Corporate Governance:
Procedures to ensure that the company is managed in the interest of the shareholders
Sarbanes-Oxley Act:
A law which strengthens financial reporting and corporate governance for public companies.
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Chapter 5Communicating and Interpreting accounting informationMcGraw-Hill/Irwin Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.Understanding the businessCorporate Governance:Procedures to ensure that the company is managed in the interest of the shareholdersSarbanes-Oxley Act:A law which strengthens financial reporting and corporate governance for public companies.5-2Players in the AccountingCommunication Process5-3The Disclosure Process:Annual Reports and Form 10-KAnnual reports normally include:Four basic financial statements.Related notes (footnotes).Report of Independent Accountants (Auditor’s Opinion) if the statements are audited.The Form 10-K is the annual report that publicly traded companies must file with the SEC.5-4Classified Balance Sheet5-5Classified Income Statement5-6Earnings Per Share *If there are preferred dividends, the amount is subtracted from Net Income in the numerator.5-7Gross Profit Percentage 5-8Statement of Comprehensive income5-9Statement of stockholders’ equity5-10Statement of cash flows5-11Notes to Financial StatementsDescriptions of the key accounting rules applied to the company’s statements.Additional detail supporting reported numbers.Relevant financial information not disclosed on the statements.5-12Differences in Accounting Methods acceptable under ifrs and u.s. gaapMany countries have adopted international financial reporting standards (IFRS) issued by the International Accounting Standards Board (IASB). IFRS are similar to U.S. GAAP, but there are several important differences. The FASB and IASB are working together to eliminate these and other differences.5-13Return on Assets (ROA) Analysis†(Beginning Total Assets + Ending Total Assets) ÷ 2*(In complex calculations, interest expense (net of tax) and minority interest are added back to net income.5-14End of Chapter 55-15