Accounting Research (1st Sem AY 2020-2021) Assignment 20

Javier, Jaypee T.

Exercise 7.

What Financial Ratios are provided in the Mergent Online Database? Compare (Identify
the similarities) and contrast (Identify the differences) in this result to the financial ratios
presented in S&P Capital IQ.

- Mergent database provides Management effectiveness ratios, Profitability Ratios,

S&P Capital IQ provides more extensive ratio analysis for the same company. There is
also year-to-year comparison which Mergent did not have. S&P list profitability ratios,
margin analysis, asset turnover, short-term liquidity, long-term solvency, growth over
prior year and compound annual growth over 2-5 years. Mergent gives more of the
overview. It provides a little bit of everything on the Highlights tab. S&P looks more in-
depth.

Exercise 13.

Find the name of the major professional accounting journal published by the AICPA.
Locate the two most recent articles in this journal using the keyword “derivatives.” Give
citation for these articles using APA style. Summarize each article in a paragraph.

2 Major professional accounting journals published by the AICPA:

 Journal of Accountancy
 CPA Letter Daily

Two most recent articles in Journal of Accountancy:

1. FASB staff Q&As address hedge accounting amid the pandemic

FASB’s staff addressed hedge accounting issues related to the coronavirus pandemic in a staff
Q&A document posted to the board’s website Tuesday. Stakeholders have asked FASB how
the postponement or cancellation of forecasted transactions related to the effects of the
pandemic should be considered when applying cash flow hedge accounting under FASB ASC
Topic 815, Derivatives and Hedging.

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Accounting Research (1st Sem AY 2020-2021) Assignment 20
Javier, Jaypee T.

The staff Q&As address those questions by answering:

 When cash flow accounting has been discontinued, whether delays in the timing of the
forecasted transactions related to the effect of the pandemic may be considered rare
cases caused by extenuating circumstances outside the control or influence of an entity.
 If an entity determines that amounts deferred in accumulated other comprehensive
income should be reclassified in earnings in accordance with ASC Paragraph 815-30-
40-5 because of missed forecasts related to the effects of the pandemic, whether those
forecasts should be considered when determining whether the entity has exhibited a
pattern of missing forecasts that would call into question its ability to accurately predict
forecasted transactions and the propriety of using cash flow hedge accounting in the
future for similar transactions.

FASB is monitoring other accounting issues related to the pandemic and plans to provide
additional guidance as necessary. (Tysiac, FASB staff Q&As address hedge accounting
amid the pandemic, 2020)

2. Optional delay provided in regulatory capital transition to credit losses standard

Federal bank regulators are providing an optional extension of the regulatory capital
transition for FASB’s new credit losses standard in an attempt to make it easier for banking
organizations to continue lending to households and businesses. The Board of Governors of
the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of
the Comptroller of the Currency jointly announced the issuance of an interim final rule that
would allow banking organizations to mitigate the effects of FASB’s credit losses standard in
their regulatory capital. FASB issued its credit losses standard in 2016 in an effort to provide
investors with more forward-looking information on expected loan losses and ensure that
banks had enough capital in reserve to absorb those losses. The federal regulators took
action amid concerns related to the coronavirus pandemic’s effect on banks’ continued
ability to provide loans to individuals and businesses. The new interim final rule states that
banking organizations that are bill that would delay the date by which financial institutions
are required to comply required to adopt FASB’s credit losses standard this year can
mitigate the estimated cumulative regulatory capital effects for up to two years, in addition to
the three-year transition period that already is in place.

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Javier, Jaypee T.

Alternatively, banking organizations can follow the capital transition rule issued by the
banking agencies in February 2019. The changes took effect immediately, and the agencies
will accept comments on the interim final rule for 45 days. The regulators’ action follows the
inclusion of language in the new federal stimulus with FASB’s credit losses standard. In
addition, the bank regulators agreed to allow early adoption of a new methodology on how
certain banking organizations are required to measure counterparty credit risk derivatives
contracts. The “standardized approach for measuring counterparty credit risk” rule was
finalized by the banking regulators in November with an effective date of April 1. The
agencies will permit banking organizations to early-adopt the rule for the reporting period
ending March 31. (Tysiac, Optional delay provided in regulatory capital transition to credit
losses standard, 2020).

Exercise 14.

Conduct a search to find the federal laws and regulations concerning the environmental
liability disclosure requirements for Chevron. List the major items. What database and
parts of the database did you use to locate the information?

Knowledge Busters 1.1

What company did Bristol Myers Squibb acquire in 2019? What happened to the
company’s stock price when the merger was announced?

- The company Bristol Myers Squibb acquired in 2019 was the Celgene Corporation. As a
result of the merger, each Celgene common share has been cancelled automatically and
converted into the right to receive the Merger Consideration: 1 share of Bristol Myers
Squibb common stock (NYSE: BMY) $50 cash.

Knowledge Busters 4.2

In 2019, who became the chair of GE’s audit committee? What was this person’s
background? What controversy arose with GE’s audit committee? How was Harry
Markopolos involved? How did Harry Markopolos achieve the notoriety around Bernie
Madoff’s Ponzi Scheme?

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Accounting Research (1st Sem AY 2020-2021) Assignment 20
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- In 2019, the person who became the chair of GE’s audit committee was Leslie Seidman.
She was named chairman of the Financial Accounting Standards Board (FASB) by the
Financial Accounting Foundation.
On August 15, 2019, Harry Markopolos, a financial fraud investigator known for his
discovery of a Ponzi Scheme run by Bernard Madoff, accused General Electric of being
a "bigger fraud than Enron", alleging $38 billion in accounting fraud. GE denied
wrongdoing.

Knowledge Busters 5.

Find the industry ranking of General Electric in the electric power generation business.
Who are the largest three companies in the industry? What database did you use?
Provide a financial comparison of these three companies.

Knowledge Busters 6.

Find the NAICS code for the property and casualty insurance business.

Knowledge Busters 7.

Access an overview of the Korean company Samsung’s products. Then explain the
significance of its Galaxy Note 7 line of products. Can you determine how many of those
products were sold and what happened to this product? Explain where you acquired
your information and why you went there.

Knowledge Busters 8.

Locate the insurance company State Farm Group. Using an appropriate database
available to you, summarize the key financial ratios that you can find on the company.
Compare that information to any information provided on the company’s website.

- Through infrontanalytics I found out that State Farm Group that the N/A ratio of State
Farm Mutual Automobile Insurance is significantly lower than the median of its peer

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group: around 11.00. According to these financial ratios State Farm Mutual Automobile
Insurance's valuation is way below the market valuation of its peer group. The N/A ratio
of State Farm Mutual Automobile Insurance is significantly lower than the average of its
sector (Food Retailers & Wholesalers): 7.31. According to these financial ratios State
Farm Mutual Automobile Insurance's valuation is way below the market valuation of its
sector. While in the actual website of the company it was also the same as the
information in the infrontanalytics they able to get the correct information and updated it
in times there is a change in the actual website.

References:

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1
https://www.bms.com/investors/shareholder-services/shareholder-faq.html#:~:text=Yes.,%2450%20cash
2
https://www.ge.com/about-us/leadership/leslie-seidman