Re: Statements of Financial Position (Re: Audited financial statements for 2023)

Le 2024-11-20 à 09:21, Martin Michlmayr a écrit :
> This is a very standard Statement of Financial Position and they all
> look the same.
>
> Unlike the monthly treasurer reports, which need to be completely
> reworked for clarity, in this case it comes down to your observation
> about accounting knowledge.
>
> I suggest you read about the accounting equation; this web site is very
> good:https://www.dwmbeancounter.com/
>
> Basically, Assets = Liabilities + Equity
>
> Let's say you have a house worth 1000k (assets), but you owe the bank
> a 800k mortgage; that means your equity ("net worth") is 200k. 1000 =
> 800 + 200 In order words, you have a house but you also have debts, so
> really your net worth is 200k.
>
> Net Assets == Equity == (in personal finance) net worth
>
> So, looking at SPI's 2023 financial statements, you see SPI has 2858k
> worth of stuff (assets: cash, investments, hardware); that's the house
> in the previous example. But SPI also has some payables (113k) and so
> what belongs to SPI is 2745k (the math is 2858 - 113 = 2745).
>
> To put this back in the accounting equation: 2858 = 113 + 2745 This
> is what you'll see in the statement.
>
> So, net assets are different to assets because of "debts" (we don't
> have loans but there are obligations to pay certain things sometimes
> and there was a big one at the end of 2023).
>
> (Things have become more complicated from a reporting perspective when
> we moved from the cash basis to the accruals basis a few years ago,
> but it gives a more accurate view.)

Yes, I am not entirely clueless about accounting; what I meant is that I
don't have (significant) education about it and have never been involved
in the production of such statements. What I was talking about is the
emphasis on "Total Liabilities and Net Assets" (the house's value)
rather than net assets (what actually belongs to SPI and its projects).

>
> Anyway, if you look at Net Assets, the 387k figure is SPI's General
> Fund whereas the 2357k figure is funds held for projects. If you go
> to the page, you'll see the fund report which shows the funds for each
> project and the total matches the 2357k figure.

OK

>
> I hope that helps.

After reading the explanation from Jonatas L. Nogueira,
https://www.investopedia.com/terms/b/balancesheet.asp and reading all
our statements, I feel like I understand fairly well now.

Basically, what I understand from the mail by Jonatas is that:

1. The Statement of Financial Position puts the emphasis on the same
information computed in 2 different ways.
2. The reason for emphasizing these lines even though they are
redundant and not the most important is to show that our
computations are credible (in other words, "look, our values match,
there is no glaring mistake!").
3. The format of balance sheets is rather standardized, and the
location of emphasis was determined by existing conventions. See
https://www.investopedia.com/terms/b/balancesheet.asp#toc-example-of-a-balance-sheet

I guess the mistake I made is to focus on the Statement of Financial
Position, when in fact SPI's financial situation (at the end of 2023) is
clearest in our Statement of Activities, on page 4, which adequately
emphasizes the 2,745,152 USD figure.

The current format may serve accountants well, but it does not offer
optimal clarity for non-accountants (the vast majority of SPI
contributors). Unless we are willing to change the Statement of
Financial Position's format, here are a bunch of quick suggestions/ideas
to help with serving our main audience:

1. Avoid referring to "financial position" in the title of the
Statement of Financial Position?? Call it "Balance Sheet" instead?
2. Put the Statement of Activities before the Statement of Financial
Position?
3. Rename the Statement of Activities? "Statement of Activities and Net
Assets"?
4. Do not underline "Restrictions" in the Statement of Activities' headers.
5. Put more emphasis on 2023 in the Statement of Activities. Perhaps
making the amount at the bottom (2,745,152) in bold.

Thank you for your intervention Jonatas

>
> Martin
>
>
>
>
>
> * Philippe Cloutier<chealer(at)gmail(dot)com> [2024-11-20 08:45]:
>> Thank you very much one more time Dr Michlmayr,
>>
>> I just have a remark about presentation of our Statement of Financial
>> Position (page 3): I do not know accounting, but find the last line ("Total
>> Liabilities and Net Assets") very confusing. It does not explain how it
>> differs from Total Assets.
>>
>> I find the page as a whole arguably misleading for putting more emphasis on
>> "Total Liabilities and Net Assets" than on Net Assets. I believe the latter
>> should have *at least* as much emphasis as the former.
>>
>> I know it is late for such a comment, but I did not see the statements
>> before they were audited.
>>
>> Le 2024-11-19 à 21:55, Martin Michlmayr a écrit :
>>> Audited financial statements for the year 2023 are available now:
>>> https://spi-inc.org/treasurer/2023-financial-statements.pdf
>>>
>>> Form 990 for the year 2023 is also available:
>>> https://spi-inc.org/treasurer/2023-990.pdf
>>>
>>> You can consider the 2023 reports under "Financial reports" at
>>> https://spi-inc.org/treasurer/
>>> as final now.
>>>
>>> Please let me know of there are any general questions. If there
>>> are specific questions about your project, please contact
>>> treasurer(at)spi-inc(dot)org
>>>
>> --
>> This mail's original content (non-quoted parts) is available under the Creative Commons Attribution-ShareAlike License 4.0.
>>
>> Philippe Cloutier
>> https://www.philippecloutier.com
>>
>>
--
Philippe Cloutier
https://www.philippecloutier.com