P & G Revenue Recognition Policy Analysis

753 Words 4 Pages
This paper will cover the following topics: P&G’s revenue recognition policies, the impact of trade promotions on P&G’s financial statements, two examples in which historical cost information is reported in P&G’s financial statements, two examples of the use of fair value information reported, how we can determine the accounting principles used by P&G, what is P&G’s accounting policy related to advertising, what accounting principle does P&G follow regarding accounting for advertising, and where are advertising expenses reported in the financial statements.
P&G’s Revenue Recognition Policies According to Procter & Gamble Co. (n.d.), there are six revenue recognition policies for P&G. The first one is revenue is recognized when title is transferred
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The term of one-year is not desirable to investors and it may also limit cash flow. Expenses are accrued as marketing and promotion liabilities in the Consolidated Balance Sheets. Expected payouts for promotion are estimates, another thing that is an estimate is the increased liabilities. If these estimates are off in any sort of way it could affect future financial statements (Procter & Gamble, n.d.).
Two Examples in Which Historical Cost Information is Reported in P&G’s Financial Statements According to P&G 2013 Annual Report (n.d.), the two examples I picked where P&G report historical cost information in their financial statements are the shareholder returns and the unaudited financial summary. The shareholder returns can be found on page twenty-one and it shows the returns between the years 2008 and 2013. The unaudited financial summary can be found on page twenty-two. It shows a number of things like net sales, gross profit, and operating income between the years 2008 and 2013 (P&G 2013 Annual Report, n.d.).
Two Examples of the Use of Fair Value Information
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According to P&G 2013 Annual Report (n.d.), the financial statements are in accordance with the U.S. Generally Accepted Accounting Principles (GAAP), which requires consistent use of accounting principles. An example found on page thirty-nine states that corporate also includes reconciling items to adjust the accounting policies to be in accordance with the U.S. GAAP (P&G 2013 Annual Report, n.d.).
What Accounting Principle Does P&G Follow Regarding Accounting for Advertising? Where are Advertising Expenses Reported in the Financial Statements? According to P&G 2013 Annual Report (n.d.), the non-advertising related components of P&G’s total advertising spending includes things like costs associated with consumer promotions, product sampling, and sales aid. The above are included in the Selling, General, and Administrative (SG&A) expenses. Coupons and customer trade funds are recorded as reductions to net sales. Advertising expenses are reported in Note 1 in the financial summary. Advertising costs are charged to expenses incurred. These include worldwide television, print, radio, internet, and in-store advertising expenses (P&G 2013 Annual Report,

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