The Procter & Gamble Company
“On my honor, as a student, I have neither given nor received unauthorized aid on this academic work.”
Financial Reporting Problem
In order to evaluate your understanding of the use of accounting information, you are asked to analyze the 2007 financial statements of The Procter & Gamble Company (P&G). The financial statements of P&G are presented in Appendix 5B or can be accessed at the book’s companion website, http://bcs.wiley.com/he-bcs/Books?action=index&itemId=0470374942&bcsId=4881. Based on the information in the 2007 Annual Report, answer the following questions. For each question, note the page number(s) on which you found the information to answer the question. Your answers should be complete sentences. For the ratios, show and label (write the formula in words and numbers) all computations.
Each student, as a member of a group, is required to complete the Financial Reporting Problem. You may self-select your group for this assignment; groups may have no more than four (4) members. Each group will submit one project, but each group member is responsible for the quality of the work submitted. You may work only with your group members on this assignment. The use of projects from prior semesters or other sources and consultation with third parties, other than the instructor of this course, are not permitted.
The completed project is due at the beginning of class Friday, November 18, 2011. This assignment should be typed on plain 8.5”x11” paper with 1” margins, single-spaced in 12-point, Times New Roman font. Each group should submit the following:
• Cover page with the title Financial Reporting Problem: The Procter & Gamble Company, the group members’ names, course name, and semester as well as the Honor Pledge signed and dated by each group member. • Questions (in bold) and answers to questions in proper order. • Copy of The Procter & Gamble Company 2007 Annual Report.
Procter & Gamble Co. is a Fortune 500 American multinational corporation headquartered in Downtown Cincinnati, Ohio that manufactures a wide range of consumer goods. It is 5th in Fortune's Most Admired Companies 2011 list. P&G is credited with many business innovations including brand management and the soap opera. William Procter, a candlemaker, and James Gamble, a soapmaker, immigrated from England and Ireland respectively. They settled in Cincinnati initially and met when they married sisters, Olivia and Elizabeth Norris. Alexander Norris, their father-in-law, called a meeting in... which he persuaded his new sons-in-law to become business partners. On October 31, 1837, as a result of the suggestion, Procter & Gamble was born. In 1858–1859, sales reached $1 million. By this point, approximately 80 employees worked for Procter & Gamble. During the American Civil War, the company won contracts to supply the Union Army with soap and candles. In addition to the increased profits experienced during the war, the military contracts introduced soldiers from all over the country to Procter & Gamble's products. (http://www.juggle.com/procter-amp-gamble)
(a)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. Pg 222 Book Internet pg 54
• Sales are recognized when revenue is realized or realizable and has been earned. Sales are recorded net of trade promotion spending, which is recognized as incurred, generally at the time of the sale. Most of these arrangements have terms of approximately one year. Accruals for expected payouts under these programs are included as accrued marketing and promotion in the accrued and other liabilities line item in the...