Saturday, April 20, 2013

Achieving Proper Cut-Off

Every time a new biking season comes around, I tell myself that "this will be the year" that I finally get an accurate count of my annual bike mileage.  In each of the past two years, I purchased a new bike but failed to buy a bike computer at the same time.  As a result, I've ridden hundreds of miles that never get recorded, or they get recorded but I forget to identify how many relate to one year versus the next.  A classic cut-off problem:

(Disclaimer: if you have no interest in accounting nerdspeak, just skip to the bolded part below)

AU Section 326:

The Use of Assertions in Obtaining Audit Evidence

.14 Management is responsible for the fair presentation of financial statements that reflect the nature and operations of the entity.  In representing that the financial statements are fairly presented in conformity with generally accepted accounting principles, management implicitly or explicitly makes assertions regarding the recognition, measurement, presentation, and disclosure of information in the financial statements and related disclosures.

.15 Assertions used by the auditor (see paragraph .16) fall into the following categories:

a. Assertions about classes of transactions and events for the period under audit:
iv. Cutoff.Transactions and events have been recorded in the correct accounting period.

But this year IS the year!  I swapped out the Cateye from the Long Haul Trucker and installed it on the Cross Check, my go-to ride these days.  Unfortunately I've already logged a few miles this year, but forgot to first take a peak at the odometer to find out what my opening balance was for 2013.

As such I've had to prepare a "roll-back" schedule to arrive at the ending balance for 2012.  This is similar to what a lot of my clients in public accounting would do if they didn't perform their inventory count right at December 31. Depending on the amount of activity before or after the count and year-end date, this could get messy.

My situation will be fairly straight forward and since I haven't ridden at all this year on the Giant, no roll-back is necessary for those miles.  Here are the key odometer stats, complete with workpapers supporting the balances:

2013 Opening Balances

916 miles = 2013 opening balance, Cross Check

1,111 miles - 2013 opening balance, Giant TCR

The 916 miles comes from backing out the 35 miles already included in the odometer, which actually relate to the 2013 riding year.

As long as I remember to compare these totals to the miles on the odometers as of December 31, I should have no problem calculating and reporting my miles this year.

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