Accounting for the nonzero asset corporation. The MPEx standard.

[MPOE-PR]

You probably want to read this.

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[cusdog]

I'm not sure what preexisting accounting standards did to you, but your attack against them is unwarranted.

a) They are not uniquely tailored to fiat currency. Having a your reporting currency in BTC does not change anything structural. Accounting standards were actually developed when the currency was commodity-backed and not fiat.

b) The lack of taxes is also irrelevant to reporting standards. Accounting standards do not match tax standards anyway. All that would happen with BTC securities is that those handbook sections related to taxes (i.e. future income tax method, taxes payable method, disclosure requirements, etc) were just become irrelevant.

c) In your post you discuss forward-looking statements/projections. It is a mistake to include such projections in with the financial statements. The two need to be segregated, like what you see in annual reports.


With respect to your example statements for S.MG:

http://polimedia.us/trilema/2013/smg-june-2013-statement/

a) You need to have note disclosure for the breakdown of your accounts. For example, what your intangibles are composed of and the amortization period (even if it is 12 months). In this case it is obvious because there has been almost no activity, but for business which are in operation it can become complicated.

b) Your treatment of the prize as an intangible is inappropriate. This is a perfect example why relying on pre-existing accounting standards is a good idea. The guidelines and rules with respect to capitalization of intangibles and goodwill is hashed out thoroughly (I prefer IFRS to US-GAAP in this case, but either is good).  I'll save you some reading time: the prize cannot be capitalized and needs to be expensed.

c) You should value the warrants on the B/S. They represent a possible future stake in the business.

d) Your "incoming and outgoing" table, which I presume is a cashflow of sorts, needs to have a rec at the bottom. Basically "Opening + Changes based on the table = ending" and then the ending ties to the cash balance on the B/S. Right now the "Changes" are not even netted.

Point c) is actually a perfect example of what I think the right course of action would be for Financial Reporting. Those preexsting standards which are applicable and make sense should be used, we should not be trying to reinvent the wheel. However, there is indeed too much complexity in certain areas with how current standards deal with things. In those isolated instances, it is certainly justified in attempting to improve clarity for the users of the statements by simplifying. c) is a good example of this as the current standards would treat the warrants in a much more complicated manner. My strategy with TU.SILVER has been to treat outstanding options written by the company as a liability held at cost. Is this compliant with IFRS or US GAAP? no. Is the additional complexity related to adhering to current standards worth it to the users of the statements? no.

[MPOE-PR]

The entirety of your message can be broken into a list of statements predicated on your authority. I am perfectly unimpressed with this: in a battle of authority yet another April 2013 btctalk account and yet-another silver whatever take no cake in a dispute with MP.

Should you be willing to rephrase in a more adequate manner it might perhaps be useful.

[pascal257]

You're arguing with your registration date vs those of others quite often. Maybe you shouldn't even respond if you don't have an argument against what was brought up.

And to spare you to look up: I'm also registered April 2013.

[MPOE-PR]

Let's try and think together, maybe it helps.

You're arguing with your registration date vs those of others quite often.

Perhaps I am. The reason may be (A) a flaw in my reasoning, or (B) a mutual shared characteristic of those with very recent accounts. Such as for instance a tendency to assume rather than research combined with an unwarranted delusion of self importance. The former is a pitfall even experienced members fall into; the latter is amply discussed in psychological literature. They who lack the qualification to do a job also lack the meta-qualification to allow them to distinguish between doing well and doing poorly.

Now, if all you're stating is that A or B, that's all fine and good (and quite banal). If you are actually pretending like A, then you'd better damn well show cause. You fail to do so, and if you fail to do so and we have to judge between you claiming A on your own authority and me claiming B on my own authority we have no choice but to examine your authority and compare it to mine.

This is why you're very well served by actually showing cause, and by you I mean he just as much as you yourself. If you're curious, the reason for this confusion between you and him would be that the only characteristic one could pin on either of you is the date of your registration, other than that you've done nothing and can lay claim to nothing. Again, I can appreciate that this may on the surface (ie, on the basis of your ignorance, easily explained by your recency) seem to work both ways. It is not however the case that it works both ways: you don't know to whom you're speaking because you're ignorant, whereas I don't know to whom I'm speaking because you're meritless.

Now run along and acquire some merits, such as for instance bringing a fucking argument that's useful, rather than more posing and butthurt (which is not useful).

[Peter Lambert]

Without trying to start an argument, I was curious why the S.MG art contest payout was listed as an asset and not an expense?

[cusdog]

Without trying to start an argument, I was curious why the S.MG art contest payout was listed as an asset and not an expense?

Any framework or set of criteria with respect to capitalization vs. expensing that is loose enough to deem the contest payout to be capital in nature can be used to justify capitalized just about every other expense imaginable. There is a reason that preexisting standards are so stringent with respect to capitalization criteria (identifiability, future economic benefit, measurability, etc).  This all seems to be lost on MP.

[Peter Lambert]

The part about the loans where a loan with no end date is accounted as infinite made me smile. Essentially it makes all those PMBs empirically worthless.

[Sukrim]

Well, if you have infinite time, even doing mining by hand and calculating the hashes on paper will earn you 21 million BTC.

I don't really get the accusations against more recent forum members, the points mentioned seem reasonable to me (a May 2011 account... )

[nubbins]

Without trying to start an argument, I was curious why the S.MG art contest payout was listed as an asset and not an expense?

Any framework or set of criteria with respect to capitalization vs. expensing that is loose enough to deem the contest payout to be capital in nature can be used to justify capitalized just about every other expense imaginable. There is a reason that preexisting standards are so stringent with respect to capitalization criteria (identifiability, future economic benefit, measurability, etc).  This all seems to be lost on MP.

This led me to: http://en.wikipedia.org/wiki/Goodwill_(accounting)

[Peter Lambert]

Without trying to start an argument, I was curious why the S.MG art contest payout was listed as an asset and not an expense?

Any framework or set of criteria with respect to capitalization vs. expensing that is loose enough to deem the contest payout to be capital in nature can be used to justify capitalized just about every other expense imaginable. There is a reason that preexisting standards are so stringent with respect to capitalization criteria (identifiability, future economic benefit, measurability, etc).  This all seems to be lost on MP.

This led me to: http://en.wikipedia.org/wiki/Goodwill_(accounting)

While a business can invest to increase its reputation, by advertising or assuring that its products are of high quality, such expenses cannot be booked as contributing to goodwill. There is hence a disconnect: goodwill from acquisitions can be booked, since it is derived from a market or purchase valuation, but similar internal spending cannot be booked, although it will be recognized by investors who compare a company's market value with its book value.

I think this implies booking an expenditure such as this as goodwill is wrong, but I could be reading this incorrectly?

[cusdog]

Your would be correct Mr. Lambert.

The key here however is not that the art contest payout was capitalized, after all MP has indicated he thinks very little of IFRS so it is not a problem per se that he does not follow its rules. What is important is that it would be impossible to develop a framework which both allows something like the contest payout to be capitalized while at the same time not allowing all sort of other absurd things to be capitalized that any sane person would think should be expensed. One of the biggest areas of fraud and management manipulation of performance has been aggressive capitalization. WorldCom is but one example of many. There is a reason that the criteria is so fleshed out in IFRS and US GAAP. MP is effectively trying to create a framework on an ad hoc basis. It is doomed to failure unless he leverages heavily off of current mainstream standards.

[nubbins]

While a business can invest to increase its reputation, by advertising or assuring that its products are of high quality, such expenses cannot be booked as contributing to goodwill. There is hence a disconnect: goodwill from acquisitions can be booked, since it is derived from a market or purchase valuation, but similar internal spending cannot be booked, although it will be recognized by investors who compare a company's market value with its book value.

I think this implies booking an expenditure such as this as goodwill is wrong, but I could be reading this incorrectly?

Emphasis mine; what counts as an acquisition? They've got BTC1.337 worth of artwork, acquired from a contest winner.

[cusdog]

Sorry, double post

[cusdog]

While a business can invest to increase its reputation, by advertising or assuring that its products are of high quality, such expenses cannot be booked as contributing to goodwill. There is hence a disconnect: goodwill from acquisitions can be booked, since it is derived from a market or purchase valuation, but similar internal spending cannot be booked, although it will be recognized by investors who compare a company's market value with its book value.

I think this implies booking an expenditure such as this as goodwill is wrong, but I could be reading this incorrectly?

Emphasis mine; what counts as an acquisition? They've got BTC1.337 worth of artwork, acquired from a contest winner.

Your reading of "acquisition" is not correct. The type of goodwill that the article is referring to is when one company acquires another, the difference between the purchase price and the Book value + FMV adjustments is treated as goodwill on the B/S of the acquirer. Goodwill is basically the extent to which the acquirer "overpays" for the identifiable assets of the business. "Acquisition" in this context does not refer to merely the purchasing of any asset.

There is a little more complexity here such as negative goodwill and when there is a non-controlling interest, but you get the gist of it.

[nubbins]

While a business can invest to increase its reputation, by advertising or assuring that its products are of high quality, such expenses cannot be booked as contributing to goodwill. There is hence a disconnect: goodwill from acquisitions can be booked, since it is derived from a market or purchase valuation, but similar internal spending cannot be booked, although it will be recognized by investors who compare a company's market value with its book value.

I think this implies booking an expenditure such as this as goodwill is wrong, but I could be reading this incorrectly?

Emphasis mine; what counts as an acquisition? They've got BTC1.337 worth of artwork, acquired from a contest winner.

Your reading of "acqusition" is not correct. The type of goodwill that the article is referring to is when one company acquires another, the difference between the purchase price and the Book value + FMV adjustments is treated as goodwill on the B/S of the acquirer. Goodwill is basically the extent to which the acquirer "overpays" for the identifiable assets of the business.

I suspected as much (used to work for a hungry insurance underwriter). Thanks for the clarification.

[Jim Rockford]

https://i.imgur.com/7BGvoVV.jpg

HAHAHAHHAHAHAHAAHAHAHAHAHAHAHA

Liar, Lunatic or Lounge Lizard.

[cusdog]

Not a problem. Yea, typically banks, insurance companies and private lenders will back out of goodwill when assessing a company. I'm not sure if anybody but me cares, but the history of goodwill and its treatment by the accounting profession is fascinating. It is one of those things which everybody would rather not allow because of how fuzzy and potentially misleading it is, but it has to be allowed as it does more often than not represent the true economic substance of an acquisition (nobody would be able to buy Coke or McDonalds at Book Value + FMV adjustments, for example).

[MPOE-PR]

Without trying to start an argument, I was curious why the S.MG art contest payout was listed as an asset and not an expense?

The payout is listed as an expense (in red, first table). The thing which was obtained in exchange for it is listed as an asset, of the intangible kind. I won't bother with the pedestrian discussion of goodwill as understood by the local wikipedia experts.

Any framework or set of criteria with respect to capitalization vs. expensing that is loose enough to deem the contest payout to be capital in nature can be used to justify capitalized just about every other expense imaginable. There is a reason that preexisting standards are so stringent with respect to capitalization criteria (identifiability, future economic benefit, measurability, etc).  This all seems to be lost on MP.

I would guess reading diligently is not where your interests lie. You know there's something to be said for reading with a view towards understanding the subject matter, as opposed to whatever it is you're doing.

HAHAHAHHAHAHAHAAHAHAHAHAHAHAHA

Liar, Lunatic or Lounge Lizard.

I take it you rarely see people.

[Peter Lambert]

Without trying to start an argument, I was curious why the S.MG art contest payout was listed as an asset and not an expense?

The payout is listed as an expense (in red, first table). The thing which was obtained in exchange for it is listed as an asset, of the intangible kind.

Aha, I had forgotten about the artwork retained after the contest. I guess I saw the category "Intangible assets and goodwill" and mistakenly thought that was part of goodwill rather than an intangible asset. Thanks for answering my question

But now we know a bit more about "goodwill". Is it used in the same way in this accounting standard as described in the wikipedia quote? (If somebody wants to cite a better source than wikipedia, that would be great too)