Ch05 - Communication - 5-1Chapter 5 Communicating and...

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Unformatted text preview: 5-1Chapter 5 Communicating and Interpreting Accounting InformationPlayers in the accounting communication processFinancial information available to usersFormat of financial statements5-2Players in the Accounting Communication ProcessSECStandard Setting and RegulationManagementPrimary ResponsibilityCFO, CEO, Accounting StaffAuditors (CPAs)VerificationPartners, Managers, StaffDirectorsOversightAudit Committee (Independent directors)Issue audit opinionPublic Company Accounting Oversight BoardSet audit standards (GAAS)FASBSet accounting standards (GAAP)5-3International Financial Reporting StandardsIFRS are accounting guidelines formulated by the International Accounting Standards Board with the objective of having one set of global standards.IFRS: principles basedUS GAAP: rules basedCurrent status for the US:1. The SEC will allow certain large U.S. public companies to begin using IFRS beginning with fiscal periods ending after December 15, 2009.2. The SEC plans to decide in 2011 whether U.S. public companies will be required to use IFRS starting in 2014.5-4IFRS Sample Differences5-5Public Accounting CPAs who perform audits of companies; may also provide tax and management consulting services.Business (public and privately held companies) Individuals in companies involved in activities like external financial reporting, cost and tax accounting, systems, internal auditing, etc.Educational institutionsGovernment SEC and IRSWhere Accountants Work5-6Information IntermediariesAnalysis and AdviceFinancial analysis, Information servicesAnnual report and other public financial informationManagementPreparationCFO, CEO, Accounting StaffUsersAnalysis and DecisionInvestors, Lenders, etc.External Users of Financial Information5-7Analysts SouthwestFinancial analysts make predictions concerning companies future earnings:QtrQtrFYFYSep-09Dec-09Dec-09Dec-10Average Estimate$ (0.05) $ (0.02) $ 0.01 $ 0.33 Number of Analysts11101311High Estimate$ (0.01) $ 0.05 $ 0.16 $ 0.70 Low Estimate$ (0.10) $ (0.12) $ (0.16) $ 0.18 Year Ago EPS$ 0.09 $ 0.08 $ 0.40 $ 0.01 Earnings EstimatesAcutal EPSmsn.com 9/14/095-8Analysts SouthwestFinancial analysts then make recommendations to buy or sell a stock:msn.com 9/14/095-9Financial Information Available to Users5-10Key Financial ReportsFinancial information is communicated to users by:1. Press Releases2. Annually:Form 10-K (required by SEC)Annual report optional3. Quarterly:Form 10-Q (required by SEC)Quarterly Report optional5-11Press ReleasesUsed to announce quarterly and annual earnings:Southwest Airlines Reports Second Quarter Earnings2009-07-21Net income for second quarter 2009 was $54 million, or $.07 per share, compared to $321 million, or $.44 per share, for second quarter 2008Gary C. Kelly, Chairman of the Board, President, and Chief Executive Gary C....
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Ch05 - Communication - 5-1Chapter 5 Communicating and...

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