Question

Discuss the implications of potentially unrecorded assets for the Company.

Answer 1

There are potentially unrecorded assets for the company such as LIFO inventory reserve; brand image, human capital, expertise of management team, loyal customers, and creative work force. Since these cannot be measurable in terms of money thus are not included in the balance sheet. However have impact on the future profitability for valuation purposes because if unrecorded assets have monetary value, they will be recognized eventually through higher future abnormal earnings for the company. The potentially unrecorded assets being unrecorded could potentially understate the total assets and income of the company