Assignment 1 ACCT 7302 Dr. Jeffery Hamm
Subhashish (Ash) Duttachwodhury
Income Statement, Balance Sheet, Cash Flow and Equities
considered for AOL Time Warner.(source: http://finance.yahoo.com
AOL Time Warner Annual Financial Statements)
- Relevance all figures look
- Reliability since AOL trades on NASDAQ,
it may be assumed that the outside auditors for AOL have certified that the figures
mentioned in these statements are reliable.
- Non recurring Expense upwards of $45 billion, purpose unspecified in the year 2002
statement. 2001 - $250 million and 2000 - $10 million.
- Effect of Accounting
changes in 2002 income statement shown as $54 billion not clear from
what style to what style.
- Consistency Statements are consistent to
a large extent with the exception of a few items which seem to have one entry in the last
three years or none and have specific names like Non recurring events Extraordinary
- Materiality - R&D seems to have incurred no
income, but why has it been included in the Income statement? Nominally, this entry should
have shown some expenses, which it has surprisingly not! Yet, AOL seems to have released
its latest version of the browser program (without R&D??).
- Objectivity All figures are stated
objectively with no overlaps or ambiguity.
- Periodicity This is for the financial
years 2002, 2001 and 2000 each ending at dates 31st of December of the
- Disclosure questionable. While certain
figures are stated straightforward, certain others like non-recurring expense increase are
not explained forthright.
- Recognition and Measurement After
comparison with statements of Microsoft, Oracle and Dillards, it was found that
expenses and income had same patterns of recognition and measurement. However, there
exists some obfuscation in all these statements as to what some of the actual expenses are
and it was found that roughly these statement entry-headers matched each other by 85%.