Some thoughts on accounting

There have always been interesting areas in accounting where i have questioned the assumptions. A few of them are listed below:

1. When we make purchases on credit, we take advantage of something known as
the "credit period". The creditor however induces us with a discount to pay
earlier. People take advantage of such discounts based on each one's own cash
flow situation. The amount payable to creditors are usually shown as "Accounts
payable" under the liabilities side of the balance sheet. So assuming people dont
avail the discount granted to them, should not this discount be accounted for as
interest as the same has been foregone by the customer.

2. The next query that comes to my mind is on Enterprise value computation. When we
include debt, we only include the book value of debt that is present on the
balance sheet. However we never include fixed committments for the future (im not
talking about contingent liabilities here). A contract with a managing director
for say 10 yrs is a future committment and is a debt in effect and the present
value of the same should be included in the balance sheet debt component which no
accounting rules or standards unfortunately provide for. However valuation
analysts need to keep this in mind. A recent example can be quoted from IPL
whereby corporates have acquired players for 10 year contracts. The franchise as
such represents a future debt committment and will be factored in while valuing
the company.

3. A recent amendment to US GAAP and other international accounting standards
brought a change in the treatment of research and development expenditure. The
standard provided for capitalisation of R&D that was previously being expensed.
The question that i have is how will this treatment be applicable to pharma and
exploration companies in the oil and gas space. These are sectors shrouded with
uncertainity be it new drug discovery or new oil field/ gas dscovery are
concerned. An expenditure has to be capitalised only if an asset comes into being
that gives the company an enduring benefit over a longer time frame. So if R&D is
incurred on a new drug discovery that ultimately doesnt see the light of the
day, how can accountants capitalise this expenditure.