Articles and surveys abound on the unbelievable loss of faith in institutions across every sector. The author asks where you might be deceiving yourself about your official external financial statement package?
Consider that accounting financial statement reserves and accruals, like reserves for bad debts, inventory accounts, and accrued liabilities, are merely guesses, sometimes manipulated for immediate organizational aims. Many of those involved in creating those best-guess reserves agree with me. Others may be disheartened when confronted with the need to truthfully face the possibility that a lack of conservatism in their company’s balance sheet prevents accurate and timely information about financial resources available, particularly in carrying out planned initiatives on which financial and professional futures rely.
When a new CEO is inclined to “write off everything including the kitchen sink,” why are reserves and accruals the first place they look? Because far too often those estimates or best guesses were far, far too optimistic, and people no longer graciously cover up for predecessors.
Before bankers, auditors, or the new “kitchen sink write-off” leader reviews your balance sheet, do a self-test by answering the following questions:
- To what extent do your people “fudge the book?”
- How adequate are your balance sheet reserves?
- How do you know if people are playing games with your balance sheet? Whether your organization is small or middle-market, or even a major international institution, how many far-too-optimistically, dramatically undervalued liabilities (or unrealistically, overvalued assets) distort crucial financial and operational information needed to make the best business decisions?
You can access the full article at http://riskandcompliancemagazine.com/liabilities-or-overstated-assets-hidden-in-broad-daylight/Please comment on why you agree or disagree with my suggestions or contact me about your unique situation or a discussion on good old fashioned over optimism or possibly puffery can lead you astray when you make crucial management decisions based on the best information available to you – in case it is partially baked or filleted. 678-319-4739 or www.fiscaldoctor.com/contact-us/ .
