Income Statement
1. Are the expenses presented by function or nature? How does this presentation enhance your understanding of the statement?
2. What is amortization on the intangible and other assets during the year and why does amortization expense not appear as a separate component on the income statement?
3. What portion of the company's expenses are research and development? What is their policy regarding capitalization of such costs?
Balance Sheet
1. What portion of the company's assets is property, plant, and equipment? Has the portion increased or decreased from the prior year?
2. How does the company value its plant and equipment?
3. Assume that one of the subsidiaries sold equipment to the parent two years ago and reported a substantial gain. The parent still owns and uses this equipment. Due to an oversight, the intercompany gain has never been eliminated when preparing the consolidated statements. What is the impact of this error on total asset turnover and return on assets for the current year?
Cash Flow Statement
1. Does the company employ the direct or indirect method of accounting for operating cash flows?
2. What was the biggest cash outflow during the year?
3. What percentage of the companies expenses were related to stock based compensation? Why does Google use stock based compensation to encourage employees?
4. If the company had reported gains or losses on sale of subsidiaries in income from continuing operations rather than in income from discontinued operations, what impact would this have had on the company's share price? Briefly explain.
Reporting and Disclosure
1. Are the company's operating segments based on product lines, geographic areas, or some other factor?
2. Does the company provide disclosures about major customers? If so, what is the nature of the disclosure?
3. Which of the operating segments is the biggest in terms of revenues? Profit? Assets?
4. Which of the operating segments reported the most improvement in return on assets from the previous year?
5. What currency is used in presenting the financial statements?
6. Identify the location(s) in the annual report where the company provides disclosures related to its current income tax status with the Internal Revenue Service and other tax authorities. Comment on whether you believe Google has reported their taxes properly in the past.
7. Indicate if and how the company describes the significance of foreign currency issues to the overall success/profitability of the company and sensitivity of its income to a change in foreign exchange risks.
8. Describe the types of hedging instruments the company uses to hedge foreign exchange risk.
9. What was the amount of foreign exchange gains or losses for the year on cash flow hedges? Describe how these gains or losses are reported.
10. Describe the basis for consolidation used by the company. Include a summary about relevant standards followed, the accounting for subsidiaries, business combinations, and non-controlling interests.