Question

What accounting policy spotify uses for inventory, depreciation, and investments?

Answer 1

Solution:

The financial statement represents the true financial picture of the business and the true position of the assets and liabilities of the business. The financial statement includes inventories, investments etc. So the valuation of the same should be done properly. The various accounting policies are issued for the same.

Inventories:

The inventories contain inventories of raw material, inventories of WIP and inventories of Finished goods. There are generally three methods of computing inventories such as FIFO method, LIFO method and Weighted Average Valuation method. The value of inventories should be recorded less of the cost and net realizable value. Inventories are treated as the current assets.

Depreciation:

Depreciation is also an important element of the financial statement. The deprecation is computing by considering various methods like straight line method, written down value method etc. The depreciation also helps in tax shield benefit. So the depreciation should be computed properly. It also helps to understand the net value of the fixed assets. So depreciation should be computed by considering the accounting standard as issued for the same.

Investments:

Generally, the investments are various types. It is for the purpose of the nature of the investment and the valuation of the same is also depending upon the same. The investment held for maturity is valued at cost price. But the investment hold for sale and trade should be consider at the market value or net realizable value. The accounting standard issued for the same helps to determine and presentation of the investment in the financial statement.

References:

Balakrishnan, K., Watts, R., & Zuo, L. (2016). The effect of accounting conservatism on corporate investment during the global financial crisis. Journal of Business Finance & Accounting, 43(5-6), 513-542.

Beames, A., Broekx, S., Heijungs, R., Lookman, R., Boonen, K., Van Geert, Y., ... & Seuntjens, P. (2015). Accounting for land-use efficiency and temporal variations between brownfield remediation alternatives in life-cycle assessment. Journal of cleaner production, 101, 109-117.

Reid, W., & Myddelton, D. R. (2017). The meaning of company accounts. Routledge.