Wednesday, November 25, 2009

Teachers in the UK


In other words, "we don't want to be teachers or do anything that would result in actually educating the students like holding them to standards. We want to be overpaid baby sitters."

6 comments:

Ryan Fuller said...

This is so ending up on DeferredSuccessBlog.org.

Nick Rowe said...

That's fine, but under U.S. GAAP, as an intangible asset with an indefinite useful life, a student's Deferred Success asset would have to be tested at least annually for impairment.

If the carrying value of the asset exceeds the undiscounted present value of expected cash flows, then the student must recognize an impairment expense equal to the difference between the carrying value of the asset and the discounted present value of expected cash flows. Thus, their diploma will be written-down in value.

GAAP does not permit recovery of write-downs from subsequent increases in the asset's value. Only when the student actually liquidates Deferred Success can they recognize a gain on their income statement is the selling price exceeds the carrying value.

If it's a foreign student, then IFRS rules will apply and carrying value must be compared to fair value.

On the other side of the transaction, since the school has collected tuition but not actually sold anything of value, they must establish an UNEARNED INCOME liability. They cannot recognize income until the student demonstrates success. If it becomes apparent that the education will never have a realizable value, the school will have to give a tuition refund and write-down the tuition income. In the meantime, they must ESTIMATE the amount of unearned income which is uncollectable and adjust their balance sheet accordingly.

But this, of course, is based on the silly, silly notion that schools are actually selling services and must actually ACCOUNT for their operations. If they did, most schools would be considered illiquid or insolvent.

Captain Capitalism said...

Colonel, You just made me laugh my ass off more than an episode of Hogan's Heroes.

Nick Rowe said...

I've been studying for the CFA exam every spare hour for the last two months. I've been stuck in Financial Reporting for three weeks.

If I had taken Accounting in college, I might not be suffering this much now.

On the other hand, this is why accountants have no life and no personality.

Study break over - back to Income Taxes.

Ryan Fuller said...

In accordance with prophecy:

http://failblog.files.wordpress.com/2009/11/epic-fail-deferred-success-fail.jpg

Anonymous said...

"But this, of course, is based on the silly, silly notion that schools are actually selling services and must actually ACCOUNT for their operations. If they did, most schools would be considered illiquid or insolvent."

Or they could create SIVs for the F students in the Bahamas and borrow freshly printed money from the Fed to cover their write-downs...