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Posted: April 12th, 2025
3–4 page report Training—Accounting Tools and Practices
Training—Accounting Tools and Practices
Number of sources: 4
Paper instructions:
Prepare either a 3–4 page report in which you analyze financial information and risks associated with an investment to expand an organization and make a recommendation on whether or not to invest in expansion. This portfolio work project will help you to not only better understand commonly used accounting tools, but it will also give you the opportunity to use your skills and experience by preparing training materials to train someone else.
Scenario
You work for an organization that is seeking growth and recently has hired new district managers to assist in this growth. In talking to other regional managers, you have heard that some district managers do not have a thorough understanding of commonly used accounting tools including an income statement and balance sheet. You have a new district manager hire, Sanjay, and see the need to do some training with him so he has a solid understanding of income statements, balance sheets, and the elements that go into them, including advertising costs, Web development costs, and store opening costs.
In preparing to train your new hire, you have determined that using examples (a picture is worth a thousand words) can be a great approach to adopt. So, you have decided to gather some examples from the company’s summary of significant accounting policies from its latest financial statements.
You may apply this scenario described in the Requirements below.
You are a regional manager for Urban Outfitters or your selected organization and oversee a number of districts. You have recently brought a new district manager on board and want to ensure he has the knowledge and tools needed to do his job effectively.
The organization you work for is Urban Outfitters. Use the U.S. Securities and Exchange Commission, SEC website, to find the Urban Outfitter’s financial statement’s summary of significant accounting policies. Look at the data for the latest filings for the following examples of essential elements you need to cover with Sanjay and ensure his understanding.
Advertising. Examine the criteria used to expense and capitalize advertising costs and where these costs appear in the financial statement.
Store opening costs. Examine how store opening and organization costs were handled and where these costs appear in the financial statement.
Website development costs. Examine the approaches taken during the application and infrastructure development stage and the planning and operating stage.
Training Materials
As you prepare your training materials for Sanjay, use the examples you collected from the company’s Notes to financial documents to illustrate how you address the following items:
Explain how one or more of the following costs are captured:
Advertising.
Store opening. If store opening costs were capitalized, over what time period would you amortize them? Explain why you selected this time period.
Website development.
Analyze the importance of Notes to financial statements in interpreting financial statements.
Explain how the accounting method the company uses affects the financial statements.
Explain how the financial statements would differ if another method were used to capture the costs.
If you have a preference for capitalizing or expensing these costs, explain why it is your preference.
Leadership has asked that you develop either a training deck or a training manual that you will use with Sanjay and that can be deployed with other new hires as well. Regardless of the format selected, the information should address the points identified above with detailed explanations within the notes areas of slides or within the training manual text. It will also be helpful to include information about why each item is important to the organization as well as the success of the new district manager.
To use your time and Sanjay’s time wisely, be conscientious about providing thorough yet concise information. These materials are expected to be used by others for future training needs, so make sure they are well organized and clear.
Training materials requirements:
3–4 pages for a training manual.
Related company standards for either format:
The training manual is a professional document and should therefore follow the corresponding MBA Academic and Professional Document Guidelines, including single-spaced paragraphs.
To learn more about creating presentations, click “MBA Program Resources” and then “Presentation Skills.”
In addition to the training deck or manual materials, include:
Title (page).
References (page).
Appendix with supporting materials. If you are using a firm or scenario of your choosing, ensure faculty has sufficient information to understand how you reached your recommendation.
At least two APA-formatted references
Criterion 1
Explain how the accounting method the company used affects the financial statements.
Distinguished
Explains the accounting method’s effect on specific financial statements clearly and with sufficient detail to demonstrate why the company chose it.
Criterion 2
Compare how two accounting methods differ in their effects on the financial statements.
Distinguished
Compares how two accounting methods differ in their effects on the financial statements and provides examples and details to clarify comparisons.
Criterion 3
Communicate accounting information clearly.
Distinguished
Communicates clearly and engages the reader with the fluidity of expression. There are few if any errors of mechanics, grammar, or style.
__________________________
Writing Guide:
Training Manual: Understanding Financial Statements for Urban Outfitters’ New District Managers
Introduction
Effective management requires a solid grasp of financial statements, which serve as a window into an organization’s fiscal health. For Urban Outfitters, a retail company navigating growth, district managers like Sanjay need to understand how costs such as advertising, store openings, and website development are recorded. This manual provides clear explanations, using examples from Urban Outfitters’ financial statements, to equip managers with the knowledge to make informed decisions. By examining these elements, managers can better support the company’s expansion goals.
Capturing Key Costs
Financial statements reflect how a company records its expenses and investments. Urban Outfitters’ approach to three specific costs—advertising, store opening, and website development—illustrates this process.
Advertising Costs
Urban Outfitters expenses most advertising costs as they are incurred, aligning with industry standards. For instance, costs for digital campaigns or in-store promotions appear in the income statement under operating expenses. However, certain costs, like those for long-term branding initiatives, may be capitalized if they meet specific criteria, such as generating future economic benefits. According to Urban Outfitters’ filings with the U.S. Securities and Exchange Commission (SEC), these capitalized costs are recorded as assets on the balance sheet and amortized over their useful life (Urban Outfitters, 2024). Recognizing where these costs appear helps managers assess marketing efficiency.
Store Opening Costs
Opening a new store involves expenses like rent, renovations, and staff training. Urban Outfitters typically expenses these costs as incurred, reporting them in the income statement under general and administrative expenses. However, if costs like leasehold improvements are significant and provide long-term value, they are capitalized as fixed assets and depreciated over time. For example, if store opening costs were capitalized, a reasonable amortization period might be seven years, matching the average lease term for retail spaces. This period balances the asset’s useful life with financial reporting accuracy, ensuring costs are spread logically over time.
Website Development Costs
Building and maintaining a website involves distinct phases. Urban Outfitters capitalizes costs during the application and infrastructure development stage, such as coding and hardware purchases, recording them as assets on the balance sheet. Costs from the planning and operating stages, like brainstorming or routine maintenance, are expensed immediately and appear in the income statement. This distinction ensures that only costs with lasting value are treated as investments, providing clarity on digital strategy expenses (Urban Outfitters, 2024).
Importance of Notes to Financial Statements
The Notes to financial statements offer critical context for interpreting the numbers. They explain accounting policies, such as how Urban Outfitters decides to expense or capitalize costs, and provide details on assumptions, like amortization periods. For managers, these Notes are essential for understanding why certain costs are reported in specific ways. Without them, financial statements might mislead users about the company’s performance. For instance, capitalizing store opening costs could inflate short-term profits, while expensing them might better reflect immediate cash flow impacts (Weygandt et al., 2020).
Impact of Accounting Methods
Urban Outfitters primarily uses Generally Accepted Accounting Principles (GAAP), which influence how costs are recorded. Expensing advertising costs immediately reduces net income in the short term but simplifies reporting. Capitalizing store improvements, on the other hand, spreads costs over time, boosting short-term profitability but requiring careful tracking of depreciation. These choices shape the income statement and balance sheet, affecting metrics like profit margins and asset values. For Sanjay, understanding these impacts ensures he can evaluate district performance accurately.
Alternative Accounting Methods
If Urban Outfitters adopted a different approach, such as capitalizing all advertising costs, the financial statements would change significantly. Capitalized advertising would increase assets and reduce expenses in the income statement, potentially inflating profits initially. However, amortization would later reduce earnings, complicating long-term comparisons. Similarly, expensing all store opening costs immediately would lower assets and profits upfront but avoid future depreciation adjustments. GAAP’s flexibility allows such choices, but Urban Outfitters’ current method balances transparency with strategic growth needs (Kieso et al., 2022).
Preference for Cost Treatment
Capitalizing costs like store improvements or website development is preferable when they provide long-term value. Spreading these costs over time aligns expenses with the benefits they generate, offering a clearer picture of financial health. Expensing smaller, short-term costs like routine advertising keeps reporting straightforward. This approach supports Urban Outfitters’ expansion by highlighting investments in growth while maintaining clarity for stakeholders.
Why This Matters
For Sanjay and other district managers, mastering these concepts is vital for overseeing budgets and contributing to Urban Outfitters’ success. Accurate financial reporting informs decisions about new stores or marketing campaigns, ensuring resources are allocated wisely. Clear training on these tools empowers managers to align their districts with the company’s broader goals, fostering sustainable growth.
Conclusion
Understanding financial statements equips district managers to navigate Urban Outfitters’ expansion with confidence. By examining how advertising, store opening, and website development costs are recorded, managers gain insight into the company’s fiscal strategy. The Notes to financial statements provide essential context, while accounting methods shape reported outcomes. This manual offers Sanjay a foundation to evaluate financial data effectively, supporting his role in driving the company forward.
References
Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2022). Intermediate accounting (18th ed.). Wiley.
Urban Outfitters. (2024). Annual report 2024: Form 10-K. U.S. Securities and Exchange Commission. Available at: https://www.sec.gov
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2020). Financial accounting (10th ed.). Wiley.
Bragg, S. M. (2023). GAAP guidebook: 2023 edition. AccountingTools, Inc.
Epstein, L. (2019). Reading financial reports for dummies (4th ed.). Wiley.
Appendix
Supporting Materials: Excerpts from Urban Outfitters’ 2024 Form 10-K, including Notes on advertising and website development costs, can be accessed via the SEC website for further reference. Sample income statement and balance sheet templates are available in Financial Accounting by Weygandt et al. (2020) for practical exercises.
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