Accounting Analysis of Boston Beer 1990-1995
Making the analysis using the financial statements and assumptions (since the published reports for this period are not available freely since Boston Beer was a partnership for this duration), we can make the following observations:
Boston Beer Co. uses ACCRUAL method of accounting as do all its competitors, so comparisons will be easy for investors.
Since Boston Beer is a contract brewery, it out sources its production process to established brewers. This means it does not own most of its operating assets, instead it pays a fixed price per unit of produce for a specified volume. However, it assumes full responsibility for upkeep and maintenance of these facilities Expenditures, repairs and renewals are charged to expense, while major improvements are capitalized. All equipment and lease hold are recorded at cost. This is in line with economic reality as Boston Beer bears all the risks and benefits of these assets as if it owned them, though it holds no title. Thus there is no accounting bias.
Boston Beer Company uses a substantial amount of revenues on Sales and Marketing in a bid to build up its brand image and acquire goodwill. Thus their brand should be an Economic Asset, since it will help Boston Beer sell its products at a premium and increase gross margins. However, Accounting standards do not allow this and so Advertising is expensed in the period during which it was incurred. This results in a bias since the effects of Advertising are more long lasting than a financial year, yet the financial statements do not reflect their true potential. So even if the benefits are recognized after a substantial period, the current period could show them to be a loss making expense.
Depreciation on these assets is not mentioned under a separate head, but since they account for them in their balance sheet, we can assume assets are NET of accumulated depreciation.
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