Silver
Well-known member
Do you then disagree with my previous statements?Remind me not to use you as my accountant
Do you then disagree with my previous statements?Remind me not to use you as my accountant
I like using actual dollars out of pocket as a yearly cost per cow. Building materials, wages and everything down to a filter for a chain saw go into the current year's cost per cow. There is no opportunity cost against land when you consider where you and I live because no one else would haul cattle this far in the bush or rent the hay land and then haul them 250 miles away again.Which is exactly my point.
However, this operation is a business that stands on it's own two feet without outside income. If it wasn't profitable more years than not we would be out of business. Every business has operating costs and capital expenditures. And while these are two different things they are fully financed by the operation. We could argue all day long as to weather a capital expense such as a new salt shed should have it's costs amortized over the life of the shed or be expensed directly against this years calf crop.
Figures lie and liars figure, so no two of us on this board are going to look at the same set of numbers and derive the same set of answers.
This is how I do it. Right or wrong, it allows me to fairly accurately monitor changes in year over year operating expenses.I like using actual dollars out of pocket as a yearly cost per cow. Building materials, wages and everything down to a filter for a chain saw go into the current year's cost per cow.
I don't count things that are paid for as an expense. I don't count the land at all. I think the land is a long term investment. I know most on here don't agree with this but a couple weeks ago I got a call about selling my place again. I told the person no but they did say the value had gone up $220,000 in the last 2 years. How would you figure that into the operation? I do count land maintenance and up keep.A lot of stuff you dont know its cost until you see how long it lasts.
I dont count paid for land. Do you count paid for equipment? The point of paying things off is to get rid of the costs.
Value of your assets goes up on your balance sheet if the land is part of the operation.I don't count things that are paid for as an expense. I don't count the land at all. I think the land is a long term investment. I know most on here don't agree with this but a couple weeks ago I got a call about selling my place again. I told the person no but they did say the value had gone up $220,000 in the last 2 years. How would you figure that into the operation? I do count land maintenance and up keep.
Do you then disagree with my previous statements?
Canada's tax structure is different than the US. We don't get as many subsidies in general but aren't taxed as heavily on income tax it seems. They get us in many other ways.What are Generally Accepted Accounting Principles?
Generally accepted accounting principles (GAAP) refer to a common set of accounting principles, standards, and procedures issued by the Financial Accounting Standards Board (FASB). Public companies in the United States must follow GAAP when their accountants compile their financial statements. GAAP is a combination of authoritative standards (set by policy boards) and the commonly accepted ways of recording and reporting accounting information. GAAP aims to improve the clarity, consistency, and comparability of the communication of financial information.
Canada's tax structure is different than the US. We don't get as many subsidies in general but aren't taxed as heavily on income tax it seems. They get us in many other ways.
That's why you run numbers on the operation as a whole and individual properties. Some properties are more profitable than others. Inherited land vs purchased pand vs rented land may all be different.I agree that long term capital investments could never be counted against an operation on an "as invested in" expense. $200,000 facility for feeding all paid up front, won't float in the year you built it... and you're going to be using that facility for 30 years or more. That's what the depreciation schedule is for. But DO include that depreciation then in the "bottom line". Some operations are "long term", and may not have a "turnover" in a given year... a reforesting operation, where you had "clear cut" an area, which gave you a "harvest" in one year, might require 30-50 years to get to the next "harvest" on that same acre. Those years in between are "annual loss years", if all the income is applied annually. But there is still a "cost" for that land each and every year, even if the land is paid for. Land, as an asset, is another one... yup, it goes up, it goes down, and THAT VALUATION IS what is essential when looking at total value of the operations ASSETS. Asset valuation is different than annual operational profitability. That's why I feel it important to include a "land rental valuation" as a part of an "annual cost of operation", when trying to figure out if I can be profitable or not.
I cash crop too, on both owned and rented land, but if the land I own and have paid for and use for cropping doesn't have included in its "profit or loss statement" what I could reasonably receive for renting it out without having to do anything to it, then I'm not really comparing the two types of ground fairly... and if I'm not including that value when I'm trying to decide if I'll be raising corn or beans or cattle on that land, or renting it out, on ALL the various options, then I'm not really knowing my true cost of overhead.
Here's my point... and it doesn't matter what kind of operation it is. Let's say I operate on "rented ground" and on owned, paid for ground. If I DON'T include a realistic "land cost" each year against my "owned ground" in the bottom line OPERATIONAL costs, and if "renting" more ground can only "cash flow" and make sense BECAUSE I have some "owned acres" that I DON'T plug in a land cost for, and therefore, I can "mentally" offset the cost of paying rent there, and still be making money on the "overall operation".......... then I'm really subsidizing the profitability of the rented ground with my owned land.... I'm fooling myself into thinking that the rented ground "pays". I might be LOSING money on that rented ground. And if that's the case (the land can't make it without some "free land" to offset the true operating cost), then I'm also fooling myself about the profitability of my owned land too.
If we don't include these costs, then we MAY be raising our commodity and SUPPLYING and selling it for LESS than our true actual cost of production. And if we're willing to do that, then why should the consumer consider paying us what our true cost of production is, as long as the supply continues to roll in? We have to think like businessmen, and if it can't pay it's true cost, we have to stop supplying the marketplace with that commodity, and find some other use for our land.
If there's more money in OWNING land, than there is in FARMING land, care to guess who will be owning the land? Investors. Why is it nigh onto impossible to buy land today and make it pay farming? Because farmers are willing to raise commodities for less than their true cost of production. And when they/we do, they/we are willing to turn to the government to subsidize that willingness to do it.
And yet no two accountants will manage the numbers in exactly the same way. Thus the reason everyone has had "good accountant" and a "bad accountant" at some point.What are Generally Accepted Accounting Principles?
Generally accepted accounting principles (GAAP) refer to a common set of accounting principles, standards, and procedures issued by the Financial Accounting Standards Board (FASB). Public companies in the United States must follow GAAP when their accountants compile their financial statements. GAAP is a combination of authoritative standards (set by policy boards) and the commonly accepted ways of recording and reporting accounting information. GAAP aims to improve the clarity, consistency, and comparability of the communication of financial information.
You really do not understand accountingAnd yet no two accountants will manage the numbers in exactly the same way. Thus the reason everyone has had "good accountant" and a "bad accountant" at some point.