Monsanto: Corporate Annual Review of Financial Statements

Topics: Generally Accepted Accounting Principles, Income statement, Depreciation Pages: 7 (2647 words) Published: October 30, 2008
In the corporate annual report, a statement reporting the independent auditor’s opinion was included. This opinion shows that the auditor has reviewed the internal controls over financial reporting and it also audits the consolidated financial position of Monsanto. The auditors express the fact that they are independent from Monsanto which means that the report is not coming from someone within the Monsanto Company. This is also important because it means that the report will not be biased and hopefully would also not be fraudulent. The report is important in those respects because it shows the shareholders that they are not investing in a company that will eventually fold because they are reporting inaccurate income. The report tells the shareholders that “effective internal control over financial reporting… is fairly stated, in all material respects, based on the criteria established in Internal Control—Integrated Framework” (Foster 56). The report also states that the “consolidated financial statements [are] presented fairly, in all material respects” (Foster 57). This is a good thing for the shareholders because it shows them that the opinions expressed are an unqualified opinion. This means that the statements are in compliance with GAAP.

Before understanding the charts presented in the corporate annual report, the shareholder needs to have an understanding of what the basics are and what is presented on these charts. Shareholders also need to understand how these numbers are computed and they might also want to see how the company has done over the past few years. There are many different components and factors that go into just one chart. The most basic of components and one of the most valuable to a company is an asset. An asset is an economic resource that is expected to be of benefit in the future. Assets are split up into two different ways that they can be claimed on. The first is a liability. A liability is an economic obligation or debt payable to an individual or an organization outside of business. Liabilities would include such things as notes payable, accounts payable, and salary payable. The next way is the owner’s equity. Owner’s equity is the owner’s claims to the assets of the business. The owner’s equity is the reason why businesses get started in the first place. The owner wants to increase his equity and so all the ways to increase the equity are divided up and put on the left side of the t-charts. On the right side are the decreases of the owner’s equity. There are many ways either decreases or increases can occur on the t-chart. The main increase addressed in the balance sheets is the revenues or the net sales. The net sales are considered to be all of the sales made after decreasing any sales returns, discounts, and allowances. These sales are then all computed to come up with the net sales which will then be subtracted by the cost of goods sold. The cost of goods sold is the net cost that the product or service provided to the customer cost the company to produce for this customer. This cost is subtracted from the net sales to come up with the gross profit. The gross profit shows the shareholders just how much profit was made before factoring in any expenses, liabilities, bad-debt, or anything that would decrease the profit after the sale has been made. An expense is the decrease in owner’s equity that occurs from using assets or increasing liabilities in the course of delivering goods or services to customers. After all of that has been computed, the total operating expenses are subtracted from the gross profit to come up with the income from operations. This shows the shareholders what the profit looks like after factoring in the operating expenses, but it does not show the net income quite yet. Other factors to include are the interest expenses and interest income and the discontinued operations that would create a loss. All of these numbers factor into...

Cited: Begemann, B. "Seeds and Traits." (2007): 19 Oct. 2007
Foster, S. L.Monsanto Company 10-K Form. 2006.
Hirst, E, and McAnally, M. Cases in Financial Reporting. Vol. 5. Prentice-Hall, 2006.
Horngren, C., and Harrison, W. Accounting. 7 ed. New Jersey: Pearson Education, Inc, 2007.
Paris, K. "Programs and Financing." Asgrow and DEKALB 19 Oct. 2007
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