Discussion Board Answer

Ch 04 EC SEC.gov Exploring Procedure

This ac:vity takes you to the website of our foremost authority in accoun:ng, the Securi:es and Exchanges Commission, aka “The SEC”. Every publicly traded company trading on U.S. exchange must send their financial statements directly to the SEC which makes this site the place to go for detailed informa:on. For now we are exploring revenue recogni:on and adjus:ng entry policies of your company, which I will demonstrate here with UPS.

First, find the :cker symbol for your company from last week’s ac:vity. Then click the link to get started: hLp://www.sec.gov/

1) Explore this page for fun if interested, then click on “Filings” in the menu bar and select “Company Filings Search” to get to work.

Use Fast Search since you have your :cker symbol already. If you do not have your :cker symbol, do not fight the picky Company Name op:on. Instead, go back to easy Google finance and type enough of the company name into the search field to get it to show you the right :cker symbol.

Click “Search” to move to the next screen.

“10-K” is the code for Annual Report for US issuers. Follow the arrows to get your company’s complete annual report. Almost there! If you don’t find any 10-k reports, then you likely have a foreign issuer. In this case, try searching for a “20-F” form, or a “40-F” form, or leave the “Filing type” field empty then click the “Search” buLon and scan down through the resul:ng filings. If your company went public too recently to have issued a 10-k report yet, search for the prospectus form “424B4”. If this fails then go to the company website and locate their annual report under “Investor Rela:ons”. Do the rest of the exercise there. Start early, and contact your instructor if you can’t get unstuck.

2) One last step. Click the link shown and you’ll be face to face with your annual report.

There, isn’t that preLy? Take 2 minutes if you can spare them and scroll down just a bit to read the table of contents. If you’ve never seen one of these, you might be shocked at the candor of the informa:on companies are required to reveal. If you don’t look, you’ll never know. Later in the semester you may need more detail than Google or Yahoo can offer. Remember how to search in this 10-k report, and you’ll always be able to get the informa:on you need on your company.

How to locate informa:on on your company’s revenue recogni:on policies:

Use the “Find” func:on of your browser (in Windows “Ctrl”+”F”) to open a search field within your 10-k. Search on the term “revenue recogni:on”. Read everything about every use of that term in the document. Answer the discussion ques:ons for this case when repor:ng. Make sure to fully address each and every ques:on completely. If that search term doesn’t find anything, try “Summary of accoun:ng policies”, or varia:ons of those terms. If that doesn’t work, use parts of the suggested search terms. If all else fails, try scrolling through the document with an eye for anything to do with accoun:ng assump:ons, policies, or sales, or anything like that. You will most likely find what you need in a footnote just aeer the financial statements. For a direct path, look for something like “Financial statements and Supplementary Data” in the table of contents. Click that link to go that sec:on. then look for a link within that index labeled something like “Notes to Consolidated Financial Statements”. That should take you to the footnotes which will contain the revenue recogni:on informa:on you need.

If the above techniques do not reveal substan:al material on this topic, then you may have a company that is displaying their financial statements including footnotes in a separate file. Look for “Financial Statements” in the form 10-k table of contents. If that link reveals a line like “The financial statements are included herein by reference” then they are not actually included. Look for that line to tell you were they are, something like “….they are in the annual report in exhibit 13….”. That exhibit will be in the list of items below the line for “Form 10-k” in the search results as displayed in the screen shot above. Look for the men:oned exhibit, or just open them one by one and search each one for “revenue recogni:on” un:l you get what you need.

How to locate informa:on on your company’s adjus:ng entry polices:

Follow the same steps in your revenue recogni:on work. Search instead on these key words: “accrual”, “assump:on”, “defer”, “accoun:ng policies”, “deprecia:on”. The paragraphs surrounding these terms are rife with more technical terms than we have seen. Use your textbook index or Google to find defini:ons of key terms where necessary. You do not need to report on everything, just find enough that makes sense to you and report that. I just want to see that you genuinely searched and found something related to something we are studying. Write enough to demonstrate that and you’ll have gained the intended learning experience. This informa:on is also located in the footnotes, accessible from the table of contents as described in the revenue recogni:on instruc:ons above.

Ch 04 EC SEC.gov Exploring Repor:ng Form Your name:________________________

Company Name:____________________

Ticker symbol:______________________

Follow the detailed instructions in the procedure to answer the following questions. This is only an exploration case. It is not a continuation of the primary analysis case.

Describe the nature of their revenue recognition policies.

Describe the nature of 1 to 3 of their policies involving adjusting entries. Highlight any significant effects these policies may have on their reported earnings and/or financial standing. There may be too much information here, select only the most interesting pieces and limit answer to one moderate paragraph

Describe any internal control weaknesses found regarding revenue recognition or adjusting policies. “Internal control issues“ is the wording that describes opportunities for cheating inherent in their processes.

How do you expect their revenue recognition and adjusting entry policies affect the accuracy and dependability of their financial statements? Do you trust the company more or less? Explain your answer providing the reasons supporting your answers. (Note: This is not a continuation of your developing analysis case. This is a separate standalone exploration case.)