Financial Ratios

7015 Words Apr 5th, 2012 29 Pages
Financial Reporting Problem:
The Procter & Gamble Company

“On my honor, as a student, I have neither given nor received unauthorized aid on this academic work.”

_____________ _____________ _____________ _____________ Financial Reporting
Financial Reporting Problem
Fall 2011
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In order to evaluate your understanding of the use of accounting information, you are asked to analyze the 2007 financial statements of The Procter & Gamble Company (P&G). The financial statements of P&G are presented in Appendix 5B or can be accessed at the book’s companion website,
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Most of these arrangements have terms of approximately one year. Accruals for expected payouts under these programs are included as accrued marketing and promotion in the accrued and other liabilities line item in the Consolidated Balance Sheets.

(b) Give two examples of where historical cost information is reported in P&G’s financial statements and related notes. Give two examples of the use of fair value information reported in either the financial statements or related notes. Internet Page 42 and 55 Book pg 42

• PP&E are recorded at cost and are shown net of depreciation on the balance sheet, and liabilities are recorded on a cost basis. Companies issue liabilities, such as bonds, notes, and accounts payable, in exchange for services or assets on an agreed upon price.

• Fair value is used in certain debt instruments, investments, and derivatives

(c) How can we determine that the accounting principles used by P&G are prepared on a basis consistent with those of last year? Internet pg 55

• We know there is no major changes due to the fact that there is no stated changes in the pronouncement and policy section.

(d) What is P&G’s accounting policy related to advertising? What accounting principle does P&G follow regarding accounting for advertising? Where are advertising expenses reported in the financial statements? Book Pg 222

• The composition of amounts included in advertising

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