Re:Microsoft reports $22.6B in Q4 revenue
by sbuttgereit on Wednesday July 20, 2016 @08:16AM
(#12128375)
The only trouble I have with what you've said are in your examples for cash basis vs. accrual. Even on a cash basis I have to depreciate capital goods over time. The capital asset still has value regardless of my accounting method, so in a sense I've converted the cash (an asset) into a machine (another kind of asset). I still expense over time under the cash method because I'm representing things like wear and obsolescence rather than showing the commitment to an expense vs. the actual settlement of that commitment.
I think it's easier to demonstrate on the revenue side: if I sell a customer something and give them 30 days to pay, under the cash method I don't record the sale until I actually receive the cash whereas under the accrual method I record the sale when I invoice the customer: in the cash basis Accounts Receivable is basically a non-booking account and under the accrual method Accounts Receivable is an asset account. (Note I'm ignoring issues of deferred revenue :-) ).
I do think your definitions are sound.
Note: there are some U.S. tax rules about the first $X yearly capital purchases being immediately depreciable each year (though it's a relatively small amount).
Non-GAAP lets executives create nicer Power Point presentations.
Re:Microsoft reports $22.6B in Q4 revenue
by droshelovich on Wednesday July 20, 2016 @10:04AM
(#12129068)
Bullseye.
Generally, "Non-GAAP" can mean either IFRS or Cash Basis Accounting
Basically:
GAAP - Generally Accepted Accounting Principles = the way large corporations in the US have to account for things (assets, liabilities, equity, earnings, cash flows, etc.) --> Accruals
IFRS - International Financial Reporting Standards = how European companies account for things --> Accruals
Cash Basis Accounting = the way small businesses usually account for things
Cash Basis Accounting vs. Accrual Accounting (GAAP/IFRS/etc.)
* Cash Basis --> expenses and revenues directly match cash flows, I buy a machine that lasts 5 years today and expense the whole purchase price today
* Accrual Accounting --> expenses are recorded when "incurred" and revenues when "earned", I buy a machine that lasts 5 years today and expense the purchase price over 5 years
Individual standards (IFRS/GAAP, etc.) define these soft terms: incurred, earned, assets, debt, equity, other income, etc.