UV1027

Oct. 16, 2008

FINANCIAL REPORTING DISCUSSIONS AND DEBATES:

A SERIES OF REVIEW TASKS

The following tasks are intended to reinforce some of the lessons and discussions you
have had to date in one or more financial reporting courses. As such, the tasks cover a spectrum
of issues. You will find some to be a bit playful, while others are more straightforward. In either
case, they are all purposeful in touching on real-world financial reporting topics.

Three Sets of Books Task

Fill in the table below with the appropriate letter from the list provided after the table.
This task is designed to compare and contrast three typical financial records that almost all
public companies maintain. As you complete the table, it is useful to be cognizant of the truly
distinct context for and uses of the three financial reporting books.

External Financial Books Tax Books Internal Managerial Books

Audience

Reports

Objectives

Authority

Guidance

Timing

This exercise was prepared by Professor Mark Haskins. It was written as a basis for class discussion rather than to
illustrate effective or ineffective handling of an administrative situation. Copyright 2008 by the University of
Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order copies, send an e-mail to
sales@dardenbusinesspublishing.com. No part of this publication may be reproduced, stored in a retrieval system,
used in a spreadsheet, or transmitted in any form or by any meanselectronic, mechanical, photocopying,
recording, or otherwisewithout the permission of the Darden School Foundation.

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A. Company managers
B. Current and prospective shareholders and lenders
C. U.S. Internal Revenue Service (IRS)
D. Form 1120
E. Annual report with a balance sheet, income statement, and statement of cash flows
F. Cost sheets, budgets, forecasts, and any other reports deemed useful by company
G. Legally minimize or defer tax liability
H. Information related to costs, quality, competitiveness, and progress toward goals
I. Decision-useful information, compliance with U.S. Generally Accepted Accounting
Principles (GAAP), and faithful representation of financial condition and performance
J. Company policy and practices
K. U.S. Securities and Exchange Commission (SEC) and Financial Accounting Standards
Board (FASB)
L. U.S. Congress
M. GAAP in the form of Statements of Financial Accounting Standards
N. Managerial judgment
O. U.S. tax code
P. Whenever needed or wanted
Q. Annually
R. Annually and quarterly

Annual Report Content Task

Annual reports for publicly traded companies adhere to a template. In particular, the
following seven sections are present:

Footnotes to the financial statements Auditors report

The financial statements CEO letter to shareholders
Management discussion & analysis (MD&A) Operations overview
Managements report

Your task is twofold. First, rearrange those seven sections of an annual report to reflect
the sequence in which they normally occur in an annual report. Next, for each of those items,
craft a one- or two-sentence description of the key content in each of those sections and the
overarching purposes of each. This task reinforces the expectations you can bring to bear
regarding the flow, content, and focus of any annual report.

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Crossword Mania Task

Give this little crossword puzzle a try. It is a blend of financial reporting terms, everyday
life, and acronyms and abbreviations. It also has an UP category of cluesprobably in
violation of some Crossword Puzzlers of America rule that prohibits such a category. Have fun!
1 2 3 4 5 6 7 8 9

10 11 12 13 14

15 16 17 18 19 20 21 22

23 24 25 26

27 28 29 30

31 32 33 34

35 36 37

38a 38b 38c 39a 40

41 42 43 44 45

46 47 48

49 50 51 52 53

54 55 56 57 58

59 60 61 62 63

64 65 66 67 68 39b 69 70 71 72

73 74

75 76 77

DOWN ACROSS
1. Temperate, not hot. 2. Childhood ammunition.
2. Word in Shakespeare question. 3. Lost in ______.
3. Childhood sneakers before Nike. 6. Eagle or top of my head.
4. Iowa (abbreviated). 8. Container.
5. Universal language. 10. Added to a summer drink.
6. Mechanics of accounting. 12. Wall Street Journal reports business ____.
7. German equivalent of Co. or Inc. 13. San Francisco mist.
8. Lewis. 14. Pose a question.
9. Also known as. 15. Initials of army march cadence.
11. To increase a liability account. 16. Post high school, high school diploma.

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DOWN ACROSS
12. The financial bottom line. 17. Horseback sport.
13. Minimum the ______. 19. Answer (abbreviated).
14. A corporate resource. 21. Type of baccalaureate degree.
16. _____ monster. 23. Increase assets with these in accounting.
18. Exclamation of pain. 25. Star Wars short, forest biped.
19. What do accountants do? 26. Purchase price.
20. Suggestive of danger or violence. 27. Salvador _____, artist.
22. Chronological publications of personal
thoughts and Web links. 28. Oklahoma (abbreviated).
24. Where cash sits. 29. One hundred in Spain.
30. Teds channel. 31. Another term for accounting.
32. Synonym for owners equity. 35. End to a fight without the o.
33. Indiana abbreviated twice. 36. Tropical plant in banana family.
34. California city ambulance destination. 37. Plural of 37 UP (abbreviated).
39a. To require a necessary accompaniment. 38a. Usual-way-to-do-it acronym.
39b. Initials for U.S. homeland military. 38b. Replaced EDP as vernacular.
40. Drunkards. 38c. Using up an asset.
41. Financial metric (abbrev.) for collectibility of
45. Capable. receivables.
47. Location for many company annual reports. 42. Of lesser importance.
43. Financial transactions are entered _____ various
48. Executive order acronym. accounts.
50. Balance sheets tend to report asset costs, not
_______. 44. Popular acronym for economic value added.
51. Annual reports tell a _______. 46. Sitting ____ my computer.
52. A small harp-like instrument. 47. To be covered with water.
53. Same as 46 ACROSS 48. Annual report organizational unit.
54. Large, abbrev. 49. Adams wife.
55. Illinois, abbrev. 51. Live Free or Die & Four More Years.
57. Initials for Massachusetts university. 53. Alabama, abbrev.
58. Certain South American natives. 54. A financial obligation.
61. Nave in reverse. 56. Inspector General, abbrev.
62. Sponsorship, auspices. 57. A function of teeth.
63. What do auditors charge? 59. Stylized, octagonal motifs in Oriental rugs.
66. Trustee, abbrev. 60. Cosmetics company.
67. Japanese currency. 63. Enjoyment.
69. Decorative container. 64. Owners financial claim.
71. Connecticut (abbreviated). 68. Selling generates this.
72. Author of annual report greeting. 70. Depression-era work group.
73. Suffix for small or diminutive.
74. Annual reports present _____ financial figures, not
UP detailed figures.
37. Two cups equal one ______. 75. Not noticed.
46. ______ and subtract. 76. Slang for uniform.
65. To silence. 77. Large oil company.
77. For example.

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GAAP Perspectives Task

Listed below are four primary annual report constituencies. As such, they are not
ambivalent about FASBs deliberations on financial reporting issues. For each constituency, note
two or three fundamental concerns they would bring to any GAAP-focused debate.

SEC _____________________________________________________
_____________________________________________________
_____________________________________________________
Auditors _____________________________________________________
_____________________________________________________
_____________________________________________________
Companies _____________________________________________________
_____________________________________________________
_____________________________________________________
Shareholders _____________________________________________________
_____________________________________________________
_____________________________________________________

The U.S. Congress often engages in a lengthy deliberative process prior to passing any
legislation. In contrast, we envision the U.S. Army engaging in far fewer deliberations when
deciding how to proceed to an objective. From your own perspective, should FASBs GAAP-
making process be more like that of the U.S. Congress or the U.S. Army? Why?

As the political rhetoric in the United States has grown exponentially of late, so too has
the use of acronyms in the commercial sector. Below is a playful, short exercise that incorporates
some of those acronyms as they pertain to the wide arena of financial information. First,
unscramble the letters. Then, using the letters in the boxes with the circles (using them twice if
there are two circles), form the final word that fits the clue at the end of the exercise.

RIS

APAG

SABF

CES

OXS

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ADM

ECO

A key part of the financial-reporting, rule-making process is.

Key Concept Task

Try this simple task. It is a reminder of the conceptual issues underlying some of the most
contentious and important aspects of financial reporting. Use one of the words depicted below to
fill in one of the blanks in the sentences that follow. Then, take the number of the statement in
which each word was used and place that number next to the dot associated with the appropriate
word where it is positioned below. Finally, place your pen or pencil on the dot affiliated with the
number one and draw a straight line to the dot affiliated with the number two. Continue this
process until you end at the dot affiliated with number six.

1. Official GAAP pronouncements often _______ the creation of new business transactions.
2. When and how much _________ to report in an income statement can be a surprisingly
complicated issue in financial reporting.
3. Determining how to define the financial reporting ________ can be as simple as adhering
to the proscribed share-ownership thresholds or as nuanced as taking into consideration
the essence of a particular organizations affiliation.
4. Like the espoused stance of Switzerland, GAAP is intended to be ________ with respect
to the decisions readers of financial statements make based on the information presented
in those financial statements.

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5. The ______ is a FASB subgroup established to respond to critical financial reporting

issues in a timely fashion.
6. Same as number one above.

The symbol that emerges when the dots are all connected says you are a ______ for delving into
the dynamic world of external financial reporting.

International Task

The ability to compare and contrast the financial condition and performance of two or
more companies is a fundamental use of the financial statements companies publish. As you
consider that use, what are some of the underlying assumptions that we, as readers of annual
reports and financial statements, can legitimately bring to bear that make comparing and
contrasting the financial statements of two U.S. companies, such as Coca-Cola and IBM, a
fundamentally sound endeavor? Are such assumptions valid for cross-border comparisons? What
are several reasons why you think they are or are not?

This document is authorized for use only in CF-MBA CV-I-Secc. A by Gloria Zambrano, Pontificia Universidad Catolica del Peru - Centrum from April 2016 to October 2016.