For the purpose of this submission, the selected company is Apple Beach County Ltd Liability Co. This is a domestic limited liability based in New York. The company produced an annual report on 2015-10-01. Some of the striking features of this report were disclosure notes that defined the investment securities available for sales. This report will be used to answer the underlying questions.
Looking at the annual report, the caption by which the investments are reported on the balance sheet can indeed be reported separate as one of the varied asset titles. However, the caption can also be included with another asset caption. From the annual report, one can successfully identify under which caption the investments are reported in the comparative balance sheet. As such, as it is evident in the annual report, the investments in securities that are available for sale are often reported as either current or non-current assets. However, this necessarily depends on the management’s intent concerning the timing of the eventual sale. For instance, if the management wants to commission an immediate sale, it follows that the investments will be covered as current assets. Current assets are a caption in the balance sheet, which captures the value of every asset, which can be reasonably be converted into cash within a short time, often a year. If the management postpones the sales of the relevant, the investment will be captured as a non-current asset.

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Realized gains refer to a gain whose source is the disposal of an asset through a sales process, often at a higher price than the amount it was bought. In the case that the asset is disbursed at a lower price than the original, the results are a realized loss. In the comparative income statement, it is clearly evident that the realized gains and losses have been reported. There are also the unrealized gains and losses. An unrealized gain is encountered when a stock increase after an investor has bought it, but he or she has not yet sold it. If the opposite of this happens, it is referred to as unrealized loss. However, rather than appearing on the income statement, they have been reported in the OCI. OCI, which abbreviates Other Comprehensive Income, is a statement that contains all changes, which, under the accounting principles and rules, should not appear on the profit and loss statement. On the OCI, the unrealized gains and losses are reported under the shareholder’s equity caption. The key reason for appearing in this particular section is the idea that these gains or losses are based on a stock. In other words, these gains or losses are usually experienced as a result of buying and selling stock. Any transaction that revolves around a stock has to be captured under the shareholder’s value. This better explains the placement of the unrealized gains and losses under the shareholder’s equity caption.

It is also important to explain why the unrealized gains and losses appear on the OCI as opposed to the income statement. As the name suggests, these gains or losses have not been realized yet. Any financial outcome that whose outcomes have not been realized should never appear on the income statement, according to the financial doctrines. Any unrealized change ought to appear on other comparative income only. These gains and losses will only appear on the income once they are realized, mostly in the next annual report.

As the selected annual report shows, these investments have been reflected in the company’s comparative statement of cash flow. They have been captured under investing activities. According to Scott (2014), investing activities refers to financial events that involve buying and selling relatively long-term assets along with other investments. However, as it is evident in the annual report, not each detail that regards these investments is documented or recorded. Rather, only the most valuable information has been captured. Good examples of such include the aggregate revenues and expenditures realized or incurred from transacting the investments. The calculations that led to the figures input on the report are not shown anywhere.

Looking at the annual report under consideration, it is indeed clear that the footnotes provide information, which is not available in the financial statement. However, it is imperative to understand what a footnote stands for. According to Scott (2014), a footnote represents an explanatory and supplemental note, which tends to accompany an entity’s financial reports or statements. Scott (2014) revealed that the exact nature of a footnote differs. However, this difference is founded on the financial framework that has been used in constructing the financial statements. Scott (2014) added that the financial footnote is an inevitable part of the financial statement. Therefore, it is a must that an entity has to issue the footnote to the interested groups such as financial analysts.

In the annual report under question, the footnotes are comprised of two major sections. One of these is the methods used section. In this part, the accounting approach that was used to prepare the financial information contained in the report is shown. The second part is disclosure and financial detail section. In this part, all the assumptions and any potential bias among others are indicated. The information, based on the context of the footnote advanced above; it is apparent that the information provided by Apple Beach County Ltd Liability Co. is important for the target group as it will allow them to make better investment decisions.

  • Scott, W. R. (2014). Financial accounting theory. Sydney: Pearson Education Canada.