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Randall Jackson
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Posted - 2010.02.28 05:45:00 -
[1]
As an accountant by day, I pondered if there would be any value to the industrial community of EVE in a project to create a single set of principals for corps to present results. As I am by no means an industrial juggernaut in-game, I thought I'd post and see what the thoughts were. I'd be willing to put in some effort to creating some standards if others thought it was useful and there was input from the community of industrials who are established.
Any other accountants out there interested in helping out?
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Riethe
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Posted - 2010.02.28 05:47:00 -
[2]
In layman's, please.
And a hypothetical example of usage would be beneficial.
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Randall Jackson
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Posted - 2010.02.28 05:52:00 -
[3]
My fault:
GAAP = generally accepted accounting principles.
Basically its the guidelines to create financial statements that are comparable to one another. Say corp x wants to raise capital, they would make this information available to prospective investors. Also, it may help others be able to stack themselves up internally against public information.
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Varo Jan
Caravanserai Consulting
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Posted - 2010.02.28 06:52:00 -
[4]
I set up a working party to establish Eve accounting standards a while back. The project has been on the back burner due to other priorities.
Some standards are likely to result from my buyout of One Stop. The accountant, the auditor and myself all have RL accounting backgrounds.
You¦re welcome to contact me in-game, Randall.
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Arjogg
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Posted - 2010.02.28 07:35:00 -
[5]
Great idea, extremely difficult to enforce.
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Drab Cane
Carbenadium Industries
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Posted - 2010.02.28 08:00:00 -
[6]
 Originally by: Arjogg
Great idea, extremely difficult to enforce.
Ideally, a set of generally accepted standards, or best practices, would be great to compile. Standardized reports would make it easier to compare different businesses, and give us a common vocabulary.
An common term already in use is the NAV (Net Asset Value), see here for one discussion of how to quickly calculate NAV.
It's not a matter of enforcement - its more of a consensus reached on best practices and standards. Accounting standards weren't created by some secret committee than imposed on the world - they evolved, and eventually became standardized. The same could happen here.
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- Who Dares, Wins
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Cyaxares II
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Posted - 2010.02.28 08:23:00 -
[7]
Don't overdo it.
I am not familiar with the US GAAP but in my country GAAP
(a) don't have to be codified to be valid and compulsory
(b) are not just deductively (teleologically) determined but there is also a strong tradition (dating from the late 19th/early 20th century) which derives the GAAP simply from the "habits of proper and honest tradesmen".
IMHO looking at the best practices already used by exemplary business managers is superior to sketching a set of GAAP on the whiteboard (at least in EVE).
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Randall Jackson
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Posted - 2010.02.28 15:26:00 -
[8]
There is definitely the ability to make it so rules-based and insane that no one would ever use it and that would defeat the purpose. Again, I'm not 100% on all the transactions that would be entered into by those looking to do IPOs or get bond financing, but I'd think something could be put together that's relatively simple.
I don't think there would be any real enforcement. Hopefully they would be well-crafted to the point that financial results would be easily produced and investors would become the "enforcement" by wanting to see this style of financial statement before giving their hard earned isk out.
Looking forward to discussing with Varo.
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Lord Arbalest
Amarr
Zero Profits
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Posted - 2010.02.28 15:40:00 -
[9]
Edited by: Lord Arbalest on 28/02/2010 15:43:19
You also have the slight hurdle in the matter of you cannot enforce any GAAP upon anyone here in EVE. The reason they successfully work in real life is because they have the law behind them; the law enforces their acceptance and accordance by all companies.
However, a template that can be used by those without a accounting background or those who do wish to reduce as much time as possible on financial reporting could be beneficial. You would need to refer to this as a guideline or aid - there is no financial body to enforce any GAAP here in EVE.
If you look at different IPO's and Bonds, you will see that people attack their financial reporting in a completely different style - for example, have a look at LYII's financial reporting and compare that with another. You will see that financial reporting in EVE is completely dependant on the skills of the team and whom is on board. Don't forget, unlike in real life not every 'Company' here in EVE is going to have an accountant producing their financial statements.
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Selene D'Celeste
Caldari
The D'Celeste Trading Company
ISK Six
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Posted - 2010.02.28 15:58:00 -
[10]
This comes up rather frequently, and such a thing is rather easy to get everyone to use, you just have to do the following: make it easy to use and read, make it useful, and use it yourself so that others see it in use, like it, and decide to copy it.
This all requires :effort: and is why we haven't seen such a thing at this point, because we are all easily distracted to other things.
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Hippopotamus Rex
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Posted - 2010.02.28 19:48:00 -
[11]
I don't think enforcement is the issue - adoption is, as Selene pointed out. If its adopted, then the market can enforce it with their investments.
Personally, I'm not sure there is a need for it at this point, however. Any issues with reporting here are not nearly as complex as the RL issues. Scamming and lack of trust keep the Eve financial markets from evolving into anything substantial. I could be completely wrong, however.
And if you think its worth it, then more power to you. It certainly wouldn't hurt.
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Randall Jackson
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Posted - 2010.03.04 02:25:00 -
[12]
I appreciate all the input. I might scour old posts for formats in use and have a convo with Varo and others to get a little more insight. Maybe I'll get some operations of my own going and start producing an example to keep a discussion going.
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SetrakDark
DarkCorp Holdings
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Posted - 2010.03.04 02:32:00 -
[13]
The only way to move these things forward is to just do some work and present it, then everyone will accidentally contribute through their criticism.
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Lui Kai
Better Than You
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Posted - 2010.03.04 02:39:00 -
[14]
I thoroughly endorse any action that causes the beached walrus that is MD to strangle itself in red-tape more quickly.
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Ave Volta
Red Frog Investments
Blue Sky Consortium
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Posted - 2010.03.04 03:03:00 -
[15]
I think adoption of something like this might be helped if someone were able to create an easy to use template/spreadsheet based on the standard principals whereby someone could put in the appropriate data points and get some pretty graphs and such for everyone to enjoy.
Easier said than done obviously. Not volunteering 
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chown -R us:us /yourbase |
Tiffa Firestormer
Minmatar
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Posted - 2010.03.04 11:48:00 -
[16]
Unfortunately in the real world GAAP is slow to react to changing market circumstances, for example off balance sheet finance. As Eve is a much quicker reporting environment, I am thinking a monthly reporting rather than a year, I could see a regulatory environment slipping out of touch quickly.
I do belive that is a very good idea, just that I do not think that the level of work involved would be gain tangible results for users of the financial statements. |
SencneS
Rebellion Against Big Irreversible Dinks
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Posted - 2010.03.04 17:45:00 -
[17]
Worthy cause, and one worth supporting, but good luck with it.. If there is anything I've seen on MD and more importantly Science and Industry is how people "value" items. Which is probably the most important thing for a Standard reporting tool.
The famous "I go {enter mediocre repetitive task} myself so those {enter item as a result of the mediocre repetitive task} are FREE!!"
A lot of people still view obtained items as a result of a task completed as free, for YEARS now as long as I have been playing MD has been ramming it down the throats of people who ask "Are my minerals free?"
There is also not one tool anywhere that automatically does this... (I'll explain in form of a production line)
I buy minerals, I produce items, I sell the items I produce. Not one tool calculates the cost of that item according to the minerals purchased and used in a FIFO type accounting method. Even a simple "Mean Average" of cost of minerals and a running inventory of mineral usage would make it easier.
With the total lack of any real significant accounting tools the current tools people have developed like EMMA, EWA, MEEP, even Invention calculator, or EVE Trader are all the tools people have to use.
Without a fully fledged FIFO Accounting tool you'll be hard pressed to even compile an acceptable GAAP, combined with the resistance from the stupid claiming "My stuff is free" it's a valiant and honorable effort that leads no where :(
Amarr for Life |
Drab Cane
Carbenadium Industries
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Posted - 2010.03.04 19:16:00 -
[18]
Originally by: Cyaxares II
IMHO looking at the best practices already used by exemplary business managers is superior to sketching a set of GAAP on the whiteboard (at least in EVE).
Agreed, the optimal idea would be to add an EVElopedia page, linked to the Market Resources page, and simply record the best practices that are already out there being used.
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- Who Dares, Wins
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Randall Jackson
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Posted - 2010.03.15 00:13:00 -
[19]
Anyone have any links to the current practices out there? Or interested in sharing their set of results to continue the discussion?
I've seen the set put out by E*Bank and they left me with more questions than answers.
Additionally, I've started doing some very minor operations (it is still tax season after all) to try to encounter the transactions that would be on the day to day in EVE. At the end of the month, I'll try to publish my results for the sake of progress.
Thanks in advance to anyone sharing.
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Professor Leech
Transmetropolitan
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Posted - 2010.03.15 01:42:00 -
[20]
Originally by: Lui Kai
I thoroughly endorse any action that causes the beached walrus that is MD to strangle itself in red-tape more quickly.
Welcome to Accounting Online.
I fully endorse brining the failings of the real world into internet spaceship game. I propose that we develop a standard for formations of stacks of trit in everyone's personal hangar.
Originally by: Crawe DeRaven
this thread is obviously going places
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Professor Leech
Transmetropolitan
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Posted - 2010.03.15 01:49:00 -
[21]
Originally by: Randall Jackson
I've seen the set put out by E*Bank and they left me with more questions than answers.
Funny how looking at the accounts of a large scam look suspicious.
Originally by: Crawe DeRaven
this thread is obviously going places
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SencneS
Rebellion Against Big Irreversible Dinks
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Posted - 2010.03.15 02:59:00 -
[22]
Originally by: Randall Jackson
I've seen the set put out by E*Bank and they left me with more questions than answers.
Post your questions I'm sure someone can answer them, if not I'll give it my best shot. Want to try and let someone outside of EBANK answer first as it would be an unbias opinion or explanation. I'll then either confirm or correct the reasonings EBANK went that route.
Amarr for Life |
Drab Cane
Carbenadium Industries
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Posted - 2010.03.15 06:14:00 -
[23]
Some Best Practices:
Asset valuation (in order of preference):
Use purchase price of asset.
Use most recent purchase price of same type of asset.
If not known, use lowest price that item could be sold at (Jita low sell price, lowest WTS contract, etc.).
Separating personal wallet from business wallet:
Best to create a corporation and use corporate wallets and hangars for handling the business ISK and assets.
Example:
Use corp wallet 1 for paying corporate rents, fees, and other overhead costs associated with running the corporation.
Use a corporate wallet for each activity (manufacturing / trade / investing / whatever).
Use a hangar division with the same name as the wallet to hold the assets for each activity
(materials and finished products for manufacturing, inventory for trade, etc.).
This keeps all the related costs and income in one wallet, making it much easier to track for the manager.
The goal is to consistently separate personal and business transactions, and to make it easier to account for individual activities.
Calculating NAV (Net Asset Value) (from NAV thread):
Generally speaking, NAV = Total Assets - Total Liabilities
Total assets = cost of inventory + cost of inventory in sell orders + wallet balance + escrow + assets not for sale.
Total Liabilities = the balance owed from all outstanding loans and bonds.
If computing a player's personal NAV, the player may want to include the market value of their highly-trained alts.
Please comment if there's anything I've missed, or misunderstood.
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- Who Dares, Wins
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Vaerah Vahrokha
Minmatar
Vahrokh Consulting
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Posted - 2010.03.15 09:44:00 -
[24]
Quote:
Please comment if there's anything I've missed, or misunderstood
You missed that:
- there are tools like EMMA that perform similar calculations in automatic
- these tools, and your assessment, have still to be manually tweaked, because EvE is made to not give exact values, not to give exact market performance, not to give exact contracts performance and so on. Even where it "looks like" you could get actual values, you have still to know how they play in the players' minds. I.e. hull applied rigs have a value on paper, another on market, another on collateral holding (close to zero).
In the end, the form comes after the substance and to determine the substance in EvE is more of an art than a automatable task.
I would not judge a perfectly compiled report above than a decent report that has been made by someone who knows how to value stuff.
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Auditing & consulting
When looking for investors, please read
http://tinyurl.com/n5ys4h + http://tinyurl.com/lrg4oz
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Cyaxares II
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Posted - 2010.03.15 11:17:00 -
[25]
Originally by: Vaerah Vahrokha
I would not judge a perfectly compiled report above than a decent report that has been made by someone who knows how to value stuff.
The whole point of this thread is to qualify "how to value stuff" a little further.
Originally by: Drab Cane
Asset valuation (in order of preference):
Use purchase price of asset.
Use most recent purchase price of same type of asset.
If not known, use lowest price that item could be sold at (Jita low sell price, lowest WTS contract, etc.).
not happy with this because of two reasons:
(1) if the market price is cheaper than the original purchase price, market price should be used
if market price is higher than purchase price, purchase price should be used
(2) why sell order price as the "lowest price the item could be sold at"?
if the item is traded frequently in Jita, the spread between sell and buy order will be small -> using buy order prices doesn't matter much
if the item is traded infrequently the spread is large, but you probably won't be able to liquidate at sell order price at very short notice, so in those cases where buy/sell order prices make a difference you are likely to overvaluate assets.
Also, the decision to use sell order price introduces inconsistency: purchase price is for most traders/industrialists usually Jita buy order price or below - so usually you will value stuff conservatively at buy order prices.
But if you don't remember the purchase price, you are suddenly less cautious and use sell order price... that looks strange to me.
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Vaerah Vahrokha
Minmatar
Vahrokh Consulting
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Posted - 2010.03.15 12:17:00 -
[26]
Quote:
The whole point of this thread is to qualify "how to value stuff" a little further
For what I can understand the thread is:
Quote:
I pondered if there would be any value to the industrial community of EVE in a project to create a single set of principals for corps to present results.
that is about formalizing results not how to get to these results.
This other OP sentence also compounds the idea:
Quote:
I might scour old posts for formats in use
The "best practices", a somewhat bland recap of what everyone know already, came later, when it was clear that the MD people are not really just after the form.
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Auditing & consulting
When looking for investors, please read
http://tinyurl.com/n5ys4h + http://tinyurl.com/lrg4oz
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Cyaxares II
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Posted - 2010.03.15 12:48:00 -
[27]
Originally by: Vaerah Vahrokha
The "best practices", a somewhat bland recap of what everyone know already, came later, when it was clear that the MD people are not really just after the form.
GAAP = Generally Accepted Accounting Principles, not Generally Accepted Presentation Principles
"what everyone know[s] already" is not clear to me, how many business owners report the value of an item as min{purchase price, market buy order price} and how many try to inflate their NAV (epeen) by valuing at sell order prices?
I think min{purchase price, market buy order price} would be the more prudent solution (and closer to the practices we know from RL), other people may think different for many reasons (the first consideration would be: do we want to promote IPOs or bonds?).
Accounting principles are easy as long as you avoid thinking about them. Once you start doing it you will find out that there is really nothing "what everyone know[s] already" and that you have to lay out very clear rules to get any degree of comparability between balance sheets.
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Vaerah Vahrokha
Minmatar
Vahrokh Consulting
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Posted - 2010.03.15 16:00:00 -
[28]
Edited by: Vaerah Vahrokha on 15/03/2010 16:01:17
Quote:
GAAP = Generally Accepted Accounting Principles, not Generally Accepted Presentation Principles
The title is not necessarily reflected in the OP first posts though.
In fact, I don't think those who posted the first replies (well before me) were dense, the OP was just mis-formulated.
Quote:
"what everyone know[s] already" is not clear to me, how many business owners report the value of an item as min{purchase price, market buy order price} and how many try to inflate their NAV (epeen) by valuing at sell order prices?
The business owners can report what they want, if there's an auditor it's his task to reconcile what's boasted with what's posted.
Curiously enough a smaller percentage of my past customers boasted above their true value than those who undervalued their stuff.
Quote:
I think min{purchase price, market buy order price} would be the more prudent solution (and closer to the practices we know from RL), other people may think different for many reasons (the first consideration would be: do we want to promote IPOs or bonds?).
It's prudent but it might still not be enough.
Some non Caldari guys trade in strictly racial bound items and strictly in their homeland (and sometimes even more complicate schemes), where these items are noticeably more requested and priced than at Jita.
In these cases I tend to value the racial part of their NAV taking into account the lowest of the racial price, not the Jita buy order prices. *
The collateral is always considered at Jita buy order price though.
* The real difference is usually limited to some hundreds of millions over a 20B-ish NAV.
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Auditing & consulting
When looking for investors, please read
http://tinyurl.com/n5ys4h + http://tinyurl.com/lrg4oz
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Randall Jackson
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Posted - 2010.03.16 01:30:00 -
[29]
Quote:
The title is not necessarily reflected in the OP first posts though.
In fact, I don't think those who posted the first replies (well before me) were dense, the OP was just mis-formulated.
I do see the point here. My apologies for the laziness in word/phrase choices or not being clear. To me, the motivation of taking this in steps forward is to enhance the secondary market here on the forums (bonds, IPOs, and who knows what other creative financial instruments others can agree to trade). As Cyaxares said I think the prize is in comparability. How did so and so perform versus what we expected or what XYZ did. This means in presentation and in valuation methods (or other specific considerations). I started out thinking principles but as we debated above realized enforcing any rules would be near impossible. Guidelines, best practices were born and the acknowledgement that investors would become the sheriff. Also, if there were a defined set of best practices, you'd make the job of an auditor more defined and get more quality of their report (yea he trades alot becomes yea he did make 20 bil last month).
Before its considered being posted, don't think I believe this project would make the investments safe or prevent scams. I've played Eve long enough to know better.
Now that we are getting to the good stuff, asset valuation would likely be one of if not the most difficult areas to reach agreement. My suggestion would be the highest buy order in the region most actively traded (not sure if volume is an easy measurement to gauge in-game - like I said - I'm a market noob).
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Drab Cane
Carbenadium Industries
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Posted - 2010.03.16 04:20:00 -
[30]
Generally, as an business owner, I'm going to create reports for two sets of people - myself and any other managers (so we can see what's happening), and outside investors/auditors (so they can see what's happening, and verify it).
In a perfect world, I'd be able to easily pull the numbers together so the reports would make operational sense to me, while still reporting numbers that easy to verify and made sense to investors.
Is there a single asset pricing strategy that would meet all the needs (easy to gather, easy to verify, makes operational and financial sense), or at least be a suitable compromise?
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- Who Dares, Wins
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