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Reporting to Stockholders and Regulators - Pasewark Accounting

By Jerry Young,2014-05-18 00:18
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Reporting to Stockholders and Regulators - Pasewark Accounting

    REPORTING TO

    SHAREHOLDERS

    AND REGULATORS

    Accounting as a Form of Communication

    Reporting to Shareholders

    ? Annual Report

    ? Corporate Websites

    ? Quarterly Report

    Reporting to Regulators

    ? Regulatory Legislation

    ? Securities Act of 1933

    ? Securities Exchange Act of 1934

    ? Sarbanes-Oxley Act of 2002

    ? Regulation Governing Reporting (S-K and S-X) ? Securities and Exchange Commission

    ? Purpose of SEC

    ? Structure of the SEC

    ? Registration of Securities

    ? Periodic Reporting

    Annual Reports (10-K)

    Quarterly Reports (10-Q)

    ? EDGAR (SEC Reports on the Web)

    Auditing

    ? Role of the Auditor

    ? Audit Firms

    ? The Audit Report

    ACCOUNTING AS A FORM OF

    COMMUNICATION

    “The Language of Business”

A transaction occurs in the “reality of

    business”.

    I’ve been Accounting function records the watching things transaction based on sensory and recording

    as I see it. perceptions.

Information is compiled and

    summarized.

Management shapes information to

    be disclosed.

    Are these Auditors examine information for

    guys following conformity to accounting rules. the rules?

Financial statement user examines

    disclosed information and forms an

    opinion.

    Financial statement user makes a I think I’ll

    buy that decision. stock today.

    Audit and Regulation 2

    REPORTING TO SHAREHOLDERS

    Annual Report Contents

Annual Report to Shareholders of Cisco Systems

    Contents Page

    Introduction 1

    Letter to Shareholders 12

    Reports of Management 16

    Report of Independent Registered Public Accounting Firm 17

    Selected Financial Data 18

    Management’s Discussion and Analysis of Financial The SEC requires Condition and Results of Operations 19 management explain Quantitative and Qualitative certain issues. Disclosures about Market Risk 42

    Consolidated Statements of Operations 45

    The primary financial The primary financial Consolidated Balance Sheets 46 statementsstatements Consolidated Statements of Cash Flows 47

    Consolidated Statements of Shareholders’ Equity 48

    Notes to Consolidated Financial Statements 49 The The notes to the notes to the Supplementary Financial Data, Stock Market financiafinancial statements are l statements are Information, and Stock Performance Graph 79 longest part of the longest part of the Shareholder Information 80report. report.

The annual report of Cisco is at:

    http://www.cisco.com/web/about/ac49/ac20/ac19/ar2007/printable_report/index.html

    Audit and Regulation 3

    REPORTING TO SHAREHOLDERS

    Corporate Investor Websites

    From the Microsoft website

    Audit and Regulation 4

    REPORTING TO SHAREHOLDERS

    Quarterly Data Sent to Stockholders

    (? APB 28)

1. Operational information

     Revenues

     Income Tax Expense

     Unusual or Infrequent Items (e.g., inventory loss)

     DEC Items

     Net Income

2. EPS

3. Seasonal Revenue and Expenses

4. Contingent Items

5. Description of Accounting Changes and Estimates

6. Significant Changes in Financial Position (Balance Sheet Items)

    Interesting Points:

1. GAAP recommends, but does not require, a balance sheet and cash

    flow statement.

2. Data should be reported for the following categories:

     Current quarter and previous year corresponding quarter

     Year-to-date or 12-month-to-date for the current and previous year

3. A fourth quarter is not required if data is provided in the annual report.

Audit and Regulation 5

    REPORTING TO SHAREHOLDERS

    Quarterly Data Sent to Stockholders

    (? APB 28)

    EXXON MOBIL CORPORATION EXXON MOBIL CORPORATION

    CONDENSED CONSOLIDATED STATEMENT OF INCOME

    (millions of dollars)

     Three Months Six Months Three Months Six Months Ended June 30 2007 2006 2007 2006 Ended June 30 2007 2006 2007 2006

     REVENUES AND OTHER INCOME

    Sales and other operating revenue $95,059 $96,024 $179,233 $182,341 Income from equity affiliates 2,015 1,687 3,930 3,487 Other income 1,276 1,323 2,410 2,186

     Total revenues and other income 98,350 99,034 185,573 188,014

     COSTS AND OTHER DEDUCTIONS

    Crude oil and product purchases 47,627 48,180 87,669 91,001 Production and manufacturing expenses 7,678 7,416 14,961 14,840 Selling, general and administrative expenses 3,788 3,557 7,180 7,023 Depreciation and depletion 2,994 2,760 5,936 5,404 Exploration expenses, including dry holes 353 176 625 458 Interest expense 96 107 199 272 Sales-based taxes 7,810 8,211 15,094 15,875 Other taxes and duties 9,888 10,170 19,479 19,043 Income applicable to minority interests 188 253 438 435

     Total costs and other deductions 80,422 80,830 151,581 154,351

    INCOME BEFORE INCOME TAXES 17,928 18,204 33,992 33,663

     Income taxes 7,668 7,844 14,452 14,903 NET INCOME $10,260 10,360 19,540 48,760

    BASIC EARNINGS PER SHARE (dollars) $1.85 $1.74 $3.49 $3.12

     DILUTED EARNINGS PER SHARE $1.83 $1.72 $3.45 $3.09

    Audit and Regulation 6

    REGULATORY LEGISLATION

    Securities Act of 1933 (Issuance) Securities Act of 1933 (Issuance)

? Regulates initial public offerings

? Requires disclosure by registration (S-1, S-2, S-3)

? Prohibits deceitful misrepresentation, and fraud in issuance

    of securities

Securities Exchange Act of 1934 (Trading) Securities Exchange Act of 1934 (Trading)

? Regulates trading of securities

? Regulates brokers engaging in trading of securities

? Requires continued reporting (10-K, 10-Q)

Purpose of the laws: Purpose of the laws

? Companies offering securities must tell the truth about their

    businesses, the securities, and associated risks.

? Brokers, dealers, and exchanges must treat investors fairly

    and honestly.

    Audit and Regulation 7

    SARBANES-OXLEY (SOX) ACT OF 2002

    True name is “Public Company Accounting Reform and Investor

    Protection Act of 2002”

    : Primary contentPrimary content

    ? Establishes Public Company Accounting Oversight Board (PCAOB) as the

    regulator of audit services which registers auditors, defines processes and

    procedures for audits, and enforces compliance.

    ? Establishes standards for auditor independence.

? Restricts auditor from doing other kinds of business with the same clients.

    ? Mandates senior executives take individual responsibility for the accuracy

    and completeness of corporate financial reports.

    ? Enhances reporting for financial transactions, including off-balance sheet

    transactions, pro-forma figures and stock transactions of corporate officers.

    ? Requires internal controls for assuring the accuracy of financial reports and

    disclosures, and mandates both audits and reports on those controls.

    ? Defines the codes of conduct for securities analysts and requires disclosure

    of conflicts of interest.

    ? Describes criminal penalties for fraud by manipulation, destruction or

    alteration of financial records.

    ? Provides protections for whistle-blowers.

    ? Requires Chief Executive Officer to sign the company tax return.

    ? Enables the SEC to temporarily freeze large or unusual payments.

    Audit and Regulation 8

    REGULATIONS GOVERNING REPORTING

REGULATION S-K REGULATION S-K

Sets requirements for non-financial data (Items 1 - 7 and 9 - 14 non-financial

    in the 10-K Report)

REGULATION S-X REGULATION S-X

Sets requirements for financial data (Item 8 in the 10-K Report) financial

Audit and Regulation 9

    PURPOSE OF THE SECURITIES

    AND EXCHANGE COMMISSION

Purpose: The SEC is established to: Purpose

? protect investors,

? maintain fair, orderly, and efficient markets, and

? facilitate capital formation

History: History

? Formed by Securities Exchange Act of 1934

? Designed to restore investor confidence in capital markets by

    providing investors and the markets with more reliable

    information and rules of honest dealing.

Audit and Regulation 10

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