Using the Web, access Coca-Cola Company’s current financial statements (www.thecoca-colacompany.com).
Identify and discuss the following aspects of consolidated tax expense disclosed in the financial statements:
1. Loss carryforwards and carrybacks.
2. Components of deferred tax assets and liabilities.
3. Deferred tax impacts of stock sales by equity investees.
4. Deferred tax impacts of sales of interests in investees.
5. Valuation allowances on deferred taxes.
6. Differences between statutory and effective tax rates.
CPAskills
CPAskills
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As one of the largest companies in the United States, The Walt Disney Company reported consolidated revenues of $37.8 billion in 2008. The Walt Disney Company is well known as a filmmaker and operator of theme parks, but it is perhaps less well known as the owner of the ESPN and ABC television networks. How much of the company’s consolidated revenues did these different lines of business generate? Knowing this could be very useful to potential investors as opportunities for future growth and prof- itability in these different industries could differ significantly.
To comply with U.S. GAAP, Disney disaggregated its 2008 consolidated operating revenues and reported that the company’s revenues were gen- erated from these different ventures: approximately $16.1 billion came from Media Networks, $11.5 billion from Parks and Resorts, $7.3 billion from Studio Entertainment, and $2.9 billion from Consumer Products.
Additional information disclosed by Disney indicated that $28.5 billion of the 2008 consolidated revenues were generated in the United States and Canada, $6.8 billion in Europe, $1.8 billion in Asia Pacific, and $0.7 billion in Latin America and other parts of the world. Such information, describ- ing the various components of Disney’s operations (both by line of busi- ness and by geographic area), can often be more useful to an analyst than the single sales figure reported in the consolidated income state- ment. “All investors like segment reporting—separate financials for each division—because it enables them to analyze how well each part of a cor- poration is doing.”1
In its 2008 Annual Report, the Boeing Company reported earnings of $2,672 million for the year ended December 31, 2008. This infor- mation was not made available to the public until early in 2009 after the company had closed the books on 2008. To provide more timely information on which investors could base their decisions about the company, Boeing published separate interim reports for each of the first three quarters of 2008. Earnings were $1,211 million in the first quarter, $852 million in the second quarter, and $695 million in the third quarter, and then earnings dropped precipitously in the fourth quarter with a net loss of $86 million. Information about the results of operations for time intervals of less than one year can be very useful to an analyst.
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chapter
8
Segment and
Interim Reporting
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
LO1 Understand how an enter- prise determines its oper- ating segments and the factors that influence this determination.
LO2 Apply the three tests that are used to determine which operating segments are of significant size to warrant separate disclosure.
LO3 List the basic disclosure requirements for operat- ing segments.
LO4 Determine when and what types of information must be disclosed for geographic areas.
LO5 Apply the criterion for determining when disclo- sure of a major customer is required.
LO6 Understand and apply procedures used in interim reports to treat an interim period as an integral part of the annual period.
LO7 List the minimum disclo- sure requirements for interim financial reports.
LO8 Recognize differences between U.S. GAAP and IFRS in segment and interim reporting.
1Robert A. Parker, “How Do You Play the New Annual Report Game?” Communication World, September 1990, p. 26.
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336 Chapter 8
The first part of this chapter examines the specific requirements for disaggregating financial statement information as required by authoritative accounting literature.
Companies must disclose specific items of information for each reportable operating segment and provide additional enterprisewide disclosures. The second part of the chapter concentrates on the special rules required to be applied in preparing interim reports. All publicly traded companies in the United States are required to prepare interim reports on a quarterly basis.