华中科技大学：《财务报表分析》（英文版）CHAPTER 2 Financial Reporting and Analysis

Financial Reporting and Analysis CHAPTER

2 CHAPTER Financial Reporting and Analysis

Environment Financial Reporti Requlators Industry Alternative Information Practices Sources Economy and Industry Information FASB GAAP Managers Voluntary Disclosure AICPA Analysts Statutory Financial Reports (Financial Statements) Investors and Corporate SEC Governance Litigation Auditors Creditors Other Users Enforcement and Monitoring Mechanisms Users

Financial Reporting Environment Regulators FASB AICPA Industry Practices GAAP Enforcement and Monitoring Mechanisms SEC Corporate Governance Managers Auditors Statutory Financial Reports (Financial Statements) Alternative Information Sources Economy and Industry Information Voluntary Disclosure Users Analysts Investors and Creditors Other Users Litigation

Form 10-K 10-Q (Annual Report (Quarterly Report 20-F 8-K (Registration Statement/ (Current Report Annual Report [Foreign] Statutory Financial Reports 14A Other (Proxy Statement/ Prospectus) SEC Filings

Form 10-K (Annual Report) 10-Q (Quarterly Report) Other SEC Filings 14-A (Proxy Statement/ Prospectus) Statutory Financial Reports 8-K (Current Report) 20-F (Registration Statement/ Annual Report [Foreign])

Earnings Announcements Key summary measures (pre-audit) o Often one to six week lag o Informative to market o Lacks supporting financial details

Earnings Announcements • Key summary measures (pre-audit) • Often one to six week lag • Informative to market • Lacks supporting financial details

Environmental Factors GAAP Generally Accepted Accounting Principles FASB APB AICPA(CAP) Levell Standards and Opinions Accounting (Most authoritative) Interpretations Research Bulletins FASB AICPA AICPA Level ll Technical Industry Audit Statement of Bulletins Accounting Guidelines Position FASB AICPA LevelⅢl Emerging Issues Task Force Practice Bulletins LevelⅣ FASB AICPA Recognized and (Least authoritative Implementation Interpretations Widely Used Industry Guides Practices

Environmental Factors GAAP Generally Accepted Accounting Principles Level I (Most authoritative) Level II Level III Level IV (Least authoritative) FASB Standards and Interpretations APB Opinions AICPA(CAP) Accounting Research Bulletins FASB Technical Bulletins AICPA Industry Audit & Accounting Guidelines AICPA Statement of Position AICPA Practice Bulletins FASB Emerging Issues Task Force FASB Implementation Guides AICPA Interpretations Recognized and Widely Used Industry Practices

Environmental Factors Unions AICPA Lenders Securities and Exchange Investors Politicians Commission Accountants Others Provide input to Financial Accounting Standards Board Helpset Generally Accepted Accounting Principles

Environmental Factors Financial Accounting Standards Board Generally Accepted Accounting Principles Provide input to Help set Securities and Exchange Commission Unions Investors Accountants Politicians Lenders Others AICPA

Environmental Factors Securities and Exchange Commission(SEC) Independent, quasi-judicial government agency Administer securities regulations disclosures Can modify set GAAP, if necessary Rarely directly challenges FASB Major player in global accounting

Environmental Factors Securities and Exchange Commission (SEC) • Independent, quasi-judicial government agency • Administer securities regulations & disclosures • Can modify & set GAAP, if necessary • Rarely directly challenges FASB • Major player in global accounting

Environmental Factors International Accounting Standards (AS) Set by International Accounting Standards board Not currently accepted in U.s SEC under pressure to accept IAS

Environmental Factors International Accounting Standards (IAS) • Set by International Accounting Standards Board • Not currently accepted in U.S. • SEC under pressure to accept IAS

Environmental Factors Managers of Companies Main responsibility for fair accurate reports Applies accounting to reflect business activities o Managerial discretion is necessary in accounting e Major lobbyist on GAAP

Environmental Factors Managers of Companies • Set by International Accounting Standards Board • Not currently accepted in U.S. • SEC under pressure to accept IAS • Main responsibility for fair & accurate reports • Applies accounting to reflect business activities • Managerial discretion is necessary in accounting • Major lobbyist on GAAP

Environmental Factors Auditing SEC requires Audit Report e Audit opinion can be: clean(fairly presented)EXU qualified(except for disclaimer (no opinion) Auditors adverse(not fairly presented) Check Auditor quality independence

Environmental Factors Auditing • Set by International Accounting Standards Board • Not currently accepted in U.S. • SEC under pressure to accept IAS • SEC requires Audit Report • Audit opinion can be: - clean (fairly presented) - qualified (except for) - disclaimer (no opinion) - adverse (not fairly presented) • Check Auditor quality & independence Auditors