http://online.wsj.com/article/BT-CO-20100505-721603.html?mod=WSJ_latestheadlines
Summary
Atmos Energy Corporation, the largest distributor of natural gas in the United States, has recently released their financial report for the second quarter. As par t of the report, it has been shown that there has been a 12% decline on unrealized loses. Although Atmos Energy Corporation suffered a profit loss from a decline on unrealized, the company has benefited from recent changes in the second quarter. The company has benefited from recent rate increases and rate-design changes that moderate earnings instability from causes such as weather, lower consumption and bad debt. During the second quarter, Atmos Energy Corporation has been leaning away from their core regulated business and performing riskier operations such as gas storage and gathering.
Connection
The connection between the article, "Atmos Energy 2Q Profit Down 12% On Unrealized Losses" and the Financial Accounting Textbook is unrealized losses, bad debts and internal control. During Atmos Energy Corporation's second quarter in their fiscal period, they suffered a decline of 12% on unrealized losses. The investments that Atmos Energy Corporation held decreased in value and caused the company to lose profit. Although Atmos Energy Corporation suffered losses from unrealized losses, they were able to benefit from rate-design changes that moderate earnings instability of bad debts, accounts receivable that cannot be collected. From the recent rate of changes and rate-design changes the company also improved their physical measures, a key part in internal control. More specifically the company improved their protection from damages or destruction caused by weather.
Reflection
Although Atmos Energy Corporatation suffered a decline on unrealized losses, I think the company will be fine. It is not uncommon for a company to lose money on an investment they are holding and since Atmos is benefiting from recent rate changes that moderate earnings instability of weather and bad debt, I am sure the company will do fine. Atmos Energy Corporation is the largest distributor of natural gas in the United States and it shows from the activities they perform. Even with the set back from the decline on unrealized losses, Atmos takes risk and performs operation outside of their usual core regulated business such as gas storage and gathering. I am also happy to see that the company is following the conservatism principle. Unlike some companies, Atmos Energy Corporation recognized their losses as soon as they could estimated and reported to the public.
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If an unrealized loss comes from long-term asset category, that doesn't bother us so much. However, it is not the case. An unrealized loss or gain always comes from short-term investment like shares and bonds. Unrealized loss or gain have different effects on the company's cash position depending the time length of the investment which is usually about 6 months. Stock market is affected by various things so it does have lots of surprises for lots of people, especially when a natural disaster happens. Unless the company relies on share-trading activities, short-term investment wouldn't do much harm to a company.
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