The GAAP provides that a company can present a classified or a non-classified version of the balance sheet which adhere to the GAAP rules and regulations.The reclassified balance sheet presented by the company does adhere to the GAAP guidelines for financial reports, specifically the balance sheet. The difference that exists in the reclassified balance sheet is that the items are further classified in terms of the business segments they are associated with. The company felt the need to depict its balance sheet in a more representative manner of its business as it provided ease of accounting and more accurate allocation of costs and revenues to the different business segments.
The case also depicts that the issue of consistency has been handled by Microsoft which issued it reclassified balance sheet as well as republished its old and previous years’ balance sheets in the reclassified form in order to make way for consistency and allow ease of comparison of the financial reports. The disclosure of the change was made public as well in order to inform the majority of the change and adhere to the rules and regulation of the GAAP which requires such changes to be announced and made public.
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