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Homework answers / question archive / The financial statements of P&GClick here to view Appendix B  are presented in Appendix B

The financial statements of P&GClick here to view Appendix B  are presented in Appendix B

Accounting

The financial statements of P&GClick here to view Appendix B

 are presented in Appendix B. The company's complete annual report, including the notes to the financial statements, is available online.

Refer to P&G's financial statements and accompanying notes to answer the following questions.

Appendix B

Specimen Financial Statements: The Procter & Gamble Company

Once each year, a corporation communicates to its stockholders and other interested parties by issuing a complete set of audited financial statements. The annual report, as this communication is called, summarizes the financial results of the company's operations for the year and its plans for the future. Many annual reports are attractive, multicolored, glossy public relations pieces, containing pictures of corporate officers and directors as well as photos and descriptions of new products and new buildings. Yet the basic function of every annual report is to report financial information, almost all of which is a product of the corporation's accounting system.

The content and organization of corporate annual reports have become fairly standardized. Excluding the public relations part of the report (pictures, products, etc.), the following are the traditional financial portions of the annual report:

  • Financial Highlights
  • Letter to the Stockholders
  • Management's Discussion and Analysis
  • Financial Statements
  • Notes to the Financial Statements
  • Management's Responsibility for Financial Reporting
  • Management's Report on Internal Control over Financial Reporting
  • Report of Independent Registered Public Accounting Firm
  • Selected Financial Data

The official SEC filing of the annual report is called a Form 10-K, which often omits the public relations pieces found in most standard annual reports. On the following pages, we present The Procter & Gamble Company (P&G)'s financial statements taken from the company's 2017 Form 10-K.

Consolidated Statements of Earnings

Amounts in millions except per share amounts; Years ended June 302017

2016

2015

NET SALES$65,058

$65,299

$70,749

Cost of products sold32,535

32,909

37,056

Selling, general and administrative expense18,568

18,949

20,616

Venezuela deconsolidation charge

2,028

OPERATING INCOME13,955

13,441

11,049

Interest expense465

579

626

Interest income171

182

149

Other non-operating income/(expense), net(404)

325

440

EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES13,257

13,369

11,012

Income taxes on continuing operations3,063

3,342

2,725

NET EARNINGS FROM CONTINUING OPERATIONS10,194

10,027

8,287

NET EARNINGS/(LOSS) FROM DISCONTINUED OPERATIONS5,217

577

(1,143)

NET EARNINGS15,411

10,604

7,144

Less: Net earnings attributable to noncontrolling interests85

96

108

NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE$15,326

$10,508

$7,036

BASIC NET EARNINGS PER COMMON SHARE:(1)Earnings from continuing operations$3.79

$3.59

$2.92

Earnings/(loss) from discontinued operations2.01

0.21

(0.42)

BASIC NET EARNINGS PER COMMON SHARE$5.80

$3.80

$2.50

DILUTED NET EARNINGS PER COMMON SHARE:(1)Earnings from continuing operations$3.69

$3.49

$2.84

Earnings/(loss) from discontinued operations1.90

0.20

(0.40)

DILUTED NET EARNINGS PER COMMON SHARE$5.59

$3.69

$2.44

DIVIDENDS PER COMMON SHARE$2.70

$2.66

$2.59

(1) Basic net earnings per common share and Diluted net earnings per common share are calculated on Net earnings attributable to Procter & Gamble.

 

Consolidated Statements of Comprehensive Income

Amounts in millions; Years ended June 302017

2016

2015

NET EARNINGS$15,411

$10,604

$7,144

OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXFinancial statement translation239

(1,679)

(7,220)

Unrealized gains/(losses) on hedges (net of $(186), $5 and $739 tax, respectively)(306)

1

1,234

Unrealized gains/(losses) on investment securities (net of $(6), $7 and $0 tax, respectively)(59)

28

24

Unrealized gains/(losses) on defined benefit retirement plans (net of $551, $(621) and $328 tax, respectively)1,401

(1,477)

844

TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX1,275

(3,127)

(5,118)

TOTAL COMPREHENSIVE INCOME16,686

7,477

2,026

Less: Total comprehensive income attributable to noncontrolling interests85

96

108

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO PROCTER & GAMBLE$16,601

$7,381

$1,918

 

Consolidated Balance Sheets

Amounts in millions; As of June 302017

2016

AssetsCURRENT ASSETSCash and cash equivalents$5,569

$7,102

Available-for-sale investment securities9,568

6,246

Accounts receivable4,594

4,373

INVENTORIES Materials and supplies1,308

1,188

Work in process529

563

Finished goods2,787

2,965

Total inventoreis4,624

4,716

Deferred income taxes

1,507

Prepaid expenses and other current assets2,139

2,653

Current assets held for sale

7,185

TOTAL CURRENT ASSETS26,494

33,782

PROPERTY, PLANT AND EQUIPMENT, NET19,893

19,385

GOODWILL44,699

44,350

TRADEMARKS AND OTHER INTANGIBLE ASSETS, NET24,187

24,527

OTHER NONCURRENT ASSETS5,133

5,092

TOTAL ASSETS$120,406

$127,136

Liabilities and Shareholders' EquityCURRENT LIABILITIESAccounts payable$9,632

$9,325

Accrued and other liabilities7,024

7,449

Current liabilities held for sale

2,343

Debt due within one year13,554

11,653

TOTAL CURRENT LIABILITIES30,210

30,770

LONG-TERM DEBT18,038

18,945

DEFERRED INCOME TAXES8,126

9,113

OTHER NONCURRENT LIABILITIES8,254

10,325

TOTAL LIABILITIES64,628

69,153

SHAREHOLDERS' EQUITY Convertible Class A preferred stock, stated value $1 per share (600 shares authorized)1,006

1,038

Non-Voting Class B preferred stock, stated value $1 per share (200 shares authorized)—

Common stock, stated value $1 per share (10,000 shares authorized; shares issued: 2017 - 4,009.2, 2016 - 4,009.2)4,009

4,009

Additional paid-in capital63,641

63,714

Reserve for ESOP debt retirement(1,249)

(1,290)

Accumulated other comprehensive income/(loss)(14,632)

(15,907)

Treasury stock, at cost (shares held: 2017 - 1,455.9, 2016 - 1,341.2)(93,715)

(82,176)

Retained earnings96,124

87,953

Noncontrolling interest594

642

TOTAL SHAREHOLDERS' EQUITY55,778

57,983

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$120,406

$127,136

See accompanying Notes to Consolidated Financial Statements.

 

Consolidated Statements of Shareholders' Equity

Dollars in millions;

Shares in thousandsCommon

Shares

Outstanding

Common

Stock

Preferred

Stock

Additional

Paid?In

Capital

Reserve for

ESOP Debt

Retirement

Accumulated

Other

Comprehensive

Income/

(Loss)

Treasury

Stock

Retained

Earnings

Non?

controlling

Interest

Total

Share?

holders'

Equity

BALANCE JUNE 30, 20142,710,806

$4,009

$1,111

$63,911

($1,340)

($7,662)

($75,805)

$84,990

$762

$69,976

Net earnings7,036

108

7,144

Other comprehensive loss(5,118)

(5,118)

Dividends to shareholders: Common(7,028)

(7,028)

 Preferred, net of tax benefits(259)

(259)

Treasury purchases(54,670)

(4,604)

(4,604)

Employee plan issuances54,100

156

3,153

3,309

Preferred stock conversions4,335

(34)

4

30

ESOP debt impacts20

68

88

Noncontrolling interest, net

 

 

(219)

 

 

 

 

(239)

(458)

BALANCE JUNE 30, 20152,714,571

$4,009

$1,077

$63,852

($1,320)

($12,780)

($77,226)

$84,807

$631

$63,050

Net earnings10,508

96

10,604

Other comprehensive loss(3,127)

(3,127)

Dividends to shareholders: Common(7,181)

(7,181)

 Preferred, net of tax benefits(255)

(255)

Treasury purchases(1)(103,449)

(8,217)

(8,217)

Employee plan issuances52,089

(144)

3,234

3,090

Preferred stock conversions4,863

(39)

6

33

ESOP debt impacts30

74

104

Noncontrolling interest, net

 

 

 

 

 

 

 

(85)

(85)

BALANCE JUNE 30, 20162,668,074

$4,009

$1,038

$63,714

($1,290)

($15,907)

($82,176)

$87,953

$642

$57,983

Net earnings15,326

85

15,411

Other comprehensive loss1,275

1,275

Dividends to shareholders: Common(6,989)

(6,989)

 Preferred, net of tax benefits(247)

(247)

Treasury purchases(2)(164,866)

(14,625)

(14,625)

Employee plan issuances45,848

(77)

3,058

2,981

Preferred stock conversions4,241

(32)

4

28

ESOP debt impacts41

81

122

Noncontrolling interest, net

 

 

 

 

 

 

 

(133)

(133)

BALANCE JUNE 30, 20172,553,297

$4,009

$1,006

$63,641

($1,249)

($14,632)

($93,715)

$96,124

$594

$55,778

(1) Includes $4,213 of treasury shares acquired in the divestiture of the Batteries business (see Note 13).

(2) Includes $9,421 of treasury shares received as part of the share exchange in the Beauty Brands transaction (see Note 13).

 

See accompanying Notes to Consolidated Financial Statements.

 

Consolidated Statements of Cash Flows

Amounts in millions; Years ended June 302017

2016

2015

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR$ 7,102

$ 6,836

$ 8,548

OPERATING ACTIVITIES Net earnings15,411

10,604

7,144

 Depreciation and amortization2,820

3,078

3,134

 Loss on early extinguishment of debt543

 Share?based compensation expense351

335

337

 Deferred income taxes(601)

(815)

(803)

 Gain on sale of assets(5,490)

(41)

(766)

 Venezuela deconsolidation charge

2,028

 Goodwill and intangible asset impairment charges

450

2,174

 Change in accounts receivable(322)

35

349

 Change in inventories71

116

313

 Change in accounts payable, accrued and other liabilities(149)

1,285

928

 Change in other operating assets and liabilities(43)

204

(976)

 Other162

184

746

TOTAL OPERATING ACTIVITIES12,753

15,435

14,608

INVESTING ACTIVITIES Capital expenditures(3,384)

(3,314)

(3,736)

 Proceeds from asset sales571

432

4,498

 Cash related to deconsolidated Venezuela operations

(908)

 Acquisitions, net of cash acquired(16)

(186)

(137)

 Purchases of short?term investments(4,843)

(2,815)

(3,647)

 Proceeds from sales and maturities of short?term investments1,488

1,354

1,203

 Pre?divestiture addition of restricted cash related to the Beauty Brands divestiture(874)

(996)

 Cash transferred at closing related to the Beauty Brands divestiture(475)

 Release of restricted cash upon closing of the Beauty Brands divestiture1,870

 Cash transferred in Batteries divestiture

(143)

 Change in other investments(26)

93

(163)

TOTAL INVESTING ACTIVITIES(5,689)

(5,575)

(2,890)

FINANCING ACTIVITIES Dividends to shareholders(7,236)

(7,436)

(7,287)

 Change in short?term debt2,727

(418)

(2,580)

 Additions to long?term debt3,603

3,916

2,138

 Reductions of long?term debt(4,931)(1)

(2,213)

(3,512)

 Treasury stock purchases(5,204)

(4,004)

(4,604)

 Treasury stock from cash infused in Batteries divestiture

(1,730)

 Impact of stock options and other2,473

2,672

2,826

TOTAL FINANCING ACTIVITIES(8,568)

(9,213)

(13,019)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASHEQUIVALENTS(29)

(381)

(411)

CHANGE IN CASH AND CASH EQUIVALENTS(1,533)

266

(1,712)

CASH AND CASH EQUIVALENTS, END OF YEAR$ 5,569

$ 7,102

$ 6,836

SUPPLEMENTAL DISCLOSURECash payments for interest$ 518

$ 569

$ 678

Cash payment for income taxes3,714

3,730

4,558

Divestiture of Batteries business in exchange for shares of P&G stock(2)

4,213

Divestiture of Beauty business in exchange for shares of P&G stock and assumption of debt11,360

Assets acquired through non?cash capital leases are immaterial for all periods.(1) Includes $543 of costs related to early extinguishment of debt.

(2) Includes $1,730 from cash infused into the Batteries business pursuant to the divestiture agreement (see Note 13).

 

See accompanying Notes to Consolidated Financial Statements.

 

 

Part 1

Under P&G's stock-based compensation plan, stock options are granted annually to key managers and directors.

 

(1) How many options were granted during 2017 under the plan?

 

Options granted during 2017

 

(2) How many options were exercisable at June 30, 2017?

 

Options exerciseable at June 30, 2017

 

(3) How many options were exercised in 2017, and what was the average price of those exercised? (Round average price to 2 decimal places, e.g. 15.25.)

 

Options exercised in 2017

Average price$ 

 

(4) What is the total stock-based compensation expense for stock options and the total compensation expense for restricted stock, restricted stock units (RSUs), and performance stock units (PSUs) for 2017, 2016, and 2015?

 

201720162015Total stock-based compensation expense$ $ $ Total compensation expense$ $ $ 

 

(5) To what accounts are the proceeds from these option exercises credited?

 

Option exercises credited

                                                                       

Cash

Discount on Bonds Payable

Bonds Payable

Common Stock and Additional Paid-in Capital

Paid-in-capital in Excess of Par—Common Stock

 

(6) What was the number of outstanding options at June 30, 2017, and at what average exercise price? (Round average price to 2 decimal places, e.g. 15.25.)

 

Number of outstanding optionsAverage exercise price$ 

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Part 2

What number of diluted weighted-average common shares outstanding was used by P&G in computing earnings per share for 2017, 2016, and 2015? (Round answers to millions upto 1 decimal places, e.g. 125.5.)

 

(In millions)201720162015Weighted-average common shares

 

What was P&G's diluted earnings per share in 2017, 2016, and 2015? (Round answers to 2 decimal places, e.g. 15.25.)

 

201720162015Diluted earnings per share

$ $ $ 

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