View the step-by-step solution to:

2014 ANNUAL REPORT Dear Shareholders, It's an honor to write this letter as the CEO of Gap Inc., and a privilege to be chosen to lead this great...

FINANCIAL STATEMENT ANALYTICS WORKBOOK:

I am required to complete a financial statement analysis for GAP, INC. by completing the INTRODUCTION TO THE CORPORATE ANNUAL REPORT WORKBOOK, I AM TO USE THE 2014 10K REPORT OF THE GAP, INC. IN COMPLETING THE WORKBOOK. INTRODUCTION TO THE CORPORATE ANNUAL REPORT – A BUSINESS APPLICATION WITH IFRS CONTENT, 4th EDITION.

THE BOOK SHOULD BE DOWNLOADED AT www.appliedaccountinganalytics.com   (WHICH I ATTACH FOR YOUR REVIEW)

The 2014 10k report of The Gap, Inc. is also attach!

 

ACT-GAP 2014 Annual Report.pdf

2014 ANNUAL REPORT Dear Shareholders,
It’s an honor to write this letter as the CEO of Gap Inc., and a privilege to be chosen to lead this great company.
I want to express my gratitude to the Board, the Fisher Family, and Glenn Murphy, who has been a role model to me as we’ve
worked side by side over the past seven years. Glenn’s tireless efforts have made a tremendous impact on the company and
I want to thank him for everything he did to ensure a smooth leadership transition.
Together, with our team of more than 140,000 employees around the world, we’re focused on four key priorities for 2015 and
beyond: Global Growth, Product, Experience, and Talent.
Let me start with growth. Around the world, we continued to make progress with our long-term global growth strategy in
2014, adding almost 40 new stores in greater China, including seven Old Navy stores and Gap’s 100th store in this region.
In the U.S., Athleta grew its footprint to just over 100 stores, with plans to open 20 more this coming year. It’s my intent to
pursue growth, where appropriate, through all of our brands, but most importantly, through Old Navy’s ongoing expansion.
When it comes to product, as our performance in 2014 indicated, we have work to do. Our focus is to put on-trend, on-brand,
quality product in our stores, season after season, in every one of our brands.
Old Navy is our proof positive that we know how to get product right. The brand delivered positive comparable sales results
during each quarter in 2014, including an 11 percent increase during the fourth quarter. This performance is the direct result
of the team coming together with a clear focus and mission: to get better and more consistent at product with each season,
while aggressively leveraging our supply chain initiatives. With new leadership at both Gap and Banana Republic, I am confident that we can move quickly to learn from the results
of Old Navy, and make rapid progress to improve the acceptance and consistency of our product. Athleta remains very well
positioned to serve the continued growth in the women’s active space and become part of our customers’ everyday wardrobe, and there’s considerable opportunity ahead for Intermix to build upon its customer loyalty.
Smart phones are rapidly changing the way we live our lives and customer behaviors are evolving faster than at any time in
the history of apparel retail. To bridge the digital and physical shopping experiences for customers, we’ve continued to break
through with new capabilities across a wide range of areas, including mobile, personalization, omni-channel, loyalty and
customer relationship management. A number of programs—such as Order in Store and Reserve in Store—provide flexible
options for how customers can get exactly what they want from our brands. We’re pleased with the customer response and
are working to roll out these leading capabilities across our brands in North America.
Our success is created by the strength and determination of our people, and I am committed to attracting, retaining and inspiring the best talent in the industry. We were proud to lead the way in February 2014 by increasing the U.S. minimum hourly
rate for our associates to $9 an hour, with a further increase to $10 an hour in June 2015. We believe this will yield a talent
advantage that will show up in front of our customers and in our results. Last September, we shared that we pay women
and men equally for equal work. This wasn’t a change we made—it is how we have always operated.
It’s tremendously exciting to be leading this company—with the great brands we have and talent that is second-to-none—at
a time of significant change in the industry. I am confident that our best days are ahead of us, and look forward to sharing
more with you in the future. Art Peck
Chief Executive Officer
Gap Inc. It’s not often you get the chance to talk with
an icon. In January 2015, Gap Inc. co-founder Glenn: Doris, you’ve watched Gap grow from a single store in 1969
to a number of amazing brands, with thousands of stores around
the world. Can you talk about what makes this company unique? Doris Fisher sat down with former Chairman
and CEO Glenn Murphy for a special conversation about our company’s values and legacy. Doris: There’s a real feeling of family. That was very important
when Don and I started the business, and even today when I talk
to employees, they are so passionate about our company’s values,
especially our commitment to the community.
Glenn: That’s something that you and Don started with your belief
that anybody can just sell clothes, but that we want to do more.
The Boys & Girls Club recently opened the Don Fisher Clubhouse, in
recognition of his many years of service. And last year, employees
at this company volunteered more than 500,000 hours. That must
make you feel proud.
Doris: It does make me incredibly proud that our employees care so
much about giving back and want to support the communities they
live in. An employee at Old Navy recently told me about the first
time her team went to the Don Fisher Clubhouse to volunteer. When
they saw Don’s “Do What You Love” memorial wall they felt such an
enormous sense of pride that they all became emotional. It really
brought to life for them what it means to work for our company.
Glenn: That’s a really special story and I’ve heard many others like
that about the pride people feel working here. After seven years
at Gap Inc., I know I’m leaving here a different person than when I
came, with such a huge appreciation of what it takes to do more.
I feel good that, as a management team, we moved the business
forward in doing the right thing.
Doris: I agree wholeheartedly. Last year, under your leadership, the
company announced that we would raise the minimum wage for our
associates. And we also shared publicly that we pay women and
men equally for equal work. I’m surprised so few companies have
done the same. Glenn, your leadership has accomplished so much
to further our company’s values, and “doing more” is definitely a
part of your legacy as well.
Glenn: Thank you, Doris. It has been my honor to be part of this company, and this incredible family you and Don created. With Art Peck
as the new CEO, I’m confident the company is going to continue to
accomplish extraordinary things for many years to come. UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended January 31, 2015
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from
to
Commission File Number 1-7562 THE GAP, INC. (Exact name of registrant as specified in its charter)
Delaware
(State of Incorporation) 94-1697231
(I.R.S. Employer Identification No.) Two Folsom Street, San Francisco, California
(Address of principal executive offices) 94105
(Zip code) Registrant’s telephone number, including area code: (415) 427-0100
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $0.05 par value
(Title of class) The New York Stock Exchange
(Name of exchange where registered) Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of
August 1, 2014 was approximately $11.5 billion based upon the last price reported for such date in the NYSE-Composite
transactions.
The number of shares of the registrant’s common stock outstanding as of March 17, 2015 was 418,771,239.
Documents Incorporated by Reference
Portions of the registrant’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 19, 2015
(hereinafter referred to as the “2015 Proxy Statement”) are incorporated into Part III. This page
intentionally left blank Special Note on Forward-Looking Statements
This Annual Report on Form 10-K contains forward-looking statements within the “safe harbor” provisions of the
Private Securities Litigation Reform Act of 1995. All statements other than those that are purely historical are
forward-looking statements. Words such as “expect,” “anticipate,” “believe,” “estimate,” “intend,” “plan,” “project,”
and similar expressions also identify forward-looking statements. Forward-looking statements include, but are not
limited to, statements regarding the following:
• international expansion, including new Gap and Old Navy stores in Asia, additional international outlet stores,
increased international online sales, and franchise expansion;
• opening additional Athleta stores;
• Intermix opportunities;
• Piperlime closure;
• product acceptance and consistency improvements, in particular at Gap brand;
• investment in digital capabilities and further enhancement of our shopping capabilities;
• attracting, retaining, and training talent;
• impact of foreign exchange rate fluctuations on financial results;
• impact of West Coast port work slowdowns and stoppages on financial results;
• our ability to supplement near-term liquidity, if necessary, with our revolving credit facility;
• target cash balance and ability to provide for our working capital needs and for unexpected business downturns;
• the outcome of proceedings, lawsuits, disputes, and claims;
• returning excess cash to shareholders;
• the number of new store openings and store closings in fiscal 2015;
• net square footage change in fiscal 2015;
• the number of new franchise stores in fiscal 2015;
• current cash balances and cash flows being sufficient to support our business operations, including growth
initiatives and planned capital expenditures;
• cash spending for purchases of property and equipment in fiscal 2015;
• our intent to increase our dividend in fiscal 2015;
• the impact of accounting pronouncements;
• the estimates and assumptions we use in our accounting policies;
• the assumptions used to estimate the grant date fair value of stock options;
• our intention to utilize undistributed earnings of our foreign subsidiaries;
• total gross unrecognized tax benefits;
• expected payments to International Business Machines Corporation (“IBM”); and
• the impact of losses due to indemnification obligations.
Because these forward-looking statements involve risks and uncertainties, there are important factors that could
cause our actual results to differ materially from those in the forward-looking statements. These factors include,
without limitation, the following:
• the risk that the adoption of new accounting pronouncements will impact future results; • the risk that we or our franchisees will be unsuccessful in gauging apparel trends and changing consumer
preferences;
• the risk that changes in global economic conditions or consumer spending patterns could adversely impact our
results of operations;
• the highly competitive nature of our business in the United States and internationally;
• the risk that if we are unable to manage our inventory effectively, our gross margins will be adversely affected;
• the risks to our efforts to expand internationally, including our ability to operate under a global brand structure,
foreign exchange fluctuations, and operating in regions where we have less experience;
• the risks to our business, including our costs and supply chain, associated with global sourcing and
manufacturing;
• the risks to our reputation or operations associated with importing merchandise from foreign countries, including
failure of our vendors to adhere to our Code of Vendor Conduct;
• the risk that trade matters could increase the cost or reduce the supply of apparel available to us and adversely
affect our business, financial condition, and results of operations;
• the risk that our franchisees’ operation of franchise stores is not directly within our control and could impair the
value of our brands;
• the risk that we or our franchisees will be unsuccessful in identifying, negotiating, and securing new store
locations and renewing, modifying, or terminating leases for existing store locations effectively;
• the risk that we are subject to data or other security breaches that may result in increased costs, violations of
law, significant legal and financial exposure, and a loss of confidence in our security measures, which could
have an adverse effect on our results of operations and our reputation;
• the risk that the failure to attract and retain key personnel, or effectively manage succession, could have an
adverse impact on our results of operations;
• the risk that our investments in omni-channel shopping initiatives may not deliver the results we anticipate;
• the risk that comparable sales and margins will experience fluctuations;
• the risk that changes in our credit profile or deterioration in market conditions may limit our access to the capital
markets and adversely impact our financial results or our business initiatives;
• the risk that updates or changes to our information technology (“IT”) systems may disrupt our operations;
• the risk that natural disasters, public health crises, political crises, or other catastrophic events could adversely
affect our operations and financial results, or those of our franchisees or vendors;
• the risk that changes in the regulatory or administrative landscape could adversely affect our financial condition,
strategies, and results of operations;
• the risk that we do not repurchase some or all of the shares we anticipate purchasing pursuant to our
repurchase program; and
• the risk that we will not be successful in defending various proceedings, lawsuits, disputes, claims, and audits.
Additional information regarding factors that could cause results to differ can be found in this Annual Report on
Form 10-K and our other filings with the U.S. Securities and Exchange Commission (“SEC”). Future economic and industry trends that could potentially impact net sales and profitability are difficult to predict.
These forward-looking statements are based on information as of March 23, 2015, and we assume no obligation
to publicly update or revise our forward-looking statements even if experience or future changes make it clear that
any projected results expressed or implied therein will not be realized. This page
intentionally left blank THE GAP, INC.
2014 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
Page PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . 18 Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. . . . . . 68 Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 PART III
Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Security Ownership of Certain Beneficial Owners and Management
Item 12. and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . 69 Item 14. Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 PART IV
Item 15. Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 This page
intentionally left blank Part I
Item 1. Business.
General
The Gap, Inc. (Gap Inc., the “Company,” “we,” and “our”) was incorporated in the State of California in July 1969
and was reincorporated under the laws of the State of Delaware in May 1988.
Gap Inc. is a leading global apparel retail company. We offer apparel, accessories, and personal care products for
men, women, and children under the Gap, Banana Republic, Old Navy, Piperlime, Athleta, and Intermix brands.
Our portfolio of distinct brands across multiple channels and geographies gives us a competitive advantage in the
global retail marketplace. In January 2015, we announced our decision to close the Piperlime brand. We expect to
close the online platform and the store in New York by the end of the first half of fiscal 2015.
Gap Inc. has Company-operated stores in the United States, Canada, the United Kingdom, France, Ireland, Japan,
Italy, China, Hong Kong, and as of March 2014, Taiwan. We also have franchise agreements with unaffiliated
franchisees to operate Gap, Banana Republic, and Old Navy stores throughout Asia, Australia, Europe, Latin
America, the Middle East, and Africa. Under these agreements, third parties operate, or will operate, stores that
sell apparel and related products under our brand names. Our products are also available to customers online
through Company-owned websites and through the use of third parties that provide logistics and fulfillment
services. Most of the products sold under our brand names are designed by us and manufactured by independent
sources. We also sell products that are designed and manufactured by branded third parties, especially at our
Piperlime and Intermix brands.
In addition to operating in the specialty, outlet, online, and franchise channels, Gap Inc. is a leader among apparel
retailers in using omni-channel capabilities to bridge the digital world and physical stores, creating world-class
shopping experiences regardless of where customers shop. The Company’s omni-channel services, including
order-in-store, reserve-in-store, find-in-store, and ship-from-store, are tailored uniquely across its portfolio of
brands.
Gap. Gap is one of the world's most iconic apparel and accessories brands anchored in American casual style.
Founded in San Francisco in 1969, our collections continue to build the foundation of modern wardrobes - all
things denim, classic white shirts, and khakis along with must-have trends.
Gap includes apparel and accessories for men and women, GapKids, babyGap, GapMaternity, GapBody, and
GapFit collections. Beginning in 1987 with the opening of our first store outside North America in London,
Gap continues to connect with customers around the world through specialty stores, online, and franchise stores.
Gap also offers a suite of omni-channel services to its customers in the United States. In addition, we bring the
brand to our value-conscious customers, with exclusively designed collections for Gap Outlet and Gap Factory
Stores.
Banana Republic. Banana Republic is a global apparel and accessories lifestyle brand that delivers modern,
covetable style for both men and women. Acquired with two stores in 1983 as a travel and adventure outfitter,
Banana Republic has evolved to keep that unique spirit alive while outfitting men and women on the modern day
journey of life.
The brand's collections include apparel, handbags, shoes, jewelry, personal care products, and eyewear for men
and women at accessible prices. Today, customers can purchase Banana Republic products globally in our
specialty and outlet stores, online, and in franchise stores. Banana Republic also offers a suite of omni-channel
services to its customers in the United States. 1 Old Navy. Old Navy opened its first store in 1994, making current American essentials accessible to every family.
The brand brings a fun, energizing shopping environment to its customers, offering on-trend clothing and
accessories for adults and children at great prices. In 2012, Old Navy opened its first store outside North America
in Odaiba, Japan and, since then, has continued to expand its global presence with its first Company-operated
stores in China and franchise-operated stores in the Philippines in 2014. Customers can purchase Old Navy
products globally in stores, online, and in franchise stores. Old Navy also offers a suite of omni-channel services
to its customers in the United States.
Piperlime. Launched in 2006, Piperlime offers a mix of private label and branded apparel and accessories, as
well as leading brands in shoes and handbags. In January 2015, the Company announced that it would close its
Piperlime brand and focus on its portfolio of five other brands. By the end of the first half of fiscal 2015, the
Company expects to discontinue its Piperlime brand, including the Piperlime e-commerce and social sites and the
brand’s one store in New York City.
Athleta. Acquired in September 2008, Athleta is Gap Inc.’s premier fitness and lifestyle brand in the rapidly
growing women's active apparel market. Athleta creates versatile and fashionable performance and lifestyle
apparel for the fitness-minded woman who lives life on the go. Athleta offers apparel and gear for a range of
activities from yoga to strength training and running, as well as seasonal sports, including skiing and tennis.
Customers can purchase Athleta products online, in stores, and through its catalogs and seamlessly shop through
its suite of omni-channel services in the United States.
Intermix. Acquired in December 2012, Intermix curates must-have styles from the most coveted emerging and
established designers. Known for styling on-trend pieces in unexpected ways, Intermix delivers a unique point of
view and an individuali...

This is the end of the preview. Download to see the full text
ACT-Introduction_to_the_corporate_annual_report_4th_edition.pdf

introduction to the corporate annual report:
A Business Application with IFRS Content
4th edition Brian B. Stanko, Ph.D., CPA & Thomas L. Zeller Ph.D., CPA [not for resale] project instructions
This page is to be completed by the student and submitted with the final
annual report project according to your instructor’s requirements.
Complete the following before you submit your assignment. This step is
required to validate your compliance with sections 107 or 108 of
the 1976 United States Copyright Act.
1. Remove the front cover of the workbook and identify: Your Name: ___________________________________________ School Term: ___________________________________________ Company Selected: ___________________________________________ Instructor: ___________________________________________ 2. Print out your completed electronic template. 3. Attach the following: • • • This front cover (completed)
Electronic solution template
Printed reports as specified by the instructions that
immediately follow Chapter 1: Select a Company
and Gather Documents – Question 1 INTRODUCTION TO THE CORPORATE ANNUAL REPORT:
A Business Application with IFRS Content 4th edition Authors Brian B. Stanko
Accounting Professor
Chair: Department of Accounting and Business Law
Loyola University Chicago and Thomas L. Zeller
Accounting Professor
Loyola University Chicago Professors Stanko and Zeller are accounting professors at Loyola University Chicago. Each has
over 20 years of experience teaching accounting and related topics to executives, graduate and
undergraduate students. Their research, published in scholarly and practitioner journals,
addresses accounting tools and techniques that link theory to practice. Dedications* Brian B. Stanko
Julie and family Thomas L. Zeller
Mary and family * The authors would also like to thank Shannon Garavaglia for her comprehensive review of our
4th edition project. Copyright 2015 by Applied Accounting Analytics. All rights reserved. Reproduction or
translation of this book beyond that permitted by the applicable copyright law without Applied
Accounting Analytics’ permission is prohibited. Requests for permission to reprint or for further
information should be directed to [email protected] or [email protected]
ISBN: 978-0-9841839-6-8 Table of Contents
PREFACE ..................................................................................................................................... 2
TO THE FACULTY MEMBER ....................................................................................................... 2
TO THE STUDENT ........................................................................................................................ 3
CHAPTER 1 - INTRODUCTION ..................................................................................................... 4
Select a Company and Gather Documents ............................................................................. 4
With a printed copy of the respective company information and an electronic copy of the
annual report and/or SEC Form 10-K saved on a disk, you are set to begin your analysis. . 8
Identify Why You Selected This Company .............................................................................. 8
Company and Annual Report Essentials............................................................................... 10
Company Strategy and Business Environment ..................................................................... 12
Wrap-up ................................................................................................................................ 16
CHAPTER 2 - ANNUAL REPORT STRUCTURE ............................................................................ 17
Financial Highlights ............................................................................................................. 17
General Company and Marketing Information .................................................................... 18
Management’s Discussion and Analysis ............................................................................... 19
Reports by Management ....................................................................................................... 20
Independent Auditors’ Report ............................................................................................... 21
Financial Statements and the Related Notes ........................................................................ 22
Five- or Ten-Year Summary of Operating Results ............................................................... 22
Shareholder Information ....................................................................................................... 24
Wrap-up ................................................................................................................................ 24
CHAPTER 3 - FINANCIAL STATEMENTS ................................................................................... 25
The Balance Sheet ................................................................................................................. 25
The Income Statement or Statement of Earnings .................................................................. 39
Statement of Cash Flows (SCF) ............................................................................................ 47
The Statement of Stockholders’ Equity (SSE) ....................................................................... 50
Notes to the Financial Statements......................................................................................... 51
Wrap-up ................................................................................................................................ 62
CHAPTER 4 - FINANCIAL ANALYSIS ......................................................................................... 63
CHAPTER 5 - DECISION-MAKING PROCESS ............................................................................. 68 PREFACE
This workbook makes the study of accounting and financial analysis an enjoyable and rewarding
learning experience. Students learn accounting and financial analysis by systematically gathering
financial and nonfinancial information to answer questions and make business decisions. The
corporate annual report is the primary document used to drive the learning process. Students can
select their own company or the instructor can direct the study and assign the same company for
the entire class. Accounting terms and concepts are defined and illustrated as needed to support
the student’s decision-making needs throughout the workbook. The work is active and driven by
the student’s need to answer questions as they relate to his or her inquiry. Upon completing this
project a student understands how to use widely available accounting and related information to
systematically answer business questions. Illustrative questions are: Would I like to work for this company? Should I use this company as a supplier? Is this company a solid investment, preliminary analysis? This project is suitable for undergraduate and graduate students in accounting and finance
courses. The learning activities stimulate a cross-functional, integrated application of business
tools. Workbook tasks illustrate why and how accounting is the language of business and must
be integrated with nonfinancial information to make a business decision. Students are required to
access and use the corporate annual report, Securities and Exchange Commission (SEC) Form10K and website analytical tools in the evaluation of their selected company.
The learning experience is active and student driven. Accessing and interpreting information
to arrive at a sound business decision drives the accounting and financial analysis learning
process. We have taken considerable care to remove all roadblocks from the learning process. TO THE FACULTY MEMBER
The challenge to link theory, practice and technology is ongoing. This workbook places you in
position to meet this challenge in an easily managed format. The workbook instructions are selfdirecting and complete. Students assume the vast majority of the responsibility of the learning
process in completing this workbook. As the instructor, you essentially take on a learning
management role. You may have to respond to student questions when a company includes an
atypical disclosure or fails to provide a reasonable disclosure. We suggest you use these student
questions to demonstrate to the class that annual reports are not all the same.
This workbook has very distinct features that we want to highlight:
1. The workbook is designed for introductory and advanced students. Some students may
have to reference an accounting text to refresh their memory regarding certain accounting
topics. The following questions are considered the most difficult:
Chapter 3: Notes to the Financial Statements - Questions 4 -14.
2. A completed workbook solution for The Home Depot Company is available to instructors
upon request. 2 3. International Financial Reporting Standards are weaved into the workbook to inform the
students about the changes presently underway in financial reporting.
4. Grading the student’s workbook is straightforward. Students are required to answer
questions throughout the workbook. Our experience suggests a good evaluation of a
student’s project can be measured by selectively grading questions.
5. This workbook project is easy adapted to a presentation class requirement. Students can
be asked to present and explain sections of the annual report or specific elements of the
financial statements. This requirement can be accomplished as a team or individual
assignment. Our experience shows that students are confident and happy to present
information about their selected company.
This edition of the workbook builds upon the success of the 3rd edition, with two additions.
First, companies are changing the way they provide annual report information. There is a distinct
trend away from the traditional - Annual Report to the Shareholders. Now companies provide
most of this information on their website, and satisfy financial reporting requirements with
Securities and Exchange Commission (SEC) Form 10-K. Like the 3rd edition of the workbook,
the 4th edition accommodates these changes and uses The Home Depot as an example of this
updated annual report format.
Second, International Financial Reporting Standards (IFRS) continue to influence financial
reporting measures and disclosures. Like the 3rd edition, this edition retains the skill development
around generally accepted accounting principle (GAAP), yet calls attention to present
International Financial Reporting Standards. This content: a) brings to life IFRS’s influence over
financial reporting and b) provides a level of learning about IFRS that can distinguish a business
school graduate in the market place. The IFRS content in this edition has been updated to
continue to conveniently weave an international perspective into the curriculum.
The 4th edition of the workbook requires NO additional work by the faculty member. You
will find we modified the workbook to improve its readability and help the student achieve a
higher level of learning. TO THE STUDENT
The annual report is the most widely distributed company report provided to shareholders and
the general public. Company leadership uses this report to communicate nonfinancial and
financial information about its company. By completing this workbook you learn how to
systematically evaluate a company’s annual report and gather the information needed for making
a business decision.
Your work begins by answering why you are investigating the annual report of a particular
company. For instance, is this company a potential employer or is it a potential customer? Next,
you learn how a company uses the annual report as a marketing tool and as a means to
communicate its corporate strategy. Then you become more acquainted with the annual report’s
structure. Following, you learn how to use financial statements and widely available data in a
systematic framework to make business decisions. In completing this project you build a
powerful skill-set that should serve you well throughout your career. 3 CHAPTER 1 - INTRODUCTION W elcome to the annual report project. You are beginning the process of learning a great
deal about accounting, the language of business and financial analysis. We suggest
you read the Preface and the To the Student section before moving forward. These
sections recap the learning process. Completing this workbook will open your eyes to
the business world in ways you may have never imagined. You will develop the skill and
confidence to systematically study a company using the corporate annual report and related
databases. You will build a solid foundation and framework for business decision-making.
ENJOY! Select a Company and Gather Documents
Your instructor may identify the company or you may be allowed to select your own company in
completing this workbook. The company must be publicly traded. A publicly traded company is
one that has its shares traded (bought and sold) on the New York Stock Exchange (NYSE),
American Stock Exchange (ASE) or National Association of Securities Dealers Automated
Quotation Stock Exchange (NASDAQ).
You will find two types of company annual reports. Both are suitable for this workbook.
First, publicly traded companies must comply with Securities and Exchange Commission (SEC)
and financial reporting regulations. The SEC requires all companies to file annual reports in SEC
Form 10-K. The annual report recaps the operating environment and business conditions of the
company and includes audited financial statements. The SEC uses this information to monitor
company performance. An example of The Home Depot’s 2013 SEC Form 10-K can be found
at: http://www.homedepotar.com/. (Select DOWNLOAD 10-K (pdf) to download a PDF copy of
The Home Depot’s SEC Form 10-K.)
SEC Form 10-K requires specific non-financial and financial company reporting. Go to http://www.sec.gov/answers/form10k.htm for a general description about SEC Form 10-K
requirements. Go to - http://www.sec.gov/about/forms/form10-k.pdf for a detailed description
about SEC Form 10-K. The SEC requires company information of the following Items: 4 Item 1: Business - general discussion of the company’s business environment. Item 1A: Risk Factors Item 2: Properties Item 3: Legal Proceedings Item 4: Submission of Matters to a Vote of Security Holders Item 5: Market for Registrant’s Common Equity and Related Stockholder Matters Item 6: Selected Financial Data; Item 7: Management’s Discussion and Analysis of Financial Condition and Results of
Operations Item 7A: Quantitative and Qualitative Disclosures About Market Risk Item 8: Financial Statements and Supplementary Data Item 9: Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure Item 9A: Controls and Procedures Item 10: Directors and Executive Officers of the Registrant, Item 11: Executive Compensation, Item 12: Security Ownership of Certain Beneficial Owners and Management, and Item 13: Certain Relationships and Related Transactions; and (n) Item 14: Principal Accountant Fees and Services. Second, companies must provide an “annual report to shareholders” when they hold an annual
meeting to elect directors. Go to - http://www.sec.gov/answers/annrep.htm for a general
description about the annual report to the shareholders. This annual report, typically, serves as a
marketing and reporting tool. The report opens with a letter from the Chief Executive Officer,
followed by selective financial data, product information, employee success stories, market
segment information and more. The company annual report, typically, is printed on quality
paper, filled with colorful pictures, with suggestive words like “great,” “growth,” “powerful,”
spread throughout. Often, these sections of the annual report are designed to positively influence
the reader’s opinion about the company, long before financial analysis begins. The audited
financial statements and related notes follow in the report, neatly formatted. Developing,
printing, and, distributing the annual report to shareholders is an expensive, time consuming
process for a company.
You are likely to find one or a combination of reporting structures when searching for a
company to use with this workbook. Some companies meet the annual report to the shareholders
requirement by including SEC Form 10-K with a letter from the Chief Executive Officer. Others
include the letter with a mix of selective financial data, pictures and/or product information. Yet,
some companies simply provide SEC Form 10-K and publish the Chief Executive Officer letter
and other information on the company website in compliance with the annual report to the
shareholders requirement. The Home Depot 2013 annual report serves as an example of how
companies publish SEC Form 10-K on their website along with other shareholder information.
(Go to: The http://www.homedepotar.com/.)
We designed this workbook to accommodate your company’s reporting structure, regardless
of how it satisfies annual report requirements. You simply need to search the annual report
records provided by your company. The workbook’s questions point you to the documents that
provide the information you need to develop a meaningful response. Select Company
Introductory accounting and finance students should avoid banks, insurance companies,
public utilities, and other regulated industry companies, as well as large conglomerates.
Regulated industries are often affected by unique accounting rules and practices. The financial
statements may contain elements that are confusing, even to the experienced professional. Large
conglomerates, on the other hand, often participate in complex reporting practices, and therefore
may be difficult to analyze. We suggest choosing a company that is interesting to you and of a 5 reasonable size.
There are two ways to locate a publicly traded company that provides a separate annual
report.
Method 1:
Use this method to locate the appropriate information for a specific company.
First, identify the company. Second, go to the company website and search for links to its
annual report (generally through the “investor relations” link). When you locate the annual
report, follow the instructions to open or print the document. If no link is found to the annual
report, it is unlikely that it is a publicly traded company.
Method 2:
Use this method to explore the many different companies and industries in selecting a company.
We suggest working through the New York Stock Exchange (NYSE) Euronext Website to
select a company. The NYSE is the largest equities marketplace in the world. The exchange lists
the world’s top large and medium sized companies.
The NYSE Euronext website directions are logical and intuitive. The following procedure
will help you use the site to locate a company. Go to: http://www.nyse.com/home.html and navigate to the listings directory or, Type: http://www.nyse.com/about/listed/lc_all_name.html to go directly to the NYSE. Using this guide you can select a company by searching by name, region, or industry. The
menu options guide you to the respective company’s website. For example, if you select an
industry from the menu tab, four search options appear: Industry, Supersector, Sector or
Subsector. Feel free to explore and select a company that you want to study. Gather Documents
Now gather the necessary documents. You will find most company documents download in a
PDF format. We suggest you save the documents in an electronic format. This step makes it
easier for you to find and print the information to respond to workbook questions. Download and
save the following: SEC Form 10-K Annual Report to Shareholders: Many times a company simply labels the annual report to
shareholders as the Annual Report. As discussed above, some companies meet the annual
report to the shareholders requirement by providing SEC Form 10-K to its shareholders. If
this is the case you will not need to download separately SEC Form 10-K. Next, complete Chapter 1: Select a Company and Gather Documents – Question 1 below to
begin your company analysis. Immediately following Question 1 is an example of Question 1
completed for The Home Depot 2012 Annual Report. The example shows the specific types
of material you need to complete the company analysis. 6 Chapter 1: Select a Company and Gather Documents – Question 1
Identify with an “X” the primary source of data for this project.
Annual report to shareholders
Annual report to shareholders with a letter from Chief Executive Officer
and SEC Form 10-K as part of the annual report to shareholders. The
annual report may include additional general company information. (The
Home Depot 2013 annual report serves as an example of how companies use SEC Form 10-K as a component of the
annual report to the shareholders. Go to: http://www.homedepotar.com/ and open the pdf file.) SEC Form 10-K and the company website.
Fill in the page numbers from the annual report where the following are located.
Required information for this
workbook project.
Financial Highlights Not absolutely necessary, but very
common in annual report to shareholders. Not in SEC Form 10-K. May be posted on
company website. If so put WEB in Page
No. box. Page
No. Required information for this
workbook project.
Chief Executive Officer Letter May be labeled President’s, CEO’s or
other top official’s message or letter to the
shareholders Not in SEC Form 10-K. Likely posted on
company website if SEC Form 10-K used
to satisfy the annual report to shareholders
reporting requirement. If so put WEB in
Page No. box. If not available, put N/A in Page No. box. Management’s Discussion and
Analysis (MD&A) Notes to Financial Statements Income Statement Report of Independent
Accountants or Independent
Auditors’ Report May be labeled Statement of Earnings Balance Sheet
May be labeled Statement of Financial Position Page No. Put range of pages, for example, 47 to 58. Five- or Ten-Year Summary of
Operating Results
Item 6 in SEC Form 10-K Statement of Change in
Stockholder’s Equity Management’s Report
(Responsibility) on Internal
Control over Financial
Reporting
Item 9A. Control and Procedures in SEC 10-K Statement of Cash Flows Investor and Company
Information or Shareholder
Information Print the respective page(s) where you find the above information. Turn-in printouts with 7 your annual report analysis. It is helpful to have both a hard copy and an electronic copy to
complete workbook questions.
Chapter 1: Select a Company and Gather Documents—Question 1
Identify with an “X” the primary source of data for this project.
Example for The Home Depot 2012 Annual Report: http://www.homedepotar.com/
Annual report to shareholders
X Annual report to shareholders with a letter from Chief Executive Officer
and SEC Form 10-K as part of the annual report to shareholders.
SEC Form 10-K and the company website. Fill in the page numbers from the annual report where the following are located.
Required information for this
workbook project.
Financial Highlights
Management’s Discussion and
Analysis (MD&A) Page
No.
NA
17-26 Income Statement Balance Sheet
Statement of Change in
Stockholder’s Equity Required information for this
workbook project.
Chief Executive Officer Letter
Notes to Financial Statements Page No.
3-4
35-50 31 Report of Independent
Accountants or Independent
Auditors’ Report 30 Five- or Ten-Year Summary of
Operating Results F-1 33 Management’s Report
(Responsibility) on Internal
Control over Financial
Reporting 27 34 Investor and Company
Information or Shareholder
Information Statement of Cash Flows 28-29 66 With a printed copy of the respective company information and an electronic copy of the annual
report and/or SEC Form 10-K saved on a disk, you are set to begin your analysis. Identify Why You Selected This Company
There are numerous reasons why you would select a particular company. The typical reason is to
make a decision regarding whether to purchase or sell its stock. This is, in fact, a very narrow
view. For example, you may have a particular interest in a company because of a hobby or you 8 may be looking at a company as a possible employment opportunity or both. For this situation
you would be most interested in learning more about the industry and the company’s long-term
profit potential. Another reason might be that the company is a major contributor to the
economic success of your community. Or it could be that you are a customer of this company
and are interested in its potential for long-term success. Recognize that there are numerous
reasons why you would select and study a company’s annual report. Answering why you
selected a particular company helps build a solid focus to the learning process of accounting and
fi...

This is the end of the preview. Download to see the full text
Sign up to view the entire interaction

Top Answer

Dear savdorean, please find... View the full answer

Answer 16092015 INTRODUCTION TO THE CORPORATE ANNUAL REPORT WORKBOOK.docx

INTRODUCTION TO THE CORPORATE ANNUAL REPORT WORKBOOK
Chapter 1 Identify why you selected this Company – Question 1
A) I have funds and want to invest in stock and selected this Company whether I...

Sign up to view the full answer

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question
Ask a homework question - tutors are online