In: Business and Management

Submitted By rnmeier
Words 757
Pages 4
Amid inquiry from the SEC, and the Department of Justice, and in the atmosphere of negative press, executives at Polymedica have been forced to publicly address concerns regarding accounting practices of their direct response advertisement. Short sellers began unloading stock, stating that Polymedica was misleading investors with overstated assets and revenue. According to GAAP of expense recognition, all advertising is recorded as expense. To understand these circumstances, it is necessary to define assets and expenses and their differences as it relates to this case. Assets are all things of value that the organization has the right to use including financial resources, equipment and other physical resources in order to generate business. Examples of assets are cash and cash equivalents (things that can be converted to cash quickly), amounts owed to the organization (accounts receivable), and marketable securities. Assets also include the plant, property, and equipment that is owned by the company and used in the production of goods and services. Another type of assets includes intellectual property such as copyrights or patents which outline rights to profit generated exclusively under these documents. Assets are sub-divided into current and non-current with current assets to be utilized during the current operating cycle which is usually 1 year. Assets are disclosed on the balance sheet and provide a snapshot of the company’s financial resources and are balanced against liabilities to show owner equity. Expenses are outflows or other use of assets and/or incurrence of liabilities that occur in the delivery of goods and services. These are reflected in the income statement and are deducted from revenue to show net income for a given time period, usually the operating cycle of 1 year. The net income then reflects the company’s viability and…...

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