The paper expounds on the 10-K and 10-Q financial reporting models as pertains to the filings made to the SEC. It has been done in order to examine the two models taking an account of the Microsoft multinational company. By researching on the web and some few academic sources, the subject matters of the two in regard to accounting have been revealed. The main differences have also been pinpointed with Microsoft Company being the case study.
Microsoft Corporation Financial Methods 10-k & 10-Q
Assumptions are required by the Microsoft management while preparing financial statements that do affect the reported amounts of assets, revenue, expenses, and liabilities.The elements that make up the software arrangement including the difference between upgrades and new products cover these assumptions. Achievement of technological feasibility for Microsoft products and the potential outcome of the future tax results of events recognized in its tax returns or consolidated financial statements are part of the assumptions. Determining when the investment breakages are other than impermanent should also be assumed during financial statements preparation. It is possible to notice differences in the actual results and outcomes from management’s assumptions (Alexander et al., 2005).
Microsoft financial statements are prepared in accordance with accounting principles accepted in the United States of America. The principle of consolidation is widely used where the financial statements do include the accounts of Microsoft Corporation and its subsidiaries. Elimination of intercompany transactions and balances is evident whereas the equity method is used to account for equity investments through which significant influence is exercised, but no control of the investee and they are not the primary beneficiaries of the investee’s activities. The cost method is used to account for those investments through which it is not possible to exercise significant influence over the investee and which have readily determinable fair values.
Securities and Exchange Commission (SEC) oversees the accounting profession in U.S.A, which is a government commission created by Congress with the task of regulating the security markets facilitate capital formation and protects investors. SEC also monitor the corporate takeovers in U.S.A. Congress is an organization for the accountancy profession which granted the accounting profession an important trust. Congress created a corps of government auditors to audit and review any companies’ financial statements. It also considered mandating federal licensing of auditors at the end of it all, congress entrusted the accounting profession with the responsibility of auditing financial statements of companies which were registered with the SEC. Under congress, the accounting profession is given an enormously valuable franchise and public responsibility.
Microsoft Corporation releases two reports at the end of its fiscal year, annual report and 10-K where the annual report includes almost all the details an investor needs to know about the business.The document contains information about employees, products, company branches, and facilities. Also attached to this report is a letter from the CEO and other senior management discussing the past and upcoming year, at the back of the annual report is a collection of financial documents such as the income statement, balance sheet, statement of cash flows and supplementary notes. The 10-K is a document filed with the SEC which containsthe detailed explanation of a business. The report is annual and must be filed within 60 days after the end of the fiscal year containing same financial statements as the annual report but in a more detailed form. 10-K contains much more detail than the annual report such as organizational structure, equity and company history, earnings per share, holdings and subsidiaries. The report allows an accounting profession to find out additional information like amount of stock options awarded to executives at the company and also deep discussion of the nature of business and marketplace.
The 10-Q document is similar to the 10-K report, but it is filed quarterly (normally the end of January, June, September and December).These forms are filed within 40 days of the quarter end, 3 are issued per year whereas the 4th quarter details are included in the 10-K report. The company planning to change its dividend policy or a crucial event may bury such details in the 10-Q document, the document is critical and can be obtained in the same way as the annual report and 10-K. Usually, an auditor does not independently verify the financial statements within the 10-Q report. The difference in 10-K and 10-Q is important in SEC filings in order to deliver the pure information about a company that is unblemished by brokerage analysis. From these two reports, one can find out everything he/she want to know about a company just by skimming through the pages of the annual or quarterly reports.Information such as an amount of cash they have on hand, their operations progressing and the kind of compensation package the CEO have can be extracted from these documents(Catty,2012).
Business operation of Microsoft Corporation is a disclosure of interest, where the general part explains how the company was founded in 1975 as a partnership and incorporated in 1981. Its mission is explained as to enable people and businesses in the world realize their full potential, the vision been to empower people through great software. Also, products segments are analyzed as revised during the fiscal year 2003. The seven product segments include MSN, Mobile and Embedded Devices, Client, Server and Tools, Information Worker, Microsoft Business Solutions and Home and Entertainment. The next interesting disclosure is the Executive officers of the Registrant which outlines the executive officers as of September 4, 2003, where William H. Gates III aged 47 years is the chairman and Chief Software Architect, Steven A. Ballmer aged 47 the Chief Executive Officer Etc. The disclosure shows the brains and minds responsible for making Microsoft the blue chip company of today. From these disclosures, it is possible to learn the operations of Microsoft and the officers in charge of bringing these operations to customer satisfaction(Microsoft Corporation, 2004).