To: All Staff in the Finance Department
From: Company Chief Executive Officer
Date:
Subject: New policy on Accounting Standards
This is to bring to your attention to the new accounting standards (ASC 842) introduced by FASB. The policy requires operating leases to be reported in the balance sheet at discounted at the present value of future payments on the balance sheet as a liability. Before the change, operating leases were not reported in the balance, but Instead, a lump sum lease/rental payments were reported in the income statement. A large amount of liabilities were thus hidden in the notes, but now will be directly seen on the balance sheet.
I want responsible staff effect these changes in financial reporting as per the policy. Besides, I also want to state that every single lease must be reported separately instead of a lump-sum. I applaud FASB for the move that brings more transparency for investors in public equities. I have noted that the accounting update will have no material change on accounting our model because they were always captured off the balance sheet. However, there will be a significant increase in total liabilities reported in public entities. I look forward to your cooperation in effecting the new changes in the company financial reporting.
Thank you for your cooperation.
To: All Staff in the Finance Department
From: Company Chief Executive Officer
Date:
Subject: Accounting for Investment Securities
I take this opportunity to clarity on best accounting for increasing investing securities in our accounting books. I would advise that we follow the same standards as the Microsoft and Intel when accounting for these securities. Note that Intel and Microsoft’s balance sheet also reported a large amount of investment securities. Short term investments were $3225 and 125,318 million for Intel and Microsoft, respectively. Intel reported assets held for sale were valued at $4716, and other long term investments were valued at $7159 while Microsoft had $6,023 equity and other investments. The short investment assets are valued at fair market price, and loss or profit on revaluation is reported in the income statement. Long term investments are valued at market price and profit or losses reported in the income statement. A cost-based method is applied for specific long-term strategic investment in equity share whose value cannot be easily ascertained for some reasons since they are not publicly traded. Kindly follow this procedure when accounting for our investment securities.
Thank you for your cooperation.