Analyze the importance of Notes to financial statements in interpreting financial statements.
You work for an organization that is seeking growth and recently has hired new district managers to assist in this growth. In talking to other regional managers, you have heard that some district managers do not have a thorough understanding of commonly used accounting tools including an income statement and balance sheet. You have a new district manager hire, John, and see the need to do some training with him so he has a solid understanding of income statements, balance sheets, and the elements that go into them, including advertising costs, Web development costs, and store opening costs.
In preparing to train your new hire, you have determined that the use of examples (a picture is worth a thousand words) can be a great approach to use. So you have decided to gather some examples from the company’s summary of significant accounting policies from its latest financial statements.
You are a regional manager for Urban Outfitters or your selected organization and oversee a number of districts. You have recently brought a new district manager on board and want to ensure he has the knowledge and tools needed to effectively do his job.
The organization you work for is Urban Outfitters. Use the U.S. Securities and Exchange Commission to find the Urban Outfitter’s 2016–2017 financial statement’s summary of significant accounting policies. Look at the data for 2015, 2016, and 2017 for the following examples of essential elements you need to cover with John and ensure his understanding.
- Advertising. Examine the criteria used to expense and capitalize advertising costs and where these costs appear in the financial statement.
- Store opening costs. Examine how store opening and organization costs were handled and where these costs appear in the financial statement.
- Website development costs. Examine the approaches taken during the application and infrastructure development stage and the planning and operating stage.
Link to urban Outfitter’s:
As you prepare your training materials for John, use the examples you collected from the company’s Notes to financial documents to illustrate how you address the following items:
- Explain how one or more of the following costs are captured:
o Store opening. If store opening costs were capitalized, over what time period would you amortize them? Explain why you selected this time period.
o Website development.
- Analyze the importance of Notes to financial statements in interpreting financial statements.
- Explain how the accounting method the company uses affects the financial statements.
- Explain how the financial statements would differ if another method were used to capture the costs.
- If you have a preference for capitalizing or expensing these costs, explain why it is your preference.
Leadership has asked that you develop a training manual that you will use with John and that can be deployed with other new hires as well. The information should address the points identified above within the training manual text. It will also be helpful to include information in regard to why each item is important to the organization as well as the success of the new district manager.
To use your time and John’s time wisely, be conscientious about providing thorough yet concise information. These materials are expected to be used by others for future training needs, so make sure they are well organized and clear.
Training materials requirements:
• 3–4 pages for a training manual.
February 2, 2023
February 2, 2023