Professional Documents
Culture Documents
Your textbook (like virtually all of them on the market these days)
largely takes an FASB approach. That is, it mostly evaluates
issues/topics/accounting in light of the FASB’s conceptual
framework.
SECONDARY QUALITIES
Comparability -- be comparable between enterprises
Consistency -- be consistent across time
CONSTRAINTS
Materiality
Cost/Benefit
2010 CLASS NOTES: THE BIGGER PICTURE
4
The CFA Institute put out a report in late 2005, arguing for the following in
financial reports (see Appendix A for more details on this):
Individual line items should be reported based upon the nature of the
items rather than the function for which they are used.
2010 CLASS NOTES: THE BIGGER PICTURE
5
CONSTRAINTS ….
2010 CLASS NOTES: THE BIGGER PICTURE
7
Managers know that users would like more, rather than less, information
in their financial reports, as doing so reduces information asymmetry.
However, managers often have incentives not to fully reveal their superior
information. For example, revealing proprietary information harms firms’
competitive positions. As another example, low-quality firms don’t want
to reveal too much information so that the users can see that it is low
quality.
2010 CLASS NOTES: THE BIGGER PICTURE
8
GAAP
Their own reputation (and, of course, Arthur Andersen) ....
Sarbanes – Oxley Act of 2002 – This Act also created the Pubic
Company Accounting Oversight Board (PCAOB), which assumed
responsibility for overseeing the auditors of public companies.
What management wants ...
What the users want ...
What the users think... What is the earnings expectation?
Board of Directors
What is it that the Board of Directors thinks about when govern the
corporation?
The CFA Centre believes that most standard setters subscribe to the
idea that GAAP accounting methods must produce decision-relevant
information, but much work remains to achieve this objective.
REVIEW PROBLEM A
BAD DEBTS (You’ll need to deal with this topic when we do
Statement of Cash Flows and also Factoring/Securitization)
(2) Ignore what you did in part (1). Assume instead that Britton
Corporation estimates that 1½% of ending accounts receivable
(which was $148,000) will not be collected. Assume further that
in May of 2010, Britton decides to write off a specific account in
the amount of $1,350. Further assume that in December of 2010,
that previously written off account of $1,350 paid their debt to
2010 CLASS NOTES: THE BIGGER PICTURE
17
Britton in full. Provide all necessary journal entries for this set of
facts.
(3) Ignore what you did in parts (1) and (2). Now assume that
Britton uses the direct write-off method to estimate bad debts.
Assume further that in May of 2010, Britton decides to write off a
specific account in the amount of $1,350. Provide the journal
entry for that write off. Further assume that in December of 2010,
that previously written off account of $1,350 paid their debt to
Britton in full. Provide all necessary journal entries for this set of
facts.
REVIEW PROBLEM B
ADJUSTING ENTRIES (This is just a general review of
adjusting entries to get you back into the mindset of
journal entries).
a. FORM 10-K:
b. FORM 10-Q:
The next two forms to investigate depend on the last two digits of your social
security number (i.e., everybody in the class won’t be reporting on the same forms
for this part of the exercise). Using the table below, determine which two forms
you are responsible for. Example: If your last two digits of your social security
number are 41, then you would be responsible for Forms 8-K and S-20.
Next to last digit / form Last digit / form
0 8-K 0 S-20
1 11-K 1 S-8
2 13G 2 S-6
3 F-1 3 S-3
4 8-K 4 S-20
5 F-3 5 S-1
6 F-4 6 N-4
7 18-K 7 N-3
8 10-QSB 8 N-2
9 12b-25 9 N-1A
c. FORM _______:
2010 CLASS NOTES: WRITING CASES AND DATABASE SEARCHES
7
d. FORM _______:
For this assignment, you will use EDGAR to find out information about one
company. Your company is based on the first letter of your last name. Using the
table below, determine which company you are responsible for. At the EDGAR
home page, go to “Search company filings” under Filings & Forms. Then go to
Company or fund name …. Enter the company that you are responsible for
researching. (If for some reason, you cannot find your company or it has no
reports, go to the next letter of the alphabet and work with that company. Answer
the questions below.*
First First Firs
lette lette t
r of Company r of Company lett Company
last last er
nam nam of
e e last
nam
e
A Maytag J Dell T Hewlett Packard
B PepsiCo K Meristar U Motorola
Hospitality
C Snap On L Black and V Revlon
Tools Decker
D Riser Foods M Stride Rite W Aetna
E Amazon.com N American X Southwest
Airlines Airlines
F Wells Fargo O Cobblestone Y Westinghouse
Golf Group Electric
G Delta P Procter and Z eBAY
Airlines Gamble
H Family Q or
R
Intel
Dollar
I Talbots S Harmon
Industries
Company:___________________________________________________________________
________
2010 CLASS NOTES: WRITING CASES AND DATABASE SEARCHES
8
Company Headquarters
Location:________________________________________________________
Did the corporation file a 10-K for the most recent year?
________________________________________
If so, when?
___________________________________________________________________________
What is the balance sheet date associated with the most recent 10-Q
filing:________________________
1. Using the SEC filings database, determine the number of reports that
mentioned SFAS 121 and whose reports are dated before 6/30/96.
Your search phrase was:
2. Using the SEC filings database, find the number of reports that
mentioned the phrase mandatorily redeemable preferred stock in
reports after January 1, 1997.
Your search phrase was:
3. Using the SEC filings database, find the number of reports that
mentioned the phrase mandatorily redeemable preferred stock in
reports after June 1, 2008.
Your search phrase was:
2. List the first four headers of the results you found in 1 above.
3. Now go back to the search and type in the term revenue. How many
results did you find?
4. List the first four headers of the results you found in 3 above.
5. If the words sales and revenue generally have the same meaning in
accounting, why are your search results different for these two terms?
1. Intangible
2. Asset
Now redo the searches #1 and #2 above, but go into the Industry area type
within the advanced search. How many hits do you get?
6. Intangible
7. Asset
8. What industry is the first result from for your search in #6 above? And
from #7?
2010 CLASS NOTES: WRITING CASES AND DATABASE SEARCHES
13
1. Go to NewsPages (at top). List out the publications you have access to
here. You can abbreviate (i.e., Wall Street Journal is WSJ).
2. Now to go Search and then Search Builder. Type in the term derivatives.
How many hits?
_____________________________________________________________________________
______
3. Now limit the search in #2 to only the New York Times publication. How
many hits?
_____________________________________________________________________________
______
4. Now limit the search in #2 to only the Wall Street Journal. How many
hits?
_____________________________________________________________________________
______
5. Now limit the search in #2 to the Banking industry. How many hits?
_____________________________________________________________________________
______