Special Purpose Framework

Question 1

What is modified cash basis and what are the common modifications to cash?

Answer 1

Modified cash basis is the blend of cash basis and accrual basis. The common modifications include:
(1) Capitalizing and depreciating fixed assets
(2) Accrual of income taxes
(3) Recording liabilities for long-term and short-term borrowings
(4) Capitalizing Inventory
(5) Reporting investments at fair-value and recognizing unrealized gains and losses