Notes to, and forming part of, the financial statements

Today, we are going to look at some accounting basics – I share them with you in the hope they will prevent you from suffering the same losses I have.

I take as my example, the film Friends with money.



First of all, I would like to make clear some of the basic assumptions underlying my calculations.

Namely, that despite their inherent value:

1 x Joan Cusack

PLUS

1 x Frances McDormand

WILL NEVER offset the negative equity of

1 x Jennifer Aniston

Let’s look more closely at the correct treatment of Jennifer Aniston, shall we? You may think that, being a completely empty vessel, incapable of conveying any complexity of character, would mean that she attracts, as an ‘asset’, a neutral value, at worst. Further, you might assume that this asset might attain maturity over time.

Don’t feel bad if you got caught out here, it is a common error.

You have to keep in mind the Cusack/McDormand matrix set out above.

Inclusion of Jennifer Aniston in your balance sheet will ALWAYS result in an operating loss, no matter how strongly your other current and non-current assets may be appreciating in value and no matter how robust your risk management plan is.

I stress, Jennifer Aniston must always be classed as a contingent liability, or, if you like to push the accounting boundaries, as an impaired intangible.

Now, I know there is an ongoing dialogue about the merits of moving away from cash-based accounting towards accrual accounting.

I think in this particular instance, we can plainly see the value of accrual accounting in providing a more accurate and holistic representation of the fiscal position that a viewer of this film finds themselves in on completion of the reporting period.

For instance, whilst in cash accounting terms, we only lost $5.95 (being the expense of leasing the film), when we use the principles of accrual accounting (calculating all forms of loss, whether cash-based or otherwise), we can see that there are additional costs associated with depreciation of enjoyment of life, including:

Loss of 88 perfectly good minutes of a human life

AND

Loss of approximately 17 other minutes spent recalling how appallingly stinky this movie was.

When expensed in real terms, all adds up to one big stinking pile of sh*t.

Let’s not forget that there are no revenues (or indeed, any positive in-flows) to offset these massive losses.

So, looking at the bottom line, we don’t even have enough petty snipes cash to launch legal proceedings for mistake of fact against Margaret Pomeranz for giving this movie 4 stars.

Learn from my mistakes people, lest you become similarly morally bankrupt.