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Analytical Procedures - AICPA Audit Guide

Publisher: AICPA
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AICPA Audit Guides are developed and updated to provide guidance and tools for practitioners as they perform audit engagements. 

The AICPA Audit Guide Analytical Procedures, updated as of March 1, 2012, includes relevant guidance contained in applicable standards and other technical sources. The guide summarizes applicable requirements and practices, and delivers "how-to" advice for handling analytical procedures used in audits. The included case study illustrates the use of analytical procedures in planning and substantive testing, utilizing trend analysis, ratio analysis, reasonableness testing, and regression analysis. The appendices include a variety of examples of financial ratios and a comparison of the key provisions of the Risk Assessment Standards.

This AICPA Audit Guide has been fully conformed to reflect the new standards resulting from the Clarity Project. Fully incorporating the clarified auditing standards into this year’s edition of the guide enables auditors to further their understanding of these recently issued auditing standards, as well as begin updating their audit methodologies, resources, and tools prior to the clarified auditing standards’ effective date. Additionally, this approach gives auditors the opportunity to review and understand the changes made by their third-party audit methodology and resource providers, if applicable. The clarified auditing standards are effective for audits of financial statements for periods ending on or after December 15, 2012 (calendar year 2012 audits). Auditors should continue to use the previous edition of this guide (2008 edition) until the clarified auditing standards become effective for the auditors’ engagements.

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Excerpt

Untitled Document

Content refers to 2007 edition

Preface

Accounting Trends & Techniques--2007, Sixty-First Edition (the current edition), is a compilation of reporting and disclosure data obtained from a survey of the annual reports to stockholders of 600 publicly traded companies. This AICPA publication is produced for the purpose of providing accounting professionals with an invaluable resource for incorporating new and existing accounting and reporting guidance into financial statements using presentation techniques adopted by some of the most recognized companies headquartered in the United States. The annual reports surveyed were those of selected industrial, merchandising, technology, and service companies for fiscal periods ending between February 2006 and January 2007.

Significant accounting trends, as revealed by a comparison of current survey findings with those of prior years, are highlighted in numerous comparative tabulations throughout this publication. These tables show trends in such diverse accounting matters as financial statement format and terminology and the accounting treatment of transactions and events reflected in the financial statements.

Accounting techniques are illustrated by excerpts from the annual reports of the survey companies and represent various presentation practices already subjected to the audit requirements mandated by the Public Company Accounting Oversight Board (PCAOB). Furthermore, the excerpts selected for inclusion were subjected to an evaluation process and found to be particularly relevant and useful to financial statement preparers. Every edition of Accounting Trends & Techniques has all new illustrations so the readers are provided only current financial statement preparation techniques.

The current edition includes illustrative excerpts of company disclosures related to recently issued technical guidance, such as SFAS No. 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, and SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. Readers should be aware that the effective dates of recently released technical guidance affect the timing of its inclusion in the financial statements of the survey companies which, in turn, affects the timing of the resulting illustrative excerpts available for potential inclusion in Accounting Trends & Techniques.

Each of the 600 survey companies included in the current edition is listed in the "Appendix of 600 Companies" both alphabetically and by company reference number, a numerical identifier unique to this publication. Additionally, the "Company Index" that follows the aforementioned appendix lists those companies from whose annual reports illustrative examples have been provided and the parenthetical references as to where those excerpts can be found within the text. The final two indexes include a "Pronouncement Index," which provides for easy cross-referencing of new pronouncements to the applicable descriptive narratives preceding the various sections of tables and excerpts, and a "Subject Index," which provides for topical cross-referencing.

We would appreciate your feedback! We hope that you find this year's edition to be informative and useful. Also, we encourage you to give us your comments regarding the content of this publication, suggested improvements for future editions, and any other feedback. Please direct your comments to Doug Bowman, Technical Manager, using the below contact information. All comments will be considered and kept strictly confidential.

The following table summarizes the cost savings initiative, which impacted, and will continue to impact, the Company's operating expenses and cost of sales:

(In millions) Fiscal 2006 Expense Fiscal 2006 Payments Accrued at June 30, 2006
Employee separation expenses $75.9 $20.7 $55.2
Facility closures and product/distribution rationalization 12.5 -- 12.5
Advertising and promotional effectiveness 3.7 2.5 1.2
       
  $92.1 $23.2 $68.9

PENSIONS AND OTHER POSTRETIREMENT BENEFITS

3.62 SFAS No. 132, Employers' Disclosures about Pensions and Other Postretirement Benefits, states the disclosure requirements for pensions and other postretirement benefits. SFAS No. 132 does not supersede SFAS No. 87, Employers' Accounting for Pensions, SFAS No. 88, Employers' Accounting for Settlements and Curtailments and for Termination Benefits, or SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, with respect to the measurement or recognition of pensions and other postretirement benefits. In December 2003, the FASB issued SFAS No. 132 (Revised), Employers' Disclosures about Pensions and Other Postretirement Benefits-- Revised. SFAS No. 132 (Revised) retains the disclosure requirements contained in SFAS No. 132, which it replaces. The revised Statement requires additional disclosures to those contained in the original SFAS No. 132 about the assets, obligations, cash flows, investment strategy, and net periodic benefit cost of defined pension and postretirement plans. SFAS No. 132 (Revised) is effective for financial statements with fiscal years ending after December 15, 2003.

3.63 The disclosure requirements of SFAS No. 132 include, but are not limited to, disclosing the actuarial assumption rates used in accounting for pensions and other postretirement benefits. SFAS No. 132 also requires disclosure of the assumed health care cost trend rate for other postretirement benefits. In addition, SFAS No. 132 (Revised), requires disclosure of the allocation by major category of plan assets. Tables 3-8, 3-9 and 3-10 show the actuarial assumption rates used by the survey companies in accounting for pension benefits. Table 3-11 shows the health care cost trend rate used by the survey companies in 2006 to account for other postretirement benefits. Table 3-12 shows the asset allocations in 2006 of the 428 survey companies that disclosed the plan asset allocation of their defined benefit pension plan.

3.64 SFAS No. 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, amends the recognition, measurement date, and disclosure requirements of SFAS No. 87, SFAS No. 106, and SFAS No. 132 (Revised). SFAS No. 158 requires that a business entity recognize the overfunded or underfunded status of a single-employer defined benefit postretirement plan as an asset or liability in its statement of financial position, recognize changes in that funded status in comprehensive income, and disclose in the notes to financial statements additional information about net periodic benefit cost. SFAS No. 158 requires a business entity to recognize as components of other comprehensive income the gains or losses and prior service costs or credits that arise during a period but are not recognized in the income statement as components of net periodic benefit cost of a period pursuant to SFAS No. 87 or SFAS No. 106. Those amounts recognized in accumulated other comprehensive income, including the transition asset or obligation remaining from the initial application of SFAS No. 87 and SFAS No. 106, are adjusted as they are subsequently recognized in the income statement as components of net periodic benefit cost pursuant to the recognition and amortization provisions of SFAS No. 87 and SFAS No. 106. Additionally, SFAS No. 158 requires that a business entity measure plan assets and benefit obligations as of the date of its fiscal year-end statement of financial position. An employer whose equity securities are traded publicly is required to initially recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures for their financial statements issued for fiscal years ending after December 15, 2006. The measurement-date requirement is effective for fiscal years ending after December 15, 2008, and shall not be applied retrospectively. Examples of pension and other postretirement benefit presentations follow. Examples of the funded status of a benefit plan recognized under SFAS No. 158 as an asset or liability in the statement of financial position are presented in Section 2 under "Other Noncurrent Assets," "Employee-Related Liabilities," and "Other Noncurrent Liabilities."

3.65 Examples of pension and other postretirement benefit presentations follow. Examples of the funded status of a benefit plan recognized under SFAS No. 158 as an asset or liability in the statement of financial position are presented in Section 2 under "Other Noncurrent Assets," "Employee- Related Liabilities," and "Other Noncurrent Liabilities." AICPA

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System Requirements

Table of Content

About the Publisher

AICPA

About the AICPA The American Institute of CPAs is the world’s largest member association representing the accounting profession, with more than 412,000 members in 144 countries, and a history of serving the public interest since 1887. AICPA members represent many areas of practice, including business and industry, public practice, government, education and consulting. The AICPA sets ethical standards for the profession and U.S. auditing standards for private companies, nonprofit organizations, federal, state and local governments. It develops and grades the Uniform CPA Examination, and offers specialty credentials for CPAs who concentrate on personal financial planning; forensic accounting; business valuation; and information management and technology assurance. Through a joint venture with the Chartered Institute of Management Accountants, it has established the Chartered Global Management Accountant designation, which sets a new standard for global recognition of management accounting.