Chapter 4 Breakwater Resources Ltd. Annouced Financial and Operating Results

http://www.marketwatch.com/story/breakwater-resources-ltds-2009-year-end-and-fourth-quarter-financial-and-operating-results-2010-02-25-183500?reflink=MW_news_stmp


Summary


The article is the financial and operating results of Breakwater Resources Ltd. Breakwater Resources Ltd. is a a mining, exploration and development company which produces zinc, copper, lead and gold concentrates. They have a very conservative revenue recognition policy and the recognition of sales can be as much as six months after the date of concentrate production. For the year of 2009, the company recognized $0.8 million compared with a net loss of $88.3 million in 2008.


Connection

Although their revenue recognition is much more conservative than the method most of businesses use, it is also safer than most of revenue recogniting method. Management can also make sure that the company will collect what is owed to them. Because the GAAPs are not laws, businesses get lots of ways and chances to cheat. For example, a corporiation can make something up to recognize revenue even before the actual revenue is produced. The GAAPs should become laws as soon as possible.

Reflection

For junior accoutants, sometimes they are just told what to do, not why to do it. Number one reason is that they don't want to lose their jobs. As long as there is profit, ethnics and principles can never be completely obeyed by people. If someday we are asked to make something up in the accounting book, I'm sure lots of people would do it. Due to the recession, many companys are on the edge of bankruptcy. That is the second reason why they lie in their book. There is really no way to solve the lying problem, we can only hope that we can be smarter and more careful about what we do.