.0/msohtmlclip1/01/clip_image001.gif”>.0/msohtmlclip1/01/clip_image002.gif”>.0/msohtmlclip1/01/clip_image003.gif”>.0/msohtmlclip1/01/clip_image004.gif”>ACCOUNTING 435 COURSE ASSIGNMENT Spring 2014 Due Wednesday, April 16th.
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Introduction
Studying the elements of Advanced Financial Accounting topics can be challenging to say the least, and the perspective we take in this course is specifically from a preparer of the financial statements. In order holistically understand the concepts learned in the course, it will be beneficial to analyse consolidated financial statements from a user perspective. This enhances a better understanding of the material studied in the course to date and confirms your understanding of consolidated entities.
Requirement (You may complete this assignment individually or as a pair. No more than 2 people working together)
Access the most recent annual report for Google Inc. by following the link provided. https://investor.google.com/pdf/2012_google_annual_report.pdf
Once you have successfully located the most recent Financial Statements in the Investor Relations section (found in the 2012 Annual Report), you will need to answer the following questions:
Income Statement
Are the expenses presented by function or nature? How does this presentation enhance your understanding of the statement?
What is amortization on the intangible and other assets during the year and why does amortization expense not appear as a separate component on the income statement?
What portion of the companys expenses are research and development? What is their policy regarding capitalization of such costs?
Balance Sheet
What portion of the companys assets is property, plant, and equipment? Has the portion increased or decreased from the prior year?
How does the company value its plant and equipment?
Assume that one of the subsidiaries sold equipment to the parent two years ago and reported a substantial gain. The parent still owns and uses this equipment. Due to an oversight, the intercompany gain has never been eliminated when preparing the consolidated statements. What is the impact of this error on total asset turnover and return on assets for the current year?
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Does the company employ the direct or indirect method of accounting for operating cash flows?
What was the biggest cash outflow during the year?
What percentage of the companies expenses were related to stock based compensation? Why does Google use stock based compensation to encourage employees?
If the company had reported gains or losses on sale of subsidiaries in income from continuing operations rather than in income from discontinued operations, what impact would this have had on the companys share price? Briefly explain.
Reporting and Disclosure
Are the companys operating segments based on product lines, geographic areas, or some other factor?
Does the company provide disclosures about major customers? If so, what is the nature of the disclosure?
Which of the operating segments is the biggest in terms of revenues? Profit? Assets?
Which of the operating segments reported the most improvement in return on assets from the previous year?
What currency is used in presenting the financial statements?
Identify the location(s) in the annual report where the company provides disclosures related to its current income tax status with the Internal Revenue Service and other tax authorities. Comment on whether you believe Google has reported their taxes properly in the past.
Indicate if and how the company describes the significance of foreign currency issues to the overall success/profitability of the company and sensitivity of its income to a change in foreign exchange risks.
Describe the types of hedging instruments the company uses to hedge foreign exchange risk.
What was the amount of foreign exchange gains or losses for the year on cash flow hedges? Describe how these gains or losses are reported.
Describe the basis for consolidation used by the company. Include a summary about relevant standards followed, the accounting for subsidiaries, business combinations, and non-controlling interests.
Submission Requirements
Format, Length, & Referencing
Your assignment should be submitted in the following format:
· Memo only limit your discussion to 2-3 pages. Begin your memo by addressing the purpose of the assignment followed by the answers to the questions provided.
· Point form may be utilized as long as it is used to summarize key points and discussion is based on the summary provided.
· .0/msohtmlclip1/01/clip_image001.gif”>.0/msohtmlclip1/01/clip_image002.gif”>.0/msohtmlclip1/01/clip_image003.gif”>.0/msohtmlclip1/01/clip_image004.gif”>Arial, Times, or Verdana font, size 11 point, 1.5 line spacing
· Professional/business writing style (third person, without grammatical and/or spelling errors)
Grading Criteria
Description
Possible
Marks
Marks
Awarded
Exploration of elements detailed under requirement above in
20
relevant and appropriate detail to the topic.
Writing and English grammar – accurate, clear, and well organized.
5
25 marks
25 marks