Peer Responses

Responding to Person 1

Hello,

Thank you for sharing your discussion post regarding Ross Stores and TJX Companies. Both companies have important aspects in their balance sheets as long-term assets. It is worth learning that the effect of these assets is significant in terms of tax and reporting responsibilities. Other elements identified for the balance sheet are also significant, and it would be important to the level of their impact on the tax and reporting responsibilities: Peer Responses.

I agree with you that these assets should reported at their true value to provide correct information not only to the government institutions but also to all interested parties. Still, I would like to know the actual figures regarding the tax obligations arising from the assets. I agree that it is not clear to identify the difference between the earnings per share for the companies under consideration as this could be used to differentiate the two companies as potential destinations for investment for various stakeholders.

Responding to Person 2

Hello,

Great work with your post. It provides key learnings about Grainger and Fastenal companies’ various balance sheet elements. I like the way Grainger reports about property, buildings and equipment by including a small line in the balance sheet and then dedicating sufficient space in the notes section to provide additional information. This is the best approach to reporting financial statement elements in contemporary accounting.

Notably, this is so because this makes the information easier to read and understand. It is worth noting that reading through your post, I think both companies uphold high standards in reporting their financial statements. However, I would like to learn more about Fastenal regarding the decision to hold property through ownership and lease and how this was arrived at in the notes to the balance sheet items section. Overall, this is a great post and hope when you get time, you will go through mine and leave a comment.

ORDER A PLAGIARISM-FREE PAPER HERE

We’ll write everything from scratch

Reply to the following persons

Person 1

The assets of the two businesses I chose, Ross Stores and TJX Companies, include property and equipment, as well as leasehold improvements and ongoing construction. Ross Stores’ balance statement shows real estate and equipment. Renovations to leaseholds have an enormous effect on tax and accounting reporting responsibilities. Businesses consider ongoing construction and renovations to leases to be assets given that they foresee potential monetary benefits.

Although this does not appear like it’s recorded on the balance sheet, it would certainly have an influence on the income statement of the business. This is true for all assets, whether they are current or not. Fair value and retirement liabilities represent some of the other variables that are included in the financial statement’s notes but are not presented in the income statement or balance sheet. It is necessary to report fair value.

It gives specifics regarding the payout that an organization may make if it sold a possession or exchanged it for a burden. Although the topic whether or not fair value is advantageous to investors continues to remain up for controversy, the use of it as an analytical framework for financial reporting has been increasing in the past few years. Reporting retirement benefits is crucial since addressing such duties may have an enormous impact on an organization’s economic health as well as long-term strategy. Unlike TJX Companies, Ross stores do not mention a retirement plan in their financial statement notes.

My biggest takeaway from reading both of the company’s reports was that Ross Stores’ income statement showed three earnings per share for basic, diluted, and weighted average shares outstanding. But TJS Companies also had a weighted average common share in basic and diluted, as well as basic and diluted earnings per share. What is the difference between reporting them that way in the income statement, I wonder?

Both businesses have comparable plant assets, including buildings, land, fixtures, and equipment, after a thorough examination. The plant assets that are listed in the financial statement’s notes and those that are reported on the balance sheet don’t differ significantly. The only one with construction is Ross Stores.

Nevertheless, they are mostly leased to both businesses, and the notes make very little reference to other plant assets. It appears that Ross Stores has purchased property and equipment as of November 2024, although payment has not yet been received. They do make reference to operational lease assets that were acquired in return for operating lease obligations.

Less

Peer Responses

Person 2

For my first company, Grainger, they report “property, buildings, and equipment- net” under the consolidated balance sheet in its own line item under the asset section. Furthermore, under note 3 Grainger dedicated the whole note to property, buildings and equipment, which breaks down the makeup. There are also other places throughout the report where property, buildings and equipment are mentioned as a part of a broader topic.

For my other company, Fastenal, the report has property and equipment in multiple places. In the balance sheet, property and equipment is under the asset section and is reported under its own line. Property and equipment is also listed on the statement of cash flows under both the operating activities and investing activities for various financial reasons. Under the net capital expenditures, property and equipment are also shown there.

◦  In terms of reporting property, buildings, and equipment, Grainger states them at cost less accumulated depreciation. When breaking down property, buildings, and equipment, items listed under it are land, buildings, machinery, furniture, and fixtures. Over the past 3 years, the depreciation expense has also increased. On this topic, the finance leases are also reported in property, buildings, and equipment-net, as well as in accrued expenses and other noncurrent liabilities.

For Fastenal, they report property and equipment under long-lived assets. Like Grainger, Fastenal also states property and equipment at cost and the depreciation is calculated using the straight-line method. Furthermore, like Grainger, Fastenal reports property and equipment under the operating and investing activities on the statement of cash flows.

When looking at the capital expenditures, Fastenal reports proceeds from the sale of property and equipment are netted against the purchases. Something I wonder about regarding PPE I wonder how the companies decide how much useful life is and what depriciation method they would like to use.

◦ Grainger has branch locations, distribution centers, and other facilities throughout the world that are both leased and purchased. In the United States, the majority of the distribution centers and branch locations are owned, and the other facilities are primarily leased. There are notes within the report regarding purchase obligations that address uncompleted additions to property, buildings, and equipment. Furthermore, like previously mentioned, finance leases are reported in property, buildings, and equipment – net.

For Fastenal, they transport their product to customers therefore have vehicles that are both leased and owned. It is stated in the report that they mainly lease the trucks they use. Like Grainger, Fastenal has some properties that are purchased and some are leased. Their properties are mainly distribution centers and manufacturing facilities; there are more purchased locations than leased ones for each.

In the notes, it is stated that they try to negotiate short lease terms when desired. From their financial statement and notes regarding leases, it appears that they have operating, variable, and short-term lease costs on facilities, equipment, and vehicles.