Conflicting Accounting Principles: Accounts of the Coach Inc

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Conflicting Accounting Principles

As suggested by Buxbaum (1996), the accounting principles may be in conflict due to the great number of discrepancies such as “foreign currency translation” (p. 166). In this respect, it is necessary to analyze the accounting data from accounting statement with regard to possible occurrence of such conflicts as those related to economic entity assumption. This means that each entity within an organization should have separate accounting in order to prevent confusing accounting statements and inadequate information in those (Minbiole, 1998, p. 10). The accounting statement under consideration includes information about accounts of the Coach Inc, a large manufacturer of handbags, eyewear, footwear, and different types of accessories under this brand as units of luxurious goods category.

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The core functions of departments

The core functions of departments include manufacturing, distribution, trading, and inventories including research and development of new designs (Gamble, 2008, p. 307). In this respect, the company is involved into operation on the for-profit market while its major functions include manufacturing and distribution of goods under its brand. So, the company’s potential conflicts in accounting principles may occur in the monetary unit assumption principle (Minbiole, 1998, p. 11).this may happen due to international market activities and a number of subsidiaries and company-owned stores abroad. The strengths of the departments include appropriate currency, split accounting in terms of entity assumption principle, short-term and long-term investments and other related issues are reported separately. The weaknesses of the departments include transportation expenditures and material expenditures that should be taken into account while assessing the overall costs and necessary changes that should be made in balance sheets.

A conflicting accounting principle

The assets are not reported in accounting statements which means that we have a conflict related to the cost principle. As costs can occur any time, it is necessary to learn about the reporting of costs with regard to assets including total assets and different types of assets possessed by the company. As the Coach Inc deals with manufacturing and distribution, it is necessary to take into account the costs for transportation, maintenance of stores, and training of employees because contracts with transportation companies and other organizations can be signed in a previous year but affect the costs and assets reported in this fiscal year.

Alternative courses of action

The company can include the costs and other types of expenditures into accounting statements so that it was easier to analyze the assets of the company and make plans for future years in terms of necessary costs that should be taken into account. As contracts may be signed for several years, this fact should be taken into account. The major impact of this conflict in accounting principles concerns the assessment of total assets with regard to costs that should be spent on other issues than building of intangible value.

Recommendations

The organization’s accounting practices include assessment of assets, liabilities, stockholders’ equities, and payable accounts. In this respect, it is necessary to use information about the conflicting accounting principles with regard to accounting processes of the Coach Inc and accounting-related departments. It is possible to include the reports about expenditures into accounting statements in order to have adequate vision of the overall situation.

Using the right analysis tool will compensate for inexperienced managers”

An appropriate analysis tool used by managers can be considered an effective substitute for inexperienced managers because the manager’s responsibilities include analysis and evaluation of the effectiveness of company’s and employees’ performance. In this respect, it is necessary to make the manager knowledgeable in the operation of analysis tools so that he/she could effectively evaluate the work performed by other members of the organization with regard to the involvement of computer software.

Tools in different situations

Tools can be helpful in different situations such as routine, daily, or rather mundane decisions like cost controls, quality controls, or staffing questions. However, the number of people necessary to collect data for this tool’s operation can be larger than and not as effective as the work performed by one experienced manager. As suggested by Wilson, Dell, and Anderson (1993), assessment tools can be used in management for more serious tasks as directing, organizing, and planning (p. 21). Analysis tools can be effective in different situations.

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Analysis tools

Though some tolls can really perform extraordinary calculations, build graphs and charts using the data received from certain databases, it is necessary to note that computers are not able to learn from their mistakes unless certain changes are made by a system administrator who is responsible for operation of computer system of the organization. In other words, experienced manager can facilitate the tasks given to a computer by analysing the effectiveness of the analysis tools as well. As suggested by Joshi (1994), analysis tools should be used so that managers could benefit from their implementation (p. 415). An inexperienced manager can fail to check data before using it for analysis and assessment which can be harmful for a company.

Reference List

Buxbaum, R. M. (1996). European economic and business law: Legal and economic analyses on integration and harmonization. 2nd ed. Berlin/New York: Walter de Gruyter.

Gamble, J. E. (2008). Coach Inc.: Is its advantage in luxury handbags sustainable? In J. E. Gamble & A. A. Thompson (Eds.). Essentials of strategic management: The quest for competitive advantage (pp. 303-316). New York: McGraw-Hill Irwin.

Joshi, S. B. (1994). Computer control of flexible manufacturing systems: Research and development. New York: Springer.

Minbiole, E. A. (1998). Accounting principles I. New York, NY: John Wiley and Sons.

Wilson, P. F., Dell, L. D., and Anderson, G. F. (1993). Root cause analysis: A tool for total quality management. Milwaukee: American Society for Quality.

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