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INTRODUCTION TO THE CORPORATE ANNUAL
REPORT:
A Business Application with IFRS Content
4th edition 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. 1 ruth montero: Fall, Harris To be completed by the student and submitted with the completed 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: Student Name: ruth montero Term: Fall Selected Company: Click here to enter text. Instructor: Harris
2. Print out your completed electronic template.
3. Attach the following: Electronic solution template 2 This front cover (completed)
Printed reports as specified by the instructions that immediately follow
Chapter 1: Select a Company and Gather Documents – Question 1 ruth montero: Fall, Harris CHAPTER 1 - INTRODUCTION
Select a Company and Gather Documents
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 2013 Annual Report: http://www.homedepotar.com/
Click here
to enter
Annual report to shareholders
text.
Click here
to enter
Annual report to shareholders with a letter from Chief Executive
text.
Officer and SEC Form 10-K as part of the annual report to
shareholders.
Click here
to enter
SEC Form 10-K and the company website.
text.
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) Income Statement 3 Page
No.
Click
here to
enter
text. Click
here to
enter
text.
Click
here to
enter
text. Required information for this
workbook project.
Chief Executive Officer Letter Page No. Notes to Financial Statements Click
here to
enter
text. Report of Independent
Accountants or Independent
Auditors’ Report Click
here to
enter
text. Click
here to
enter
text. ruth montero: Fall, Harris
Balance Sheet Click
here to
enter
text. Five- or Ten-Year Summary of
Operating Results Click
here to
enter
text. Statement of Change in
Stockholder’s Equity Click
here to
enter
text. Management’s Report
(Responsibility) on Internal
Control over Financial
Reporting Click
here to
enter
text. Statement of Cash Flows Click
here to
enter
text. Investor and Company
Information or Shareholder
Information Click
here to
enter
text. Identify Why You Selected This Company
Chapter 1: Identify Why You Selected This Company – Question 1
A) What is/are your motivation(s) or interest(s) in selecting this company?
[See above for examples.] B) What question(s) are you seeking to answer?
[For example, is the company profitable? Can the company change and develop new products
and services to be competitive? Would I invest in this company? Will the company provide
rewarding career opportunities? In chapter 5 you will have pulled together the financial and
nonfinancial information to answer these question(s).] A)
Click here to enter text.
B)
Click here to enter text. Company and Annual Report Essentials
Chapter 1: Company and Annual Report Essentials – Question 1
What is the company’s complete name? 4 ruth montero: Fall, Harris Click here to enter text.
Chapter 1: Company and Annual Report Essentials – Question 2
What is the address of your company’s corporate headquarters?
Click here to enter text.
Chapter 1: Company and Annual Report Essentials – Question 3
Identify the company’s website address.
Click here to enter text.
Chapter 1: Company and Annual Report Essentials – Question 4
Identify the telephone number and e-mail address of the company’s Investor Relations
Department.
Click here to enter text.
Click here to enter text.
Chapter 1: Company and Annual Report Essentials – Question 5
Which stock exchange lists your company?
Click here to enter text.
Chapter 1: Company and Annual Report Essentials – Question 6
What is your company’s stock exchange trading symbol?
Click here to enter text.
Chapter 1: Company and Annual Report Essentials – Question 7
What is your company’s Standard Industrial Classification (SIC) and sector? Run a
search on “Standard Industrial Classification,” and the classification and code will be
identified. Your company may list more than one SIC code numbers. The first listed is
considered the primary SIC for the company.
For example, search – The Home Depot SIC – brings up a listing of sources. Once you locate this
code, search on the Department of Labor website at 5 ruth montero: Fall, Harris
https://www.osha.gov/pls/imis/sicsearch.html to find out more about your Company’s SIC. SIC Code: 5211
Sector: Basic Materials, Construction, Retail
Industry: Lumber and other building materials
Click here to enter text.
Chapter 1: Company and Annual Report Essentials – Question 8
Locate the board of directors listing. How many board members does your company
have?
Click here to enter text.
Chapter 1: Company and Annual Report Essentials – Question 9
How many of the directors are company employees, labeled inside directors? And how
many are non-company directors, labeled outside directors? Why does a company want
and need outside directors?
(Inside and outside directors are typically identified as such by their title and company.) Click here to enter text. Chapter 1: Company and Annual Report Essentials – Question 10
Leadership addresses the stockholders, typically, once a year at the annual stockholders
meeting. Identify where and when this occurred, as reported in your annual report.
Click here to enter text.
The previous series of questions provides basic company information. All are building blocks
of a complete study of a company through the annual report. Company Strategy and Business Environment
Chapter 1: Company Strategy and Business Environment – Question 1
Review the chairman’s message of your company’s annual report. Does it appear to be
uplifting or somewhat apologetic? Identify phrases that support your position. 6 ruth montero: Fall, Harris Click here to enter text.
Chapter 1: Company Strategy and Business Environment – Question 2
Check below the one primary company strategy identified in the chairman’s message.
Support your answer with phrases found in the chairman’s message that pointed you to
the identified corporate strategy.
Growth: Vertical Click here to enter text.
Horizontal___Click here to enter text.
Concentric Click here to enter text.
Conglomerate Click here to enter text. Stability
Click here to enter text.
Retrenchment Click here to enter text. .
Phrases to support your conclusion:
Click here to enter text.
Chapter 1: Company Strategy and Business Environment – Question 3
Briefly summarize the company’s discussion found in Item 1 of SEC Form 10-K.
Type of business:
Click here to enter text.
Major business segments:
Click here to enter text.
Primary customers:
Click here to enter text.
Primary products and/or services:
Click here to enter text.
Other:
Click here to enter text. Chapter 1: Company Strategy and Business Environment – Question 4
Identify broad-based social, political, economic, and technological concerns that may
affect your company. Put N/A if one of the categories does not apply.
Social:
7 ruth montero: Fall, Harris
Click here to enter text.
Political:
Click here to enter text.
Economic:
Click here to enter text.
Technological:
Click here to enter text.
Other:
Click here to enter text. Wrap-up
Chapter 1: Wrap-up – Question 1
After further review of additional information you should now be confident in
identifying the one primary company strategy, beyond the insight provided by the
chairman’s message?
Check below the one primary company strategy identified in the chairman’s message
and all other supporting documents. Support your answer with phrases.
Growth: Vertical Click here to enter text.
Horizontal Click here to enter text.
Concentric Click here to enter text.
Conglomerate Click here to enter text. Stability
Click here to enter text.
Retrenchment Click here to enter text. .
Phrases to support your conclusion from information gathered from the chairman’s message,
Item 1 of the SEC Form 10-K and other insight gained from completing Chapter 1.
Click here to enter text. 8 ruth montero: Fall, Harris CHAPTER 2 - ANNUAL REPORT STRUCTURE
Financial Highlights
Chapter 2: Financial Highlights – Question 1
Review the financial highlights of your company’s annual report to the shareholders.
Identify net sales or revenues, net income, basic earnings per share (BEPS), and total
assets for the current and preceding years. These are the most common values included
in financial highlights. If your company reports something different, simply cross out an
item here and recap what is reported. SEC Form 10-K does not provide financial
highlights. You may find this information on the company website. If not available put
N/A in the first row of boxes.
Categories Current Year One Year Prior Two Years Prior Net sales or revenues Click here to
enter text. Click here to
enter text. Click here to
enter text. Net income Click here to
enter text. Click here to
enter text. Click here to
enter text. Basic EPS Click here to
enter text. Click here to
enter text. Click here to
enter text. Total Assets Click here to
enter text. Click here to
enter text. Click here to
enter text. Based on your preliminary review, is your company performing better than, equal to, or
less favorably than in the prior year? Briefly explain.
Click here to enter text. General Company and Marketing Information
Chapter 2: General Company and Marketing Information – Question 1
Look for pictures of product and people that are colorful and send a positive company
signal to the reader.
Category Message Example: Volunteer
Activities Ongoing and contributing to the success of the
community Click here to enter text. Click here to enter text. Click here to enter text. Click here to enter text. Click here to enter text. Click here to enter text. 9 ruth montero: Fall, Harris
Click here to enter text. Click here to enter text. Click here to enter text. Click here to enter text. What is the broader message from this information?
Click here to enter text. Management’s Discussion and Analysis
Chapter 2: Management’s Discussion and Analysis – Question 1
Results of Operations:
Identify the primary drivers/issues that explain current and future results of operations
discussed in the MD&A. For example, the gross profit percentage increased because of
improved buyer/supplier relations resulting in greater overall operating performance. Or
an increase in operating expenses because of increased fuel costs reduced profits. List
the six major drivers/issues of performance you find in the MD&A section of the annual
report.
Click here to enter text.
Click here to enter text.
Click here to enter text.
Click here to enter text.
Click here to enter text.
Click here to enter text.
Liquidity:
Recap what you find about your company’s liquidity in the MD&A section of the
annual report. Look for information about the ability of the company to satisfy shortterm cash needs and the ability to generate operating cash flows, for example.
Click here to enter text.
Capital Resources:
Recap what you find about your company’s capital resources in the MD&A section of
the annual report. Look for information about cash reserves and credit availability. For
example, your company’s MD&A section may have a disclosure about an established
line of credit to fund future growth.
Click here to enter text. 10 ruth montero: Fall, Harris Reports by Management
Chapter 2: Reports by Management – Question 1
Review the Management’s Report (Responsibility) on Internal Control over Financial
Reporting in your company’s annual report. Answer the following questions.
Who is responsible for maintaining the
internal controls designed to provide
reasonable assurance that the books and
records reflect the transactions of the
company? Click here to enter text. Record the statement that identifies
management’s conclusion about internal
controls. Click here to enter text. Who audited management’s assessment of
the effectiveness of your company’s
internal control over financial reporting? Click here to enter text. Independent Auditors’ Report
Chapter 2: Independent Auditors’ Report – Question 1
Review the Independent Auditors’ Report of your company’s annual report and answer
the following questions.
Who was the company’s
auditor and where is it
located? Click here to enter text. What is the responsibility
of the auditor? Click here to enter text. Who is responsible for the
preparation of and
information within the
company’s financial
statement? Click here to enter text. The audit was conducted
in accordance with what? Click here to enter text. What was the opinion of
the auditor? Click here to enter text. 11 ruth montero: Fall, Harris Five- or Ten-Year Summary of Operating Results
Chapter 2: Five- or Ten-Year Summary of Operating Results – Question 1
Identify the major components provided in the five- or ten-year summary. Summarize
the insight provided by each. Look for stable, increasing or decreasing trends.
Consistent, slightly improving performance signals management has control of the
business. Inconsistent performance signals management does not have control of the
business.
Component Summary of Insight Example: The Home Depot Sales and earnings have grown significantly over time.
Operating expenses are decreasing. Click here to enter text. Click here to enter text. Click here to enter text. Click here to enter text. Click here to enter text. Click here to enter text. Click here to enter text. Click here to enter text. Click here to enter text. Click here to enter text. Click here to enter text. Click here to enter text. 12 ruth montero: Fall, Harris CHAPTER 3 - FINANCIAL STATEMENTS
The Balance Sheet
Chapter 3: Balance Sheet – Question 1
Identify the date shown at the top of your selected company’s balance sheet.
Current Year Prior Year Click here to enter text. Click here to enter text. Does the company’s fiscal year follow the calendar year? Yes, No
text. Click here to enter If not, why do you think it is different?
Click here to enter text. Chapter 3: Balance Sheet – Question 2
Review the current asset section of your selected company’s balance sheet. Explain why
the order of individual items begins with cash. In your opinion, would it be more or less
appropriate to order these items according to dollar magnitude? Explain.
Click here to enter text. Chapter 3: Balance Sheet – Question 3
Review your company’s balance sheet (or SEC Form 10-K) and compare accumulated
depreciation to the historical cost of Plant and Equipment (PE) using the following ratio.
Compute the following: Percentage of Asset Life Remaining Accumulated depreciation / High percentage means older assets Plant and Equipment Low percentage means newer assets Click here to enter text.
Is the investment in fixed assets, on average, relatively recent? If not, can we assume
that these assets will be replaced shortly?
Click here to enter text. 13 ruth montero: Fall, Harris
Chapter 3: Balance Sheet – Question 4
Since property, plant, and equipment (PPE) and long-term investments in stock represent
a company’s investment, why do we distinguish between them in the balance sheet?
Click here to enter text. Chapter 3: Balance Sheet – Question 5
Review the noncurrent asset section of your company’s balance sheet. Are any
intangible assets listed? If so, identify the types of intangible assets and the percent of
total assets that the intangible assets represent.
Intangible Asset 1: Click here to enter text.
Intangible Asset 2: Click here to enter text.
Intangible Asset 3: Click here to enter text.
Total Intangible Assets Total Assets = Click here to enter text.
If this company were to be acquired by another company, would the intangible assets
influence the purchase price? Explain your answer.
Click here to enter text. Chapter 3: Balance Sheet – Question 6
Now review your company’s total assets for the most recent year. What percentage of
total assets is current? Noncurrent?
Current Noncurrent Click here to enter text. Click here to enter text. Should companies have a greater investment in current assets or noncurrent assets, or
does it depend on the nature of their business? Explain your answer.
Click here to enter text. Chapter 3: Balance Sheet – Question 7
Review your company’s balance sheet. Does it report a deferred tax asset? A deferred
tax liability? If so, are the deferred tax assets and/or liabilities reported as current or
noncurrent?
Deferred tax asset? Yes or No Click here to Current or Noncurrent* Click here to enter
enter text.
text.
Deferred tax liability? Yes or No Click
here to enter text. 14 Current or Noncurrent* Click here to enter
text. ruth montero: Fall, Harris
*Note: If your company reports a current deferred tax asset (liability), it will realize an
income tax benefit (obligation) in the next accounting period because of a previously
reported event.
If your company reports a noncurrent deferred tax asset (liability), it will realize an
income tax benefit (obligation) in future accounting periods (beyond the next) because
of a previously reported event.
Chapter 3: Balance Sheet – Question 8
Identify the information that relates to the stockholders’ equity section of your
company’s balance sheet.
Par value per share of common stock? Click here to enter text. Number of common shares authorized? Click here to enter text. Number of common shares issued? Click here to enter text. Number of common shares outstanding? Click here to enter text. Number of treasury shares held by the company? Click here to enter text. Chapter 3: Balance Sheet – Question 9
Answer the following questions relative to the stockholders’ equity section of the
balance sheet.
By what amount did retained earnings increase or
decrease from the prior year?
Was the increase or decrease in retained earnings
equal to the company’s current year net income or net
loss? Click here to enter text.
Yes or N
Click here to enter text.* * If No, then dividends were paid (or declared) by your selected company or certain
events took place during the year where the accounting for the events directly affected
the retained earnings account.
Chapter 3: Balance Sheet – Question 10
List (write-in) each financial statement element as shown in your company’s balance
sheet.
Assets Liabilities Stockholders’ Equity Click here to enter text. Click here to enter text. Click here to enter text. Click here to enter text. Click here to enter text. Click here to enter text. Click here to enter text. Click here to enter text. Click here to enter text. Click here to enter text. Click here to enter text. Click here to enter text. 15 ruth montero: Fall, Harris
Click here to enter text. Click here to enter text. Click here to enter text. Click here to enter text. Click here to enter text. Click here to enter text. Click here to enter text. Click here to enter text. Click here to enter text. Click here to enter text. Click here to enter text. Click here to enter text. Chapter 3: Balance Sheet – Question 11
Identify the combined carrying values (dollar amounts) of the following selected
account groups taken from your company’s balance sheet:
Account Groups Increase or
Decrease Current
Year Prior Year Current Assets Click here to
enter text. Click here to
enter text. Click here to
enter text. Net Fixed Assets Click here to
enter text. Click here to
enter text. Click here to
enter text.

Intangible and Other Noncurrent Assets Click here to
enter text. Click here to
enter text. Click here to
enter text. Current Liabilities Click here to
enter text. Click here to
enter text. Click here to
enter text. Long-term Liabilities Click here to
enter text. Click here to
enter text. Click here to
enter text. Common Stock Click here to
enter text. Click here to
enter text. Click here to
enter text. Additional Paid in Capital* Click here to
enter text. Click here to
enter text. Click here to
enter text. Retained Earnings Click here to
enter text. Click here to
enter text. Click here to
enter text. Other Equity Components Click here to
enter text. Click here to
enter text. Click here to
enter text. (in dollars) *Note again that additional paid in capital is known as share premium in IFRS based financial
statements.
Chapter 3: Balance Sheet – Question 12
Identify the three major balance sheet accounts, for example accounts receivable,
accounts payable, inventory, etc. that changed the most from the prior year. What events
might explain these changes? Working to explain why these changes occurred
contributes to a greater understanding about a company.
Account 16 Explanation ruth montero: Fall, Harris
Example: Example: Account
Receivable An increase in accounts receivable should coincide with an increase
in sales, i.e., a 10% increase in sales would explain a 10% increase
in accounts receivable. If accounts receivable are increasing and
sales decreasing, the signal is unfavorable. Click here to
enter text. Click here to enter text. Click here to
enter text. Click here to enter text. Click here to
enter text. Click here to enter text. Chapter 3: Balance Sheet – Question 13
Prepare a common-sized balance sheet (expressed in percentages) using the following
account groups shown in your selected company’s balance sheet.
Account Group Increase or
Decrease Current
Year Prior Year Current Assets Click here to
enter text. Click here to
enter text. Click here to
enter text. Net Fixed Assets Click here to
enter text. Click here to
enter text. Click here to
enter text. Intangible and Other Noncurrent Assets Click here to
enter text. Click here to
enter text. Click here to
enter text. 100% 100% Current Liabilities Click here to
enter text. Click here to
enter text. Click here to
enter text. Long-term Liabilities Click here to
enter text. Click here to
enter text. Click here to
enter text. Common Stock Click here to
enter text. Click here to
enter text. Click here to
enter text. Additional Paid in Capital Click here to
enter text. Click here to
enter text. Click here to
enter text. Retained Earnings Click here to
enter text. Click here to
enter text. Click here to
enter text. Total Assets 17 (current year
percent minus
prior year percent) ruth montero: Fall, Harris
Other Equity Components Click here to
enter text. Click here to
enter text. 100% 100% Total Liabilities and Stockholders’
Equity Click here to
enter text. Chapter 3: Balance Sheet – Question 14
Identify the three balance sheet groups from question 13 above that changed most
significantly. Within each of these groups, identify the primary balance sheet element
that drove this change. What events might explain these changes?
Group Name: Explanation: Current Assets (Example – sales increased by 22%, thus accounts receivable
increased by approximately 22%) Click here to enter
text. Click here to enter text. Click here to enter
text. Click here to enter text. Click here to enter
text. Click here to enter text. Chapter 3: Balance Sheet – Question 15
Did your company become more or less liquid when comparing this year to last year?
Current Year: Prior Year: Current Assets minus Current Liabilities = Current Assets minus Current Liabilities = Click here to enter text. Click here to enter text. Explain why?
Click here to enter text. Chapter 3: Balance Sheet – Question 16
Did your company increase or decrease its financial leverage when comparing total debt
to total stockholders’ equity from this year to last?
Current Year: Prior Year: Total debt Total stockholders’ equity = Total debt Total stockholders’ equity =
Click here to enter text. Click here to enter text. 18 ruth montero: Fall, Harris
Explain why:
Click here to enter text. The Income Statement or Statement of Earnings
Chapter 3: Income Statement – Question 1
Review the heading of your company’s income statement. Does the
company’s income statement provide two or three years of comparative
information? (Insert number to the right.) Click here
to enter
text. ___ yrs.
Why do you think the SEC requires that balance sheets provide two years of
comparative financial information and income statements provide three years of
comparative financial information?
Click here to enter text. Chapter 3: Income Statement – Question 2
Review the middle section of your company’s income statement. Did operating income
(loss) increase or decrease from the prior...

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