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Financial Statements for American Eagle Outfitters

Financial Statements for American Eagle Outfitters

Financial Statements for American Eagle Outfitters

American Eagle Outfitters, Inc. has numerous operational assets that assist the firm in operating and achieving its business objectives. Property, plant, and equipment are the first category of active support. This comprises structures, machines, and furnishings used to make and store goods or to deliver services. These long-term investments will be employed in more than one accounting period.

Right-of-use assets are the second category of operational assets. These are leases for real estate, equipment, or other assets purchased from a third party. These assets are reported as liabilities and an asset on the balance sheet. This is because the firm is required to pay for the use of the asset, but it also has the right to use the asset for a specific length of time.

Leasehold improvements are the third sort of operational asset. These are enhancements to a rented property not covered by the lease agreement. Examples are painting, carpeting, renovating, and other modifications to make a rented property more usable or appealing to clients. Typically, these improvements are capitalized and depreciated during the lease duration.

American Eagle Outfitters, Inc. has invested in these operational assets to guarantee that it can execute its business objectives efficiently and effectively. These assets assist the corporation in the creation of its goods, the provision of services, and the upkeep of its physical premises. Consequently, these assets are critical to the organization’s success.

American Eagle Outfitters, Inc. may make educated choices about their investments and guarantee that they can function successfully and accomplish their company objectives by knowing various operational assets.

American Eagle Outfitters, Inc. has several intangible assets that are not physical and do not appear on the balance sheet. These intangibles are valuable because of their ability to provide future economic rewards.

Customer connections are the company’s initial sort of intangible asset. These ties are built via marketing, advertising, and customer service, enabling the firm to keep a loyal consumer base. Because client loyalty is critical to a company’s success, American Eagle Outfitters, Inc. has spent substantially cultivating customer connections.

Trademarks are the company’s second form of intangible asset. These are symbols, words, phrases, or graphics used to differentiate one company’s goods and services from those of another. American Eagle Outfitters, Inc. owns many trademarks, including its brand name and emblem. These trademarks are critical in enhancing the company’s brand identity and assuring customer recognition of its goods.

Software is the third form of intangible asset owned by American Eagle Outfitters, Inc. This collection of apps, tools, and databases manages and facilitates the company’s operations. These software packages are critical in ensuring that the organization can manage its operations successfully and stay competitive in the market.

Finally, American Eagle Outfitters, Inc. has several intangible assets that are not physical and do not appear on the balance sheet. Client connections, trademarks, and software are examples of intangibles vital in maintaining the company’s market competitiveness and client loyalty.

American Eagle Outfitters, Inc. employs the first-in, first-out (FIFO) inventory costing approach for its operating assets. This approach was selected because it is the most widely used inventory costing method and accurately represents a company’s existing inventory and related expenditures. The FIFO technique requires the corporation first to record the cost of stock acquired or produced, and these expenses are then used to compute the cost of goods sold (COGS). This is accomplished by first calculating the cost of the oldest units, followed by the price of any additional units acquired or made. Because things are sold in the same order that they are received or created, this technique mimics the natural movement of inventory with production and sale.

The FIFO technique has the benefit of being the most reliable approach for determining the actual cost of goods sold and reporting correct inventory values in financial statements. This aids the company’s understanding of its expenses and earnings and the current worth of its inventory. Furthermore, it enables the organization to better reflect market circumstances by adjusting its purchasing prices and production costs.

The FIFO approach has the problem of not being the ideal method to apply in times of inflation. This is because the COGS is calculated using the cost of the oldest inventory, even if the price of recently acquired or manufactured merchandise is more significant. As a result, the company’s reported profit may be smaller than it would have been with an alternative inventory costing approach.

American Eagle Outfitters, Inc. has adopted the FIFO inventory costing approach to depict its current inventory and related expenses correctly. This dependable strategy accurately shows the organization’s costs and earnings.

American Eagle Outfitters, Inc. (AE) depreciates its operating assets using the straight-line approach. This strategy is often used for fixed assets such as property, plant, and equipment, as well as right-of-use assets and leasehold improvements.

The straight-line depreciation method subtracts the asset’s cost from its anticipated residual value to calculate the depreciable base. This sum is then divided by the asset’s expected useful life for the yearly depreciation expenditure. This promising strategy enables the organization to equally distribute the asset’s cost across its useful life.

The straight-line technique provides a more realistic depiction of the asset’s worth during its useful life since the depreciation expenditure is spread out equally. In contrast, accelerated depreciation systems recognize more considerable depreciation charges in the early years of an asset’s life. This strategy simplifies assessing identical assets’ performance over time since all depreciation charges are distributed evenly.

Furthermore, the straight-line technique offers a consistent foundation for recognizing depreciation expenditure, which may aid in preparing the company’s financial statements in conformity with generally accepted accounting standards. Because the depreciation expenditure is known in advance, this strategy also helps the organization to better prepare for the future.

Overall, American Eagle Outfitters, Inc. depreciates its operating assets using the straight-line approach. This technique is desirable because it offers a more accurate depiction of the asset’s true worth across its useful life and allows for an easier comparison of the performance of comparable holdings over time. Furthermore, the straight-line technique guarantees that the company’s financial statements are produced in compliance with generally accepted accounting rules and allows for better future planning.

References

Financial Accounting Appendix A: American Eagle Outfitters, Inc., 2020 Annual Report

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Question 


This IP builds upon your work in Units 1 and 2.

In this unit, you will continue to analyze and interpret the financial statements for American Eagle Outfitters, Inc. Using the financial statements (Appendix A: American Eagle Outfitters, Inc., 2020 Annual Report of the required textbook: Financial Accounting), review the company’s operational assets.

Financial Statements for American Eagle Outfitters

Financial Statements for American Eagle Outfitters

Consider the following questions:

  • What types of operational assets does the company have?
  • Are there any intangibles?
  • What inventory costing methods are used?
  • What depreciation methods are used?

Deliverable Requirements: Your evaluation of the company’s operational assets should have at least five pages (the title and reference pages are not counted in these five pages), and follow the requirements below for using the APA style.

  • For your evaluation of the operational assets, present industry findings regarding investments.
  • Address the questions above, and consider their implications for American Eagle Outfitters, Inc.
  • Do not forget to review the notes to the financial statements for additional information about the company’s operational assets.

Submitting your assignment in APA format means that you will need the following at a minimum:

  • Title page: Remember the running head. The title should be in all capitals.
  • Length: There should be at least five pages.
  • Body: This begins on the page following the title and abstract pages and must be double-spaced (be careful not to triple- or quadruple-space between paragraphs). The typeface should be 12-point Times New Roman or 12-point Courier in regular black. Do not use color, bold type, or italics except as required for APA-level headings and references. The deliverable length of the body of your paper for this assignment is five pages. In-body academic citations to support your decisions and analysis are required. Using a variety of literary sources is encouraged.
  • Reference page: References that align with your in-body academic sources are listed on the final page of your paper. The references must be in APA format and use appropriate spacing, hanging indentation, italics, and uppercase and lowercase for the type of resource used. Remember that the reference page is not a bibliography but a further listing of the abbreviated in-body citations used in the paper. Every referenced item must have a corresponding in-body source.

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