There are a few recent articles discussing enforcement action by the California Attorney General regarding the accounting for donated medicine used by three national charities. Looks like the issue is beginning to get a bit wider attention than this teeny tiny little ol’ blog.
Inflated Expectations / What’s going on with foreign affairs nonprofit Food for the Poor? from Slate on May 10, 2018, provides a non-technical description of the issues raised by the California AG.
Good explanation of medicine valuation, near-term expiry, joint cost allocation, principal market, access, and materiality issues without ever using those words. Even hints at daisy chain and SFAS 136 agency transactions.
Let me suggest a couple of exercises for accountants in the audience.
First, read through the article another time identifying all the accounting issues touched upon. Think about that as an illustration of how to describe technical accounting issues without being technical. (Yeah, I know, what a crazy idea – explaining stuff so people will understand.)
Second exercise is to read through the article thinking about how non-accountants would respond to each of those ideas if it was the first time they had heard about it.
How many of those GAAP accounting treatments would actually make sense?
How many would seem flat-out silly to people who haven’t spent years working with accounting rules?
Description of one shipment