How can you just "find" $78 billion dollars?

posts from hell said:
Maybe some accountant on AllDeaf can chime on this....

BBC News - Germany finds extra 55bn euros after accounting error

just seriously...
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[pick me] :giggle:

The article does not explain, specifically, what the problem was but all it would take is for a junior staff member to misunderstand the accounting treatment or classification of a particular asset or liability.

For example, suppose we have a long term debt interest of 1,000,000 and instead of amortizing the debt over 20 years ($50,000 per year) someone calculated the amortization over 5 years ($400,000 per year). That is a $350,000 error to the bad. If someone discovered the error they could reverse it and realize significant savings.

The same could hold true for inadequate accruing of interest revenue. Any accrual is simply a calculation. An estimate so that you match your monthly revenues and expenses (matching principle :) ) If you miscalculate your accrued interest revenue, again, correcting the mistake would result in signifcant revenues and, therefore, improved bottom line.

Make sense?

Yes, I am a number nerd and, yes, geeks freaking rock! WOOT!! :giggle:
 
Oh .... so thats where I put it.

I need to call them pronto and thank them for finding my money for me.
 
rebeccalj said:
[pick me] :giggle:

The article does not explain, specifically, what the problem was but all it would take is for a junior staff member to misunderstand the accounting treatment or classification of a particular asset or liability.

For example, suppose we have a long term debt interest of 1,000,000 and instead of amortizing the debt over 20 years ($50,000 per year) someone calculated the amortization over 5 years ($400,000 per year). That is a $350,000 error to the bad. If someone discovered the error they could reverse it and realize significant savings.

The same could hold true for inadequate accruing of interest revenue. Any accrual is simply a calculation. An estimate so that you match your monthly revenues and expenses (matching principle :) ) If you miscalculate your accrued interest revenue, again, correcting the mistake would result in signifcant revenues and, therefore, improved bottom line.

Make sense?

Yes, I am a number nerd and, yes, geeks freaking rock! WOOT!! :giggle:
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None! But I admire your skills. :lol:
 
rebeccalj said:
[pick me] :giggle:

The article does not explain, specifically, what the problem was but all it would take is for a junior staff member to misunderstand the accounting treatment or classification of a particular asset or liability.

For example, suppose we have a long term debt interest of 1,000,000 and instead of amortizing the debt over 20 years ($50,000 per year) someone calculated the amortization over 5 years ($400,000 per year). That is a $350,000 error to the bad. If someone discovered the error they could reverse it and realize significant savings.

The same could hold true for inadequate accruing of interest revenue. Any accrual is simply a calculation. An estimate so that you match your monthly revenues and expenses (matching principle :) ) If you miscalculate your accrued interest revenue, again, correcting the mistake would result in signifcant revenues and, therefore, improved bottom line.

Make sense?

Yes, I am a number nerd and, yes, geeks freaking rock! WOOT!! :giggle:
Click to expand...

That same junior accountant can see after the first quarter/year that the numbers in the bank account and on the paper don't match, right? I mean -- it's not that hard to see things are not matching up.
 
posts from hell said:
That same junior accountant can see after the first quarter/year that the numbers in the bank account and on the paper don't match, right? I mean -- it's not that hard to see things are not matching up.
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Correct me if I'm wrong, but I think she was using the example of interest rates on loans, not physical cash in the bank.

So a difference of a couple percentage points would affect future cash, and that could be where the extra "money" was found. Money is moved from the "loan expenses" category to the "cash held" category (no idea if those are actual accounting categories, though).
 
DeafBadger said:
Correct me if I'm wrong, but I think she was using the example of interest rates on loans, not physical cash in the bank.

So a difference of a couple percentage points would affect future cash, and that could be where the extra "money" was found. Money is moved from the "loan expenses" category to the "cash held" category (no idea if those are actual accounting categories, though).
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She was...

However, at the end of the day, regardless of how much you earn/lose via interest will be reflected on the bank statement.

It doesnt make sense to me at all.

Especially since they got bailed out...
 
This is why I have a degrees in accounting and am glad I never got to use it.
 
posts from hell said:
That same junior accountant can see after the first quarter/year that the numbers in the bank account and on the paper don't match, right? I mean -- it's not that hard to see things are not matching up.
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No, they would not because the same error is being carried over year after year. The examples I provided are based on accruals. Accruals are just calculations that you make to estimate amounts that will go into your accounting system. So, with an accrual, nothing really hits the bank because it is just a 'paper' transaction.

The only situation that I could think of where there would be a disparity between what the cash in the bank was valued at, and what the accounting system had, would be a bank account that was not known because any business that I've been involved with does monthly bank reconciliations. For example, my client has multiple bank accounts but one account was never recorded on the accounting system and the auditors never caught the mistake either. All of a sudden I received a bank statement, with a bank balance, and it was nowhere to be found on the accounting system so there was no way to reconcile it before that. Then we had to make an entry on our accounting system to reflect that we had more cash than we realized.
 
posts from hell said:
She was...

However, at the end of the day, regardless of how much you earn/lose via interest will be reflected on the bank statement.

It doesnt make sense to me at all.

Especially since they got bailed out...
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If you did not receive your interest payment until 10 years later then, yes, it could still have gone undetected because you would be making 'paper' entries the entire term of the debt or investment.

I've made a number of investments for my client and some of them are short term (ie: one year) and others are longer term (ie: five years). The longer term investments require an accounting entry and we will not know the exact interest income until the investment matures.

But, there are ways to commit fraud on the financial statements. Unfortunately, the article doesn't really say what the initial problem was.
 
Too bad that it didn't happened at the USA goverment. We could use that to pay off the national debts.
 
Assets can be off the balance sheet. Values can be created by models. Income can flow through a separate entity. Accounting can be a very creative endeavor. lol The gross cash receipts and standard expenses are straight forward. The devil is in the details. Corporate professionals know how to keep the revenue up and the taxes down (or nonexistent).
 
I have a degree in accounting and I've audited and worked for a few corporations in the past.

Intentionally overaccruing payroll related liabilities is a common trick. Then, at year-end, if the company needs a "hero" the accounting dept. can "find" a way to make the financials look better.
 
sallylou said:
Assets can be off the balance sheet. Values can be created by models. Income can flow through a separate entity. Accounting can be a very creative endeavor. lol The gross cash receipts and standard expenses are straight forward. The devil is in the details. Corporate professionals know how to keep the revenue up and the taxes down (or nonexistent).
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Exactly! And the more complicated the corporate structure the easier it is for mistakes to be made, or hidden, across all divisions.

One trick is not valuing non-tangible assets (ie: trademarks and copywrights). Then, as it is provable that they do have value, voila, instant boost to your balance sheet.

Jazzberry said:
I have a degree in accounting and I've audited and worked for a few corporations in the past.

Intentionally overaccruing payroll related liabilities is a common trick. Then, at year-end, if the company needs a "hero" the accounting dept. can "find" a way to make the financials look better.
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Yes! Or make things look worse. That is a common trick because it is an estimate so, if it doesn't 'appear' unreasonable, or material, most auditors will let it go if you can defend it. These 'paper' only transactions can affect everything from dividend payments for public companies, bonus payments to Executives and Managers or income taxes payable. If a company is tight on cash it is very common from my experience to manipulate the statements to make it appear that they cannot afford those payments.

Another trick is carrying out a re-valuation of assets, which would increase annual amortization, if a company is purposefully trying to create a loss and, therefore, lower corporate taxes. Because it is a 'non-cash' entry it's one that can be played around with. It isn't something you can do very often but, again, if it can be justified most auditors and Revenue Canada (IRS) will let it go.
 
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