Accounting Analysis of Boston Beer Essay Example

Accounting Analysis of Boston Beer Essay Example Accounting Analysis of Boston Beer Essay Accounting Analysis of Boston Beer Essay This means it does not own most of its operating assets, instead it pays a fixed price per unit of produce for a specified volume. However, it assumes full responsibility for upkeep and maintenance of these facilities Expenditures, repairs and renewals are charged to expense, while major Improvements are capitalized. All equipment and lease hold are recorded at cost. This Is In line with economic reality as Boston Beer bears all the risks and benefits of these assets as If It owned them, though It holds no title. Thus there Is no accounting bias. Boston Beer Company uses a substantial amount of revenues on Sales and Marketing in a bid to build up its brand image and acquire goodwill. Thus their brand should be an Economic Asset, since it will help Boston Beer sell its products at a premium and increase gross margins. However, Accounting standards do not allow this and so Advertising is expensed in the period during which it was incurred. This results in a bias since the effects of Advertising are more long lasting than a financial year, yet the Flanagan statements do not reflect their true potential. So even If the benefits are recognized after a substantial period, the current period could show them to be a loss making expense. Depreciation on these assets is not mentioned under a separate head, but since they account for them in their balance sheet, we can assume assets are NET of accumulated depreciation. EXPENSES There has been no mention of Provisions for Bad Debts which would give an indication of the firms credit policy and whether they are following an aggressive selling strategy but not actually receiving any payments. This could help inflate Net Income as they recognize revenues when goods are shipped to customers net an undisclosed amount of allowance for Unconvertible Amounts. This is a problem with Accrual Accounting that could be erased by a mention of the Expected Bad Debts so Investors could Judge the real revenues of the company. Also there Is no mention of their refund policy or indeed, the purchase/sales returns which could reduce Inventories Ana sales. I Nils Is poor Ulcerous on tenet part Ana could a way to manipulate statements before the PIP. De construed as Innovation is one of the key strategies employed by Boston Beer Co. To differentiate and establish its niche. However since US GAP does not allow R to be capitalized(though it is a valuable asset), BBC must expense it. They have not provided details of this particular expenditure. A reasonable assumption would be that it has been included as part of General and Administrative expenses but it would be more accurate to show it as a separate entry under Operating expenses as has been done by competitor Redbook (which has no R expenses for 2004-2006). This would help investors in deciding the growth prospects of the company. However, if it has not been included, then the operating expenses are understated which would increase Operating Income and hence Net Income. LIABILITIES We can infer that Boston Beer Companys major liabilities are the debt they take on and the payments they must make to the companies they contract out the production process. We know that they provide all raw materials (hence the inventories) but do not know what payment plan is being used. Our assumption is that they pay for the eggs on a per unit basis for a given volume periodically which is why they have such large Accounts payable figures that increase with sales especially in the last quarter. But a payment schedule and also the price per unit paid should be included to estimate profitability and compare the prices they pay with prevalent market figures. This could be mentioned under Cost of Goods Sold to show if Boston Beer is indeed getting the best price available. Boston Beer is not required to pay taxes under US law since they are a partnership, hence no mention of taxation has been made.