Bachmann referred to as a RINO.

If Bachmann is a RINO, who the **** is actually conservative?
 
I've now heard Bachmann referred to as a RINO.

If Bachmann is a RINO, who the **** is actually conservative?


Would the true Republican please stand up, please stand up.:mrgreen:
 
Would the true Republican please stand up, please stand up.:mrgreen:

It's the return of the... "Ah, wait, no way, you're kidding,
he didn't just say what I think he did, did he?"
And Dr. Dre said... nothing you idiots!
Dr. Dre's dead, he's locked in my basement! (Ha-ha!)
 
You guys said I didn't know anything about economics, but I do. And it's not only me, the other poster has more experience than I do in finance and business, and he happens to agree with me.

Is Keynes the only economics model to be granted credibility though?

j-mac
 
I've now heard Bachmann referred to as a RINO.

If Bachmann is a RINO, who the **** is actually conservative?

I think she is the real deal. I am days away from backing her. (I am sure she will be grateful for my support).
 
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.

I just pointed out in the past three pages why that argument is total crap. RTFT
 
Yes. That sums it up. When normal people say a company is losing money they mean it is not profitable. You adjust your meaning to fit whatever you want it to fit. You are out of touch.

But that doesn't mean the company is actually losing money. Read the past few pages how companies can easily and legally turn a GAAP profit into a GAAP loss. Shewolf is not wrong, but she's not utilizing the strongest argument out there to prove her point.

Answer me this.

A corporation on 12/30/2011 buys back $50 million in stock. It previously had a pre-tax income of $25 million. Have they really lost money in the sense of on going operations?
 
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But that doesn't mean the company is actually losing money. Read the past few pages how companies can easily and legally turn a GAAP profit into a GAAP loss. Shewolf is not wrong, but she's not utilizing the strongest argument out there to prove her point.

Answer me this.

A corporation on 12/30/2011 buys back $50 million in stock. It previously had a pre-tax income of $25 million. Have they really lost money in the sense of on going operations?

Right. "Just because they are losing money, doesn't mean they are not profitable"...

I've really enjoyed watching the way economic illiterates have tried every way they can to make this sentence true for them.
 
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