Toll Brothers is one of America’s largest home builders with annual revenues in excess of $5.8 billion. The company’s inventory consists of land acquisition costs, land development costs, home construction costs, and overhead costs related to development and construction. In accordance with generally accepted accounting principles (GAAP), Toll Brothers treats its inventory as a long-lived asset rather than a current asset because its master planned communities can take up to 10 years to fully develop.
While Toll Brothers’ industry has some unique attributes relative to most manufacturers, it is an industry well-suited for job-order costing. For example, each new home that the company builds can be accounted for as a job that gets assigned direct material costs (such as lumber, shingles, and bricks), direct labor (such as subcontracted electricians, plumbers, and roofers), and overhead costs (such as the costs of construction supervisors and the equipment that they use to perform their jobs).
Source: Toll Brothers 2017 Annual Report
Accounting for certain type of assets can vary depending on the industry. As the above case indicates, assets for the construction industry may deviate from GAAP. GAAP conventionally treats assets as current or long-lived with the typical distinction being one year – that is, current assets are those with lives of less than one year whereas long-lived (plant) assets are one year and longer. The home construction industry as stated above for Toll Brothers has nonconventional treatments for assets. The agricultural industries also have nonconventional practices that are written in professional standards. Technology or software development companies may use nonconventional accounting practices as well.
Agricultural assets may be subject to different requirements. An orchard, vineyard, or forest is an asset that may take years to prepare for usage. An example of “produce or harvest from a biological asset (for example, milk, tea leaves and lumber) is inventory. Typically, inventory is a current asset for which the item is recorded at cost. However, for agriculture, the harvested produce is transferred to inventory at fair value less costs to sell; it is thereafter accounted for in accordance with International Accounting Standards (IAS) 42, “Inventories”. However, while the produce is still growing or still attached to the biological asset, its value forms part of the value of the biological asset. The unique requirement for agricultural assets makes exception from standard conventional accounting practices.
If you work in a sector (healthcare, technology, construction, or agriculture sectors), you probably formulate forecasts for the different types of assets with nonconventional accounting practices. When accounting standards allow nonconventional usage of accounting practices, typically the footnotes in the Comprehensive Financial Report will so note such deviations.
Tableau has data modeling packages for forecasting purposes for forecasting purposes that illustrate data analytics relating to the reporting of metrics for the various sectors or industries (construction, agriculture, health care, etc.). Tableau can powerfully illustrate different data models.
For the Unit 2 Discussion, research and analyze a publicly traded company noting their adherence to conventional accounting practices. From their Comprehensive Financial Reports and footnotes, describe to which type of accounting practices they adhere. If they use nonconventional accounting practices like the construction or agricultural industries above, describe the nature of any exceptions. If their accounting policies are standard (conventional) so note that characteristic. If you find companies or industries that further deviate from conventional accounting practices (GAAP), address such deviations. Justify those differences with sound explanations and acceptability within the accounting world. If your company or industry uses GAAP or IFRS or standard accounting practices, state this and clearly explain there are no exceptions.
Describe the companies or industry that you choose to research and identify how their accounting practices conform or deviate from conventional accounting practices (GAAP). Justify any differences with sound explanations and acceptability within the accounting world. Identify and describe the methods that are used.
Submission Requirements
This report should:
be prepared as a Microsoft™ Word document and attached to the unit discussion thread.
explicitly address all required components of this discussion assignment (There is no minimum or maximum in terms of the word count).
be consistent with the most current APA writing style
reflect higher level cognitive processing (analysis, synthesis and or evaluation).
