I am not talking about eBooks or Audiobooks, although it would be a novel idea to try those formats for these book: I am talking about the financial statements lots of companies need to present to their stakeholders, their parent companies, their regulators and their accountants.
More and more information is required to be included, and included in quite a bit of detail.
The new kid on the block is Lease Accounting. A proposal has just been released by the IASB and US-FASB to include information about the (right to use) assets and liabilities (to pay rentals) in the statement of financial position (balance sheet). Here’s a link.
Timeframes are not yet set in stone, but when it goes live (think: 2012-2013), you will need to include the previous year as well, for comparison.
So for planes, trains, automobiles, offices, factories, computers, printers etc. it all seems to be quite straightforward: include. But what about the grey areas? Heaven forbid that rules and regulations are crispy clear. So it will be a bit of a guess for now whether you need to include, for instance, the Cloud in your statements. May be dependent on the type of contract, but any liability will need to be made clear. One could state: if you have the right to use Cloud services, these need to be included in the books. Of course, Leases were already included in the books, but the different types of Leasing required different types of accounting. No longer so: one model for all Leases. And that would be the detailed one.
Even more interesting would be the forecast. One needs to not only take into account the agreed terms but also the chance of under or overextending the individual contracts. So if you make a contract for the lease of a laptop for, say, 3 years, you would have to look at the averages of laptops being returned earlier or later.
Put that to the Cloud and we could wonder how much we need to register and extrapolate in order for our liabilities to be forecasted correctly. Or reported correctly for that matter. And what would be the scope of the “right to use”? Just the processing power? The storage? Bandwidth?
Thinking about this a bit further (Lease: “To grant use or occupation of under the terms of a contract.”): supposing a company would hire me (use me) for an assignment of longer duration, would I be mentioned in the financial statements? Under assets, I hope.
So, we better start adjusting our processes and procedures to get a good and detailed grip on what we lease. And when engaging with the cloud, stay out of the fog for the sake of your books.