The Procter & Gamble Company Essay
The Procter & Gamble Company
a) Proctor and Gamble’s revenue recognition policies state that the customer recognizes revenue upon either date of shipment or date of receipt; e.g. when the product or receipt has switched hands. They also record revenue net of sales, trade promotion spending, and other taxes on behalf of governmental authorities. All of these transactions are generally recorded at time of sale. Discounted and returned products are recorded as a reduction in sales in the same period in which revenue was recorded.
b) P&G’s trade promotions consist mostly of customer pricing allowances, merchandising funds, and consumer coupons. There are a variety of programs that customers and consumers of these products can take advantage of. Most trade promotions only last for a year; P&G has accruals for the expected payouts under these programs and will post them, as they are accrued, to marketing and promotion on the accrued and other liabilities line on the Consolidated Balance Sheets.
c) You can determine that the accounting principles that P&G used were consistent with the last year due to that P&G had used that same accounting firm Deloitte & Touche LLP for the last three years. P&G had already put in place an Audit Committee to provide oversight to the board. Deloitte & Touche followed all guidelines from generally accepted accounting principles (GAAP) in the United States of America. Also, management had in place internal control over financial reporting established by control-integrated framework issued by the Committee of Sponsoring Organizations of the Treadway Commission..
d) 1) The accounting policy that P&G used related to advertising is expenses as they incurred. 2) The Matching principle is what P&G follow regarding accounting for advertising. 3) Advertising expenses are reported on pg 49 under selling, general and administrative expenses.
AIA2-5 (International Reporting Issues)
Three similarities and differences between the FASB and IASB conceptual framework are:
1. In both FASB and IASB objectives of financial reporting, the Information has to be useful. However for FASB it is only to those making investment and credit decisions, who have a reasonable understanding of business and economic activities. In IASB it is to a wide range of users making economic decisions. FASB requires the information to be helpful to present and potential investors, creditors, and other users in assessing the amounts, timing and uncertainty of future cash flows.
IASB also requires the information to performance and changes in financial positions of enterprise, but leaves out timing and uncertainty of future cash flows. And finally FASB requires the information about economic resources and claims to those resources as well as changes to them. IASB states the financial statement must state changes in financial position but it say nothing about resources and to whom has claims to those resources.
2. FASB’s underlining assumption are economic entity, going-concern, monetary unit and periodicity. IASB’s underlining assumptions are going-concern and Accrual basis. Going-concern is the same but; IASB is missing the other three assumptions in FASB’s assumptions.
3. The elements of financial statements under IASB include Asset, Liability, Equity, Income, and Expenses which all the same as FASB’s elements (although income is revenue under FASB). However, IASB differs in that FASB also has Investment by Owners, Distributions to Owners, Comprehensive Income, Gains and Losses.