a company's fiscal year must correspond with the calendar year.

Learn accounting fundamentals and how to read financial statements with CFI’s free online accounting classes. A labor strike that could potentially threaten the company into bankruptcy should be disclosed in the financial statements.

In addition, agreements entered into by the Company sometimes include indemnification provisions which may subject the Company to costs and damages in the event of a claim against an indemnified third party. The Company believes decisions by customers to purchase its hardware products depend in part on the availability of third-party software applications and services. There is no assurance that third-party developers will continue to develop and maintain software applications a company’s fiscal year must correspond with the calendar year. and services for the Company’s products. If third-party software applications and services cease to be developed and maintained for the Company’s products, customers may choose not to buy the Company’s products. The Company relies on sole-sourced outsourcing partners in the U.S., Asia and Europe to supply and manufacture many critical components, and on outsourcing partners primarily located in Asia, for final assembly of substantially all of the Company’s hardware products.

The norm in private industry is to produce a budget for each fiscal year. Some government organizations also prepare annual plans, but two-year budgets are also standard in government. The calendar year, of course, begins 1 January and runs through 31 December—always. Calendar days and years are defined by solar events, moreover, which means they are do not change. Calendar days and weeks impact business operations by determining when the firm opens or closes for business. Third, explaining the reasons that individual governments, companies, and other organizations define their fiscal years differently.

Under the provisions of ASC Topic 718, the Company determines the appropriate fair value model to be used for valuing share-based payments and the amortization method for compensation cost. Cash and cash equivalents include cash and liquid investments with original maturities of three months or less. Cash and cash equivalents includes amounts due in respect of credit card sales transactions that are settled early in the following period in the amount of $128 million at January 30, 2016 and $111 million at January 31, 2015. The fair value as of the respective vesting dates of RSUs was $6.1 billion, $5.1 billion and $4.8 billion for 2017, 2016 and 2015, respectively. The majority of RSUs that vested in 2017, 2016 and 2015 were net share settled such that the Company withheld shares with value equivalent to the employees’ minimum statutory obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. The total shares withheld were approximately 15.4 million, 15.9 million and 14.1 million for 2017, 2016 and 2015, respectively, and were based on the value of the RSUs on their respective vesting dates as determined by the Company’s closing stock price.

a company's fiscal year must correspond with the calendar year.

The exchange rate used also depends on the method of valuation that is used. Assets and liabilities valued at current costs use the current exchange rate and those that use historical exchange rates are valued at historical costs. On a balance sheet, the value of inventory is the cost required to replace it if the inventory were destroyed, lost, or damaged. Inventory includes goods ready for sale, as well as raw material and partially completed products that will be for sale when they are completed.

Plant assets and intangible assets are usually long-term assets that are used to produce or sell products and services. Recording revenues before they are earned overstates current-period income; recording revenues in periods after they have been earned understates the recording period’s income. The time period principle assumes that an organization’s activities can be divided into specific time periods.

What Fiscal Quarter Are We In?

This indicates the ability to service current debt from current income, rather than through asset sales. Cash, receivables, and liabilities are re-measured into U.S. dollars using the current exchange rate. Inventory, property, equipment, patents, and contributed capital accounts are re-measured at historical rates resulting in differences in total assets and liabilities plus equity which must be reconciled resulting in a re-measurement gain or loss. Generally, sales growth, whether rapid or slow, dictates a larger asset base – higher levels of inventory, receivables, and fixed assets . As a company’s assets grow, its liabilities and/or equity also tends to grow in order for its financial position to stay in balance. How assets are supported, or financed, by a corresponding growth in payables, debt liabilities, and equity reveals a lot about a company’s financial health. Each of the three segments on the balance sheet will have many accounts within it that document the value of each.

That is, the total value of a firm’s assets are always equal to the combined value of its “equity” and “liabilities. ” In other words, the accounting equation is the mathematical structure of the balance sheet. We’ll do one month of your bookkeeping and prepare a set of financial statements for you to keep.

a company's fiscal year must correspond with the calendar year.

In an accounting context, shareholders ‘ equity (or stockholders ‘ equity, shareholders’ funds, shareholders’ capital, or similar terms) represents the remaining interest in assets of a company, spread among individual shareholders of common or preferred stock. In financial accounting, a liability is defined as an obligation of an entity arising from past transactions or events, the settlement of which may result in the transfer or use of assets, provision of services bookkeeping or other yielding of economic benefits in the future. By using the temporal method, any income-generating assets like inventory, property, plant, and equipment are regularly updated to reflect their market values. The gains and losses that result from translation are placed directly into the current consolidated income. A method of foreign currency translation that uses exchange rates based on the time assetsand liabilities are acquired or incurred, is required.

130) A company’s post-closing trial balance has total debits of $40,560 and total credits of $40,650. Accordingly, the company should review for errors in the closing process. 129) The aim of a post-closing trial balance is to verify that total debits equal total credits for temporary accounts, and all temporary accounts have zero balances. 126) The steps in the closing retained earnings process are close credit balances in revenue accounts to Income Summary; close debit balances in expense accounts to Income Summary; close Income Summary to Retained Earnings; close Dividends to Retained Earnings. 118) A worksheet can be helpful in showing the effects of proposed or “what if” transactions but not in helping to prepare interim financial statements.

Decrease Assets And Increase Expenses

Revenue is recorded net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded as current liabilities until remitted to the relevant government authority. For third-party applications sold through the App Store and Mac App Store and certain digital content sold through the iTunes Store, the Company does not determine the selling price of the products and is not the primary obligor to the customer. Therefore, the Company accounts for such sales on a net basis by recognizing in net sales only the commission it retains from each sale. The portion of the gross amount billed to customers that is remitted by the Company to third-party app developers and certain digital content owners is not reflected in the Company’s Consolidated Statements of Operations. The Company regularly reviews its foreign exchange forward and option positions and interest rate swaps, both on a stand-alone basis and in conjunction with its underlying foreign currency and interest rate exposures. Given the effective horizons of the Company’s risk management activities and the anticipatory nature of the exposures, there can be no assurance these positions will offset more than a portion of the financial impact resulting from movements in either foreign exchange or interest rates. Further, the recognition of the gains and losses related to these instruments may not coincide with the timing of gains and losses related to the underlying economic exposures and, therefore, may adversely affect the Company’s financial condition and operating results.

a company's fiscal year must correspond with the calendar year.

If the Company is unable to continue to develop and sell innovative new products with attractive margins or if competitors infringe on the Company’s intellectual property, the Company’s ability to maintain a competitive advantage could be adversely affected. The following discussion of risk factors contains forward-looking statements. Many of the Company’s products are designed to include intellectual property obtained from third parties.

For sales of qualifying versions of iOS devices, Mac, Apple Watch and Apple TV, the Company has indicated it may from time to time provide future unspecified software upgrades to the device’s essential software and/or non-software services free of charge. Because the Company has neither VSOE nor TPE for the unspecified software upgrade rights or the non-software services, revenue is allocated to these rights and services based on the Company’s ESPs. Revenue allocated to the unspecified software upgrade rights and non-software services based on the Company’s ESPs is deferred and recognized on a straight-line basis over the estimated period the software upgrades and non-software services are expected to be provided. As of September 30, 2017, the Company had deferred tax assets arising from deductible temporary differences, tax losses and tax credits of $3.9 billion and deferred tax liabilities of $31.5 billion.

Defining The Balance Sheet

3) Interim financial statements report a company’s business activities for a one-year period. For subsequent events that are new events and thus do not provide additional information about pre-existing conditions that existed on the balance sheet, these events are not recognized in the financial statements.

Such losses would only be realized if the Company sold the investments prior to maturity. The Company must purchase components and build inventory in advance of product shipments and has invested in manufacturing-related assets, including capital assets held at its suppliers’ facilities.

  • In major states and major foreign jurisdictions, the years subsequent to 2003 generally remain open and could be subject to examination by the taxing authorities.
  • The Company intends to increase its dividend on an annual basis, subject to declaration by the Board of Directors.
  • Forward-looking statements can also be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” and similar terms.
  • Failure to obtain the right to make third-party digital content available, or to make such content available on commercially reasonable terms, could have a material adverse impact on the Company’s financial condition and operating results.

Management believes it is more likely than not that forecasted income, including income that may be generated as a result of certain tax planning strategies, together with future reversals of existing taxable temporary differences, will be sufficient to fully recover the deferred tax assets. The Company will continue to evaluate the realizability of deferred tax assets quarterly by assessing the need for and the amount of a valuation allowance. The year-over-year increase in other income/, net during 2017 was due primarily to higher interest income and the favorable impact of foreign exchange-related items, partially offset by higher interest expense on debt. The year-over-year increase in other income/, net during 2016 was due primarily to higher interest income, partially offset by higher interest expense on debt and the unfavorable impact of foreign exchange-related items. The weighted-average interest rate earned by the Company on its cash, cash equivalents and marketable securities was 1.99%, 1.73% and 1.49% in 2017, 2016 and 2015, respectively.

Upon approval of the 2014 Plan, the Company reserved 385 million shares plus the number of shares remaining that were reserved but not issued under the 2003 Plan. Shares subject to outstanding awards under the 2003 Plan that expire, are canceled or otherwise terminate, or are withheld to satisfy tax withholding obligations with respect to RSUs, will also be available for awards under the 2014 Plan.

Breaking Down The Balance Sheet

 California adds $6 to $10 of sales tax to the cost of computers and televisions to fund recycling programs. The company paints buildings, called Sky High Painting Jaewan invests $60,000 of his own money in Sky High Painting Painting. Timing Issues Accountants divide the economic life of a business into artificial time periods .

A substantial majority of the Company’s outstanding trade receivables are not covered by collateral, third-party financing arrangements or credit insurance. The Company’s exposure to credit and collectability risk on its trade receivables is higher in certain international markets and its ability to mitigate such risks may be limited. The Company also has unsecured vendor non-trade receivables resulting from purchases of components by outsourcing partners and other vendors that manufacture sub-assemblies or assemble final products for the Company. In addition, the Company has made prepayments associated with long-term supply agreements to secure supply of inventory components.

That specific moment is the close of business on the date of the balance sheet. A balance sheet is like a photograph; it captures the financial position of a company at a particular point in time. As you study about the assets, liabilities, and stockholders’ equity contained in a balance sheet, you will understand why this financial statement provides information about the solvency of the business. According to this principle, an organization’s activities are identified with specific time periods, such as a month, a three-month quarter, or a year. Most organizations use one year as their primary accounting period and prepare annual financial statements. However, nearly all organizations also prepare interim financial reports that cover one or three months of activity.

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In general, the Company is a net receiver of currencies other than the U.S. dollar. Accordingly, changes in exchange rates, and in particular a strengthening of the U.S. dollar, will negatively affect the Company’s net sales and gross margins as expressed in U.S. dollars. There is a risk that the Company will have to adjust local currency product accounting pricing due to competitive pressures when there has been significant volatility in foreign currency exchange rates. The lower effective tax rate in 2017 compared to 2016 was due to a different geographic mix of earnings and higher U.S. The lower effective tax rate in 2016 compared to 2015 was due primarily to greater R&D tax credits.

The Company classifies certain long-lived assets as held for disposal by sale and ceases depreciation when the particular criteria for such classification are met, including the probable sale within one year. For long-lived assets to be disposed of by sale, an impairment charge is recorded if the carrying amount of the asset exceeds its fair value less costs to sell. Such valuations include estimations of fair values and incremental direct costs to transact a sale. Cost of sales consists of the cost of merchandise, including inbound freight, and shipping and handling costs. An estimated allowance for future sales returns is recorded and cost of sales is adjusted accordingly. Adjusting Entries for “Prepaid Expenses” Depreciation Buildings, equipment, and vehicles (long-lived assets) are recorded as assets, rather than an expense, in the year acquired. Companies report a portion of the cost of a longlived asset as an expense during each period of the asset’s useful life .

This is “the process of allocating the costs of these assets over their expected useful life”. A record containing all accounts used by a company, a collection of all accounts and their balances. “Liquidity” is a measure of how quickly an asset can be converted into cash. The chart of accounts proves that all transactions were correctly journalized and posted. The owner’s equity represents the number of assets that can be claimed by creditors.

The Company believes its stock price should reflect expectations of future growth and profitability. The Company also believes its stock price should reflect expectations that its cash dividend will continue at current levels or grow and that its current share repurchase program will be fully consummated. Future dividends are subject to declaration by the Company’s Board of Directors, and the Company’s share repurchase program does not obligate it to acquire any specific number of shares. If the Company fails to meet expectations related to future growth, profitability, dividends, share repurchases or other market expectations, its stock price may decline significantly, which could have a material adverse impact on investor confidence and employee retention.

Disclosure of accounting policy for stock option and stock incentive plans. This disclosure may include the types of stock option or incentive plans sponsored by the entity the groups that participate in each plan significant plan provisions and how stock compensation is measured, and the methodologies and significant assumptions used to determine that measurement. Disclosure of accounting policy for revenue recognition for the sale of goods, which is a transaction between an entity delivering a tangible good to a purchaser.