Disclosure Requirements on Accounting Policies

Assignment 1

Full Disclosure in Financial Reporting – Verizon Communications

Kelly McLaughlin

Intermediate Accounting III

Professor

August 30, 2016

  Disclosure Requirements on Accounting Policies

        Accounting policies are rules and procedures followed by any business entity to use in the preparation of their financial statements. The presentation and design of the information in the financial statements are representations of the accounting policies used by a business. The disclosure requirements are used to provide detailed documentation of the financial information presented by the financial statements so the reader may have a proper understanding of the information presented. Some types of disclosures will give the analyst or reader insight into whether the business used an aggressive or conservative approach to the management style of reported earnings. The disclosure requirements on accounting policies are put in place to certify that the preparation and presentation of the financial statements are honest and have followed consistently with other business entities.  Also disclosures also aide the investor in making decisions regarding the financial health of the company because they may contain useful information about investment and credit decisions made by the business.

Two Common Disclosures

        Some of the most commonly used disclosures are the Summary of Significant Accounting Policies and Investments. These are both useful to the analyst or the investor because it will provide useful information about the organization regarding accounting controls, the sources of major revenue streams and exactly where the organization invests their cash.

1. Summary of Significant Accounting Policies

The disclosure should accurately identify and describe all accounting principles that are practiced by the business entity that may directly affect the presentation of the financial information.

These polices may include, but are not limited to:

• The method used for accounting
• The basis of accounting
• How the fixed assets are capitalized
• Depreciation methods
• Inventory valuation
• Any unusual policies specifically relating to revenue, expenses or expenditures

1. Investments

The disclosures regarding investments should include:

• How the value of the investments are presented on the financial statements
• The types of investments held by the organization
• The amount paid for the investment at cost
• The amount of the investment at fair value
• A summary of realized and unrealized gains and losses
• Any income from the investments

In the case of Verizon Communications’ 2015 Annual report disclosure on accounting policies they went into detail regarding exactly what the business does and how they generate their revenue. The Summary of Significant Accounting policies went into depth regarding all of the points listed above; this would provide sufficient data to a potential investor on the overall financial health of the business. The notes were straight to the point and easy to read and understand; in my opinion the potential investor would be able to make decisions regarding Verizon Communications.  

Management Discussion and Analysis

This section of the financial report contains the management’s position that directly relates to the process of preparation and presentation of financial statements. In this discussion management are able to discuss the past and the present of the company’s performance. There are many points stressed in the Management Discussion and Analysis portion of the financial statement, the main idea being communicated is that Verizon believes in innovation and moving forward with new technology. This says to the investor that the company will constantly be changing and adapting to the market. There are also points made regarding the revenue growth from 2014 to 2015 of 3.6 percent which is over $131.6 billion dollars. Verizon has also invested $28 billion in capital to increase they future capacity of the wireless networks. This analysis covers many issues regarding the growth, investments and potential for more profitability in the future of the company. All of these claims are supported with charts and graphs that show the growth since 2013 and the potential into the future.