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Disclosure Analysis Paper Essays

Under the full disclosure principle, companies are mandated to disclose financial information to be in compliance with the Security Exchange Commission. The information presented pertains to events that have an impact on the company’s financial position and results (Accounting Tools, 2012). With this purpose in mind, this paper will provide financial information pertaining to Crown Crafts incorporated. The information presented will show an analysis related to the company’s cash, cash equivalents, receivables, and inventory.
Also this information will include a list identifying the components of the business’s cash and cash receivables as well. Crown Crafts Incorporate was created in 1957. The company sells, designs, and distributes infants and toddler products. These products include items such as bedding, blankets, and other nursery accessories. To strengthen their business, the company’s management team implements an aggressive strategy to position the company to take a tremendous opportunity in the global market, resulting in the business acquiring a strong consolidated balance sheet.
The cash and cash equivalents from Crown Crafts incorporated primarily comprise of highly liquid investments purchased with an original maturity of three months or less. For instance, the company’s consolidated balance sheet shows cash and cash equivalent at April 3rd, 2011 are $205,000 and at April 1st, 2012 shows a balance of $214,000 (U. S. Security and Exchange Commission, 2012). Also financial statements notes consider accounts receivables and account payables as cash and cash equivalents. For instance, according to the U. S.
Security and Exchange Commission (2012), “a negative balance outstanding under its revolving line of credit is considered as cash. This is done because these amounts legally are owed to the company are ready for withdrawal upon a company decision” (Pg. 2). Allowances against receivables are mainly contractually agreed-upon deduction for components, such as warehouse allowance and volume deductions, and advertising. To reduce the company expose to credit losses, the company assigns the majority of its trade account receivable under factoring agreements with CIT. In the event f such receivables are not collected as a result to creditworthiness. The company without choice will bear the risk of losses. Management must make estimates about uncollected receivables when analyzing the adequacy of the company’s allowance for doubtful accounts.
This is done by evaluating the business’ account receivables, customer concentrations, historical debts, customer creditworthiness, current economic trends, and changes in its customers’ payment terms (U. S. Security and Exchange Commission, 2012). For instance, the company’s account receivables at April 1st, 2012 showed a balance of $20. million. The net of allowance amounted to $1. 1 million. Out of this money $19. 4 million was under the company agreement and $18,000 shows as a negative balance outstanding under the revolving line of credit. Both amounts combined represent the net amount loss if delinquent receivables are not collected (U. S. Security and Exchange Commission, 2012). Analyzing the disclosure contained within the financial statements notes related to inventory. The company inventory is determined by using the FIFO method, which is determined base on the quantity of inventory sold and the order in which is received.
Once that amount is determined in that specific period is reported in the consolidated balance sheet and the cost of goods sold reported in the income statement. For instance, in April 1, 2012, the company inventory is ($1,630) and at April 3rd, 2011, inventory shows as (632). In addition, management reviews inventory in a periodic basis. If management happens to determine the existence of obsolescence, deterioration, changes in price levels, quantities not expected to be sold within the ordinary course of the business; an allowance is established against the company inventory value during that specific period.
Any of these events are recorded as an expense or recorded in the form of cost of goods sold. The entity also reports, according to U. S. Securities and Exchange Commission (2012), “certain amounts of discontinued finished goods which fall into the establishment of inventory reserves. These amounts are highly subjective and results could differ based on estimates only when inventory for an allowance has been established, later sold or otherwise disposed” (Para. 15).
In Conclusion- Under the full disclosure principle, companies are mandated to disclose financial information to be in compliance with the Security Exchange Commission. Crown Crafts Incorporate was created in 1957. The company sells, designs, and distributes infants and toddler products. To strengthen their business, the company’s management team implements an aggressive strategy to position the company to take a tremendous opportunity in the global market, resulting in the business acquiring a strong consolidated balance sheet.
The information presented pertains to events that have an impact on the company’s financial position and results (Accounting Tools, 2012). Management must make estimates about uncollected receivables when analyzing the adequacy of the company’s allowance for doubtful accounts. This is done by evaluating the business’ account receivables, customer concentrations, historical debts, customer creditworthiness, current economic trends, and changes in its customers’ payment terms.
The cash and cash equivalents from Crown Crafts incorporated primarily consist of highly liquid investments purchased with an original maturity of three months or less. In addition, inventory is determined by using the FIFO method, which is done base on the quantity of inventory sold is based on the order in which is received. Once the balance of cash, cash equivalents, receivables, and inventory are determined, those balances are reported in the consolidated balance sheet, which become important factors in determine the company’s income.
References
AccountingTools.com. (2012). The Full Disclosure Principle. Retrieved from http://www.accountingtools.com/full-disclosure-principle U.S. Security and Exchange Commission (2012). Crown Crafts Inc. Retrieved from http://www.sec.gov/cgi-bin/viewer?action=view&accession_number=0001437749-12006233&xbrl_type=v# Crown Crafts.com. (2012). Retrieved from http://www.crowncrafts.com/profiles/investor/fullpage.aso?BzID=591&to=cp&Nav=0&LangI/d=1&s=347&ID=12901

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