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Determining A Corporation's Health Or Illness From Financial Statements Essay

Accounting 201 and Finance301: Accounting 201

Discussion Question: Discuss FASB and IASB. Comment on at least two specific aspects of the two standard setting boards and their role in setting accounting standards. Also, watch 2 provided YouTube videos and post comments.

FASB and IASB

The Financial Accounting Standards Board (FASB) was established in 1973 to set and improve accounting and reporting standards for private sector U.S. entities (Financial Accounting Standards Board, n.d.). Though the Securities Exchange Commission (SEC) has the power to set standards for publicly held companies, it relies on private organizations to set and improve standards, and the SEC officially recognizes the FASB's standards as legitimate standards for nongovernmental entities in the U.S. The FASB is independent of any business or organization so it can carry out its duties fairly and impartially. In order to carry out its mission, the FASB publishes the FASB Accounting Standards; along with SEC standards, the FASB codes set the national accounting and reporting standards (Financial Accounting Standards Board, n.d.).

The International Accounting Standards Board (IASB) was established in 2001 by an independent not-for-profit foundation called the IFRS Foundation to set and approve international standards of financial reporting. Just like the FASB, the IASB is independent of any business or other organization so it can fairly and impartially set and approve standards. In order to carry out its mission of setting and approving international financial reporting standards, the IASB pursues and develops a technical agenda, prepares rough and final drafts of international financial reporting standards according to the IFRS Constitution's due process standards, and improves and issues IFRS interpretations from the Foundation's Interpretations Committee (Deloitte Global Services Limited, 2014).

b. YouTube Video: Quarter close, Q4 2012: Eurozone, FASB disclosure, and other financial reporting

The YouTube Video "Quarter close, Q4 2012: Eurozone, FASB disclosure, and other financial reporting" covers several financial and accounting topics that are important in the dynamic business world. The Eurozone debt crisis affects companies even if they operate only domestically because in an interconnected global economy, they are competing with other companies who must directly deal with the Eurozone debt crisis. The video also gives 5 tips for modern accounting: during uncertain economic times, companies should revisit their accounting and reporting documents to be assured of their accuracy and transparency; communications such as the annual filing should explain to investors the reasons and implications of changes with the knowledge of management; companies that change their debt structure should carefully ensure their accounting is keeping step with those changes; business changes by relationships such as partnerships, consolidations and acquisitions can be challenging to goodwill questions about those possible challenges should be asked early to avoid surprises; and companies should not only be familiar with the new fair value measurement guidance and disclosures that went into effect in 2014 but also with SEC observations so far, which will help a company with its year-end disclosure because the SEC is looking for transparency that will give clear insight into a company's fair value measurement process. The video also discusses the Disclosure Effectiveness Project in which the FASB is inviting comments about whether flexible disclosures are a good idea, when flexibility should be used and how "relevance" will be defined to determine when and how a company should be flexible in its reporting. Finally, the video presents a discussion about the Guide for Accounting for Financing Transactions, which is a user-friendly system of flow charts organizing complex possibilities and standards for financing transactions. This Guide makes it easier to navigate and understand the optimal course of action in accounting (PwC U.S., 2012).

c. YouTube Video: Impact of the joint FASB/IASB leasing proposal

The YouTube video "Impact of the joint FASB/IASB leasing proposal," a joint project since 2007 to see whether there is a single model that can give a better picture of a company's finances because a lease can be an executory contract that should be reported as a periodic expense over the usage period or whether it represents an asset and a liability. The proposal is anticipated to become effective in 2017 or later. Companies should marshal their information, develop a plan for responding to the eventual accounting standard through accounting and through lease negotiations and discuss software developments with the companies' providers to ensure that the company's IT systems will be prepared when the proposal becomes a regulation (PwC U.S., 2013).

Works Cited

Deloitte Global Services Limited. (2014). Overview of the structure of the IFRS Foundation and IASB. Retrieved November 27, 2014 November 26, 2014 from www.iasplus.com Web site: http://www.iasplus.com/en/resources/ifrsf/overview

Financial...

(n.d.). Facts about FASB. Retrieved November 27, 2014 November 26, 2014 from www.fasb.org Web site: http://www.fasb.org/facts/index.shtml#mission
PwC U.S.. (2012, December 11). Quarter close, Q4 2012: Eurozone, FASB disclosure, and other financial reporting updates. Retrieved November 27, 2014 November 26, 2014 from www.youtube.com: https://www.youtube.com/watch?v=NFnD4MoLZ54

PwC U.S.. (2013, June 12). Impact of the joint FASB/IASB leasing proposal. Retrieved November 27, 2014 November 26, 2014 from www.youtube.com Web site: https://www.youtube.com/watch?v=C9KomlV206o

2. Case Assignment: Familiarity with Corporate Financial Statements

a. Agilent Technologies, Inc.:

i. How much cash is available for Agilent Technologies, Inc. To pay its current debts? Is Agilent Technologies, Inc. In trouble or in good shape?

Agilent Technologies, Inc. is a publicly traded U.S. company that internationally provides instruments, services, consumables, applications and expertise to laboratories (Agilent Technologies, Inc., 2014). Its web site provides annual financial reports from 1999 through 2013 (Agilent Technologies, Inc., 2014). According to its 2013 financial report, Agilent has $2,675 million in cash and cash equivalents at the end of 2013, up $324 million from its 2012 $2,351 million in cash and cash equivalents but down $852 million from its 2011 $3,527 million in cash and cash equivalents (Agilent Technologies, Inc., 2014, p. 29). Worse yet, its total liabilities at the end of 2013 were $5,397 million (Agilent Technologies, Inc., 2014, p. 28), meaning that Agilent does not have enough cash to pay its debts. Agilent's indebtedness is $46 million higher than its 2012 $5,351 million indebtedness and $656 million higher than its 2011 $4,741 million indebtedness (Agilent Technologies, Inc., 2014, p. 29). In sum, Agilent Technologies is in trouble.

ii. Is Agilent Technologies, Inc. increasing or decreasing its investment in its operations?

Agilent's increased its investment in its operations in 2013. Reviewing operations expenditures piecemeal, expenditures slightly in some respects but decreased slightly in other respects from 2011 through 2013. Its 2013 cost of products was $2,576 million, which was $32 million lower than its 2012 $2,608 million expenditure but $103 million more than its 2011 $2,473 million expenditure. Its 2013 cost of services and "other" was $671 million, which was $25 million higher than its 2012 $646 million expenditure and $58 million higher than its 2011 $613 expenditure. Its 2013 investment in research and development was $704 million, up $36 million from its 2012 $668 million expenditure and $55 million more than its 2011 $649 million expenditure. Its selling, general and administrative costs in 2013 were $1,880 million, which is $63 million higher than its 2012 $817 million expenditure and $71 million higher than its $1,809 million expenditure. All in all, its total costs and expenses of operations in 2013 were $5,831 million, which was $92 million more than its 2012 expenditure of $5,739 million and $287 million more than its 2011 $5,544 million expenditure (Agilent Technologies, Inc., 2014, p. 26).

iii. How well Agilent Technologies, Inc. doing in its operations?

Agilent's operations are lackluster at best. Though it is clearly a giant that deals with the U.S., China and Japan, among others, and though its total assets increased from $9,057,000 million in 2011 to $10,536,000 million in 2012 and $10,686,000 million in 2013, its total liabilities also increased from $4,749,000 million in 2011 to $5,354,000 in 2012 and $5,400,000 million in 2013 (Agilent Technologies, Inc., 2014, p. 30). The smaller increase in its investments in operations cannot account for all those losses and its available cash and cash equivalents could not cover its increasing indebtedness.

iv. Based on your answers to the above questions, give the president of Agilent Technologies, Inc. A letter grade for his/her performance over the most recent year reported in the financial statements. Explain your grade.

Agilent's president should receive a D. based on the 2013 financial statement. The company's performance has worsened in 2011 -- 2013, with higher debt, higher expenditures, and lower cash and cash equivalents. The company is still afloat and its equity rose but not at as great a pace as its liabilities. If the 3-year trend is not reversed, the company could conceivably go out of business.

b. Facebook, Inc.:

i. How much cash is available for Facebook, Inc. To pay its current debts? Is Facebook, Inc. In trouble or in good shape?

Facebook, Inc. is a publicly traded U.S. company that internationally provides online social networking services (Facebook, Inc., 2014). It provides annual reports for 2012 and 2013 on its web site (Facebook, Inc., 2014). The company had cash and cash equivalents of $3,323,000 million at the end of 2013, which was $939 million higher than the 2012 $2,384,000 million and $1,811 million higher than the 2011 $1,512,000 million. Facebook…

Sources used in this document:
Works Cited

Agilent Technologies, Inc. (2014). Annual Reports. Retrieved November 27, 2014 from www.investor.agilent.com Web site: http://www.investor.agilent.com/phoenix.zhtml?c=103274&p=irol-reportsannual

Agilent Technologies, Inc. (2014). Company Information. Retrieved November 27, 2014 November 27, 2014 from www.agilent.com Web site: http://www.agilent.com/about/companyinfo/index.html

CFO Studio. (2012, April 2). David Mudrick - CFOs becoming CEOs . Retrieved November 27, 2014 from www.youtube.com Web site: https://www.youtube.com/watch?v=E2GxuhDRVYg

CFO Studio. (2012, February 1). Ron Gaboury - CFOs becoming CEOs . Retrieved November 27, 2014 from www.youtube.com Web site: https://www.youtube.com/watch?v=y5HkWah-bfs
Deloitte Global Services Limited. (2014). Overview of the structure of the IFRS Foundation and IASB. Retrieved November 27, 2014 from www.iasplus.com Web site: http://www.iasplus.com/en/resources/ifrsf/overview
Duke Energy Corporation. (2013, October 21). Lynn J. Good. Retrieved November 29, 2014 from www.duke-energy.com Web site: http://www.duke-energy.com/about-us/leaders/lynn-good.asp
Facebook, Inc. (2014). Annual reports. Retrieved November 27, 2014 from investor.fb.com Web site: http://investor.fb.com/annuals.cfm" target="_blank" REL="NOFOLLOW" style="text-decoration: underline !important;">http://investor.fb.com/annuals.cfm
Facebook, Inc. (2014). Investor relations. Retrieved November 27, 2014 from investor.fb.com Web site: http://investor.fb.com/
Financial Accounting Standards Board. (n.d.). Facts about FASB. Retrieved November 27, 2014 from www.fasb.org Web site: http://www.fasb.org/facts/index.shtml#mission
NetCent Communications. (2014). Financial Managers. Retrieved November 29, 2014 from www.ncbuy.com Web site: http://www.ncbuy.com/careers/blsj/job010.html
PwC U.S.. (2012, December 11). Quarter close, Q4 2012: Eurozone, FASB disclosure, and other financial reporting updates. Retrieved November 27, 2014 from www.youtube.com: https://www.youtube.com/watch?v=NFnD4MoLZ54
PwC U.S.. (2013, June 12). Impact of the joint FASB/IASB leasing proposal. Retrieved November 27, 2014 from www.youtube.com Web site: https://www.youtube.com/watch?v=C9KomlV206o
Rakoczy, C. (n.d.). Pros and cons of hiring a CFO to be a CEO. Retrieved November 27, 2014 from business.lovetoknowcom Web site: http://business.lovetoknow.com/wiki/Pros_and_Cons_of_Hiring_a_CFO_to_Be_a_CEO
Starbucks Corporation. (2014). Howard Schultz. Retrieved November 29, 2014 from news.starbucks.com Web site: http://news.starbucks.com/leadership/howard-schultz" target="_blank" REL="NOFOLLOW" style="text-decoration: underline !important;">http://news.starbucks.com/leadership/howard-schultz
Starbucks Corporation. (2014). Leadership Team. Retrieved November 29, 2014 from news.starbucks.com Web site: http://news.starbucks.com/leadership
Starbucks Corporation. (2014). Scott Maw. Retrieved November 29, 2014 from news.starbucks.com Web site: http://news.starbucks.com/leadership/scott-maw
Starbucks Corporation. (2014). Starbucks Company timeline. Retrieved November 29, 2014 from news.starbucks.com Web site: http://news.starbucks.com/uploads/documents/AboutUs-Timeline-Q214-7-16-14.pdf
The Gap, Inc. (2014). Annual reports and proxy. Retrieved November 27, 2014 from investors.gapinc.com Web site: http://investors.gapinc.com/phoenix.zhtml?c=111302&p=irol-reportsAnnual
The Gap, Inc. (2014). History. Retrieved November 27, 2014 from www.gapinc.com Web site: http://www.gapinc.com/content/gapinc/html/aboutus/ourstory.html
Verizon. (2014). Annual reports. Retrieved November 27, 2014 from www.verizon.com Web site: http://www.verizon.com/about/investors/
Verizon. (2014). Our Company. Retrieved November 27, 2014 from www.verizon.com Web site: http://www.verizon.com/about/our-company/verizon-glance/
Xcel Energy, Inc. (2014). Ben Fowke. Retrieved November 29, 2014 from www.xcelenergy.com Web site: http://www.xcelenergy.com/About_Us/Our_Company/Leadership/Ben_Fowke
Yahoo! Finance. (2014, November 28). Starbucks Corporation - Balance Sheet. Retrieved November 29, 2014 from finance.yahoo.com Web site: http://finance.yahoo.com/q/bs?s=SBUX+Balance+Sheet&annual
Yahoo! Finance. (2014, November 28). Starbucks Corporation - Watchlist - 1 year. Retrieved November 29, 2014 from finance.yahoo.com Web site: http://finance.yahoo.com/echarts?s=SBUX+Interactive#%7B%22range%22%3A%221y%22%2C%22scale%22%3A%22linear%22%7D
Yahoo! Finance. (2014). Verizon. Retrieved November 27, 2014 from finance.yahoo.com Web site: http://finance.yahoo.com/q/bs?s=VZ+Balance+Sheet&annual
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