Compensation of 187 million most of this was in the

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compensation of $187 million. Most of this was in the form o f stock and stock options ($130 m illion)32. Clearly, there is motive for these managers to keep the stock climbing. Another motive for Intel's accounting practices is to minimize the tax burden. Intel is pretty open about this, stating that profits made in another country will stay there fo r reinvestm ent purposes versus bring the profits back to the U.S. where they would be taxed. There were several accounting changes in 2011 and 201233. In 2011, Intel adopted a policy concerning revenue recognition related to m ultiple deliverables. This change simply allowed Intel to m odify the method by which revenue is allocated to the separately identified deliverables (recurring software subscription versus a one tim e hardware purchase by the same customer). According to Intel, this change had no material impact. There were tw o other changes, one in 2011 and one in 2012, that had no material impact, but paved the way fo r more accounting flexibility. Specifically, the changes allow Intel to assess qualitative factors in determ ining whether the fair value of an asset's goodwill and long-lived assets are going to be less than its carrying value. These qualitative factors add to the subjectivity in assessing the fair value of these items. Overall, the accounting strategy used by Intel seems to accurately represent the company's financial activity and health. Their policies and estimates seem realistic and no business transactions seem out of place. While it still remains true that Intel has significant accounting flexibility, Intel uses a conservative approach in alignm ent w ith industry norms. Finally, the auditor (Ernest & Young) has this to say, "...the financial statements referred to 32 w w w .in tc.co m /ln telP roxy2014/58-execitive-com pen sation .htm l 33 w w w .in tc.c o m /in tel-an n u al-rep o rt/2013/10K /58-acco u n tin g -ch an g es.h tm l 23
above present fairly, in all material respects, the consolidated financial position o f Intel Corporation at December 28, 2013 and December 29, 2012". Additionally, they state, "Intel Corporation maintained, in all material respects, effective internal control over financial reporting as of December 28, 2013". Disclosure Quality Annual reports can be over a 100 pages. The latest from Intel is 140 pages. W ithin those pages, companies have a choice on making it more or less easy fo r someone to assess the company's accounting quality and use the statements to understand the business reality of the firm . Overall, Intel appears to make an attem pt to be as transparent as possible w ith their financial reporting. While some aspects of the accounting procedures are subjective and accounting changes made in 2011 and 2012 increase this qualitative approach, this seems to have been done to increase the level o f fidelity into specific elements o f revenue streams versus just aggregating them in one num ber that is reported. The Executive Letters accompanying Intel's annual report are prim arily cheerleading and m otivational speech. However, the Management's Discussion and Analysis of Financial

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