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Analysis of Social Security Benefits in Financial Statements: A Case Study, Assignments of Accounting

A case study analyzing the inclusion of social security benefits as assets in financial statements. It explores the implications of this practice for loan eligibility, net worth calculations, and compliance with generally accepted accounting principles (gaap). The document examines key terms like contingent assets, gaap, and debt-to-income ratio, highlighting their relevance to the case study. It provides insights into the ethical considerations and financial implications of accurately representing social security benefits in financial reporting.

Typology: Assignments

2024/2025

Available from 02/21/2025

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Tina Skinner
DeVry University
ACCT540
Professional Research for
Accountants Week 3 Team 2 Course
Project Case 4 Professor Nwaogu
November 12, 2024
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pf4
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Tina Skinner DeVry University ACCT Professional Research for Accountants Week 3 Team 2 Course Project Case 4 Professor Nwaogu November 12, 2024

Week 3 Team 2 Course Project Case 4 Here are the key terms for Randy Jones' case and their relevance.

  1. Contingent Assets are assets whose value depends on uncertain future events. Social Security benefits qualify as contingent assets because they depend on future eligibility and life expectancy, making them speculative for inclusion in financial statements (International Monetary Fund, 2014).
  2. GAAP (Generally Accepted Accounting Principles) provides guidelines for accurately recording assets and liabilities. Under GAAP, contingent assets like Social Security benefits should only be included in financial statements once realizable, highlighting that Randy's proposal does not align with accepted accounting standards (PwC, 2023).
  3. Social Security Benefits are government-provided income streams for retirement or disability that are non-transferable and lack liquidity. Randy's intention to list them as assets is significant because it challenges traditional definitions of tangible, liquid assets that are generally acceptable for financial statements (Reznik et al., 2021).
  4. Net Worth : This measure of financial health is calculated by subtracting liabilities from assets. Including future Social Security benefits as assets could inaccurately inflate Randy's net worth, which might mislead banks assessing his loan eligibility (Mukherjee, 2018).
  5. Loan Eligibility : Banks often evaluate applicants' financial positions based on liquid assets and income streams. Understanding how Social Security benefits factor into

Week 3 Team 2 Course Project Case 4 Randy's loan eligibility is critical, as banks typically do not accept these benefits as assets (DW, 2011).

  1. Financial Profile : This encompasses the total financial picture presented by an individual. For Randy, structuring a robust financial profile without inflating asset values is essential for accurately representing his financial health to lenders (International Monetary Fund, 2014).
  2. Debt-to-Income (DTI) Ratio : This ratio compares an individual's monthly debt payments to monthly income and is a key metric in loan evaluations. Randy’s Social Security benefits could be more accurately included in his income rather than as assets, thereby improving his DTI without misrepresenting his assets (Reznik et al., 2021). Each term is vital to shaping an accurate, GAAP-compliant approach to Randy's loan application and helping him understand acceptable financial representations and ethical standards.

Week 3 Team 2 Course Project Case 4 References DW. (2011, May 21). Taking Social Security benefits involves more than time and money calculation: Scott Burns. The Boston Globe. https://devry.idm.oclc.org/login?url=https://www.proquest.com/newspapers/ taking-social-security-benefits-involves-more/docview/867865299/se- 2 International Monetary Fund. (2014). Monetary and Financial Statistics Manual and Compilation Guide (MFSM). Classification of financial assets and liabilities (June 2014). https://www.imf.org/external/pubs/ft/mfsmcg/c4.pdf Mukherjee, A. (2018). Time and money: Social security benefits and intergenerational transfers. AEA Papers and Proceedings, 108 , 396–

  1. https://doi.org/10.1257/pandp. PwC. (2023). 23.5 Gain contingencies. PwC.com. https://viewpoint.pwc.com/dt/us/en/pwc/accounting_guides/ financial_statement_/financial_statement 18_US/chapter_23_commitmen_US/ 235_gain_contingenci_US.html Reznik, G. L., Couch, K. A., Tamborini, C. R., & Iams, H. (2021). Changing longevity, Social security retirement benefits, and potential adjustments. Social Security Bulletin, 81 (3), 19–37. https://www.ssa.gov/policy/docs/ssb/v81n3/v81n3p19.html