Lack of Exactness in Reporting

Question: Many of the figures reported in financial accounting cannot be

absolutely correct. Although $4.731 billion is the asset balance shown by Dell, the cash eventually collected might

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be somewhat higher or lower. Should the lack of exactness in reporting receivables cause concern for decision


Answer: No one will ever be able to predict the exact amount of cash to be received from nearly $5 billion

in accounts receivable. In fact, Note One to Dell’s financial statements specifically states, “The preparation of

financial statements in accordance with GAAP requires the use of management’s estimates. These estimates are

subjective in nature and involve judgments that affect the reported amounts of assets and liabilities, the disclosure

of contingent assets and liabilities at fiscal year-end, and the reported amounts of revenues and expenses during

the fiscal year. Actual results could differ from those estimates.”

Knowledgeable decision makers understand that some degree of uncertainty exists with all such balances.

However, a very specific figure does appear on Dell’s balance sheet. By including this amount, company officials

are asserting that they have obtained sufficient evidence to provide reasonable assurance that the amount collected