The financial statements of Procter & Gamble Company available at http://www.pg.com/en_US/index.shtml . Refer to P&G's financial statements and the accompanying notes to answer the following questions:
Using the notes to the consolidated financial statements, determine P&G's revenue recognition policies. Discuss the impact of trade promotions on P&G's financial statements.
Give two examples of where historical cost information is reported in P&G's financial statements and related notes. Give two examples of the use of fair value information reported in either the financial statements or related notes.
How can we determine that the accounting principles used by P&G are prepared on a basis consistent with those of last year?
What is P&G's accounting policy related to advertising? What accounting principle does P&G follow regarding accounting for advertising? Where are advertising expenses reported in the financial statements?
Using the notes to the consolidated financial statements, determine P&G's revenue recognition policies.
From footnote 1:
"Sales are recognized when revenue is realized or realizable and has been earned. Revenue transactions represent sales of inventory. The revenue recorded is presented net of sales and other taxes we collect on behalf of governmental authorities. The revenue includes shipping and handling costs, which generally are included in the list price to the customer. Our policy is to recognize revenue when title to the product, ownership and risk of loss transfer to the customer, which can be on the date of shipment or the date of receipt by the customer. A provision for payment discounts and product return allowances is recorded as a reduction of sales in the same period that the revenue is recognized."
Discuss the impact of trade promotions on P&G's ...
Brief (few sentences) answer each requirement for your review.
Basic and Diluted EPS, Stock-Based Compensation, Proctor and Gamble Footnote Study
Impact of Transactions on Financial Statement Elements
Identify the specific effects (including account name, dollar amount, and financial statement impact) of the following transactions or conditions on the various financial statement components:
I = Increase D = Decrease NE = No effect
[see attached file]
Financial Statement Analysis
Proctor & Gamble offers a variety of stock-based compensation plans to its executives. Refer to P&G's 2012 annual report to answer the following questions related to stock-based compensation, dilutive securities, and earnings per share. The 2012 annual report of Proctor & Gamble can be found on Blackboard. P&G's fiscal year end is June 30.
Used report found here:
Earnings Per Share
1. What was the % per-share decrease in basic EPS from 2011 to 2012? Round to the nearest whole percent.
2. The Income Statement reports 2012 diluted EPS as $3.66. What types of securities are causing the dilution?
3. How many stock options were not included in the diluted EPS calculation because they were anti-dilutive?
1. How does P&G determine the exercise price for its stock options?
2. What are the terms of the following stock options (e.g. period of benefit and exercisable time frame)?
a. Key manager stock option awards (since Sept 2002).
b. Key manager restricted stock units.
c. Senior level executive performance stock units.
3. How much stock-based compensation expense/cost did P&G recognize in 2012 for all of its stock-based compensation plans? NOTE: ignore related tax benefits. What percentage is this of total after-tax net income for the year (round to one decimal place)?
4. How much compensation expense related to stock option grants remains to be recognized as of 6/30/12?
5. What model does P&G use to measure the fair value (compensation expense) of its stock options? List two assumptions used in that model.
6. How does P&G estimate the number of options that will be exercised and employee termination patterns for purposes of the valuation model?
7. How many shares of stock related to P&G's stock compensation plans are exercisable at 6/30/12?
8. What is the weighted-average exercise price of those exercisable shares?