The Daily Technical #76: What are some examples of non-recurring items?

Good morning. Welcome to the 76th edition of The Daily Technical. You’re here for one reason so let’s dive in.

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OVERVIEW OF YESTERDAY’S QUESTION
Why are the values of a company's intangible assets not reflected on its balance sheet?

In answering why a company's intangible assets aren't reflected on its balance sheet, highlight the objectivity principle of accrual accounting.

This principle mandates using only verifiable, unbiased data in financial reports, not subjective measures. Internally developed intangible assets, like branding and intellectual property, aren't recorded because they can't be accurately quantified.

However, if these assets are acquired and a confirmable purchase price exists, part of the excess paid can be assigned to these assets, allowing them to be recorded on the closing balance sheet.

Common Mistakes

1. Assuming all intangible assets are omitted from the balance sheet. Only internally developed intangibles lack representation. Highlight acquisitions, where the purchase price justifies their inclusion.

2. Using vague terms like "unrecorded value" can be misleading. Be precise: unrecorded refers to internally developed assets, distinguishable from those acquired.

TL;DR

• Objectivity principle: Use only verifiable, unbiased data in financial reports.

• Only acquired intangible assets with confirmable purchase price appear on balance sheet.

• Internally developed intangibles are not recorded on balance sheet because they can't be accurately quantified.

TODAY’S QUESTION
What are some examples of non-recurring items?

Type your answer here. Within 60 seconds you’ll have custom feedback in your inbox.

THAT’S A WRAP
See you tomorrow,

Mike Lukasevicz
Founder @ HirePrep