100 Understanding the Numbers
- Handy and Harman Inc., annual report, December 1997. Information ob-
tained from Disclosure Inc., Compact D/SEC: Corporate Information on Public
Companies Filing with the SEC (Bethesda, MD: Disclosure Inc., June 1998. - Even with great improvements in supply chain management, it is still diffi-
cult to get along without any inventories. - Reviews and compilations represent a level of outside accountant service well
below that of an audit. Compilations typically provide only an income statement and
balance sheet. Neither notes nor a statement of cash f lows are part of the standard
compilation disclosures. - Absent disclosures, the effect of a LIFO liquidation can be estimated. This
requires the assumption that the observed increase in the gross margin is due largely
to the LIFO liquidation. The pretax effect of the LIFO liquidation can then be ap-
proximated by multiplying sales for the period of the liquidation times the increase in
the gross margin percentage. - Archer Daniels Midland Company, annual report, June 2000, 20.
- Guidance in this area is found in SFAS No. 109, Accounting for Income Taxes
(Nor walk, CT: FASB, February 1992). - The offsetting of gains and losses in the 1998 other income and expense note
is swamped by a $329 million nonrecurring gain on the disposition of C.R. Bard’s car-
diology business. - Reg. S-K, Subpart 229.300, Item 303(a)(3)(i) (Washington, DC: SEC, 2001).
- Mason Dixon Bancshares might take issue with this characterization. Finan-
cial firms tend to characterize these disclosures as designed to measure core earnings.
However, our experience is that the end product is very similar to sustainable earn-
ings,where the focus is on purging nonrecurring items from reported net income. - Phillips Petroleum, annual report, December 1999, 33.
- Ibid., 33.
- Other companies that have provided similar presentations in recent years in-
clude Amoco Corp., Carpenter Technology, Chevron Corp., Deere & Company Inc.,
Halliburton Co. Inc., Maxus Energy Corp., and Raychem Corp. - C. R. Bard Inc., annual report, December 1999, 17.
- A hedge of foreign-currency exposure is achieved by creating an offsetting
position to the financial statement exposure. The most common offsetting position is
established by the use of a foreign-currency derivative. These issues are discussed
more fully in Chapter 12. - These alternative translation methods are discussed and illustrated in Chap-
ter 12. - Dibrell Brothers Inc., annual report, December 1993, 35.
- Ibid., 14.
- Arthur Levitt, The Numbers Game,speech given at the NYU Center for Law
and Business, September 28, 1998 (available at: http://www.sec.gov/news/speeches
/spch220.txt). - The earnings of a subsequent period are increased by reducing the previously
accrued restructuring charge on the basis that the accrual was too large. The amount
by which the liability is reduced is also included in the income statement as either an
item of income or an expense reduction.