The following is the assignment.
The assignment is a final that incorporates numerous areas of accounting, such as accounting and international accounting (e.g., IFRS). Please incorporate as much of those areas into the assignment.
As the title suggests, the paper is about both financial reporting and the efficient market hypothesis.
Requirements #2-9 are about financial reporting and requirement #11 is about the efficient market hypothesis. In other words, the main objective of the assignment is to use the financial reporting information that was gathered (see requirements #2 through 9) and three recent news articles (see requirement #10) to support the efficient market hypothesis (requirement #11).
Option #2: Efficient Markets Hypothesis (EMH) and Financial Reporting
The company chosen for this assignment is Apple, Inc.
The objective of this research project is to support the applicability of the Efficient Markets Hypothesis (EMH) given observations of Apple's general disclosures, financial analysis, and news announcements.
Project include the following elements:
• Abstract: summarize and discuss problem, analysis, and findings
• Introduction: description of Apple and requirement 1
• Problem Statement: define the EMH and the linkage, if any, between accounting information and financial market response
• Analysis and Findings: requirements 2-11 below
• Conclusions and Recommendations: requirement 12 below
Instructions:
• The company you will be writing about is Apple, Inc. In fulfilling the following requirements, you will use Apple's 10K dated September 26, 2015, which can be found at sec.gov or at the following link:
https://www.sec.gov/Archives/edgar/data/320193/000119312515356351/d17062d10k.htm
Requirements:
1. General disclosures:
1. Compose a brief description of Apple.
2. Indicate the most important point regarding future investment from the Management Discussion and Analysis section of the 10K report.
2. Disclosures regarding revenue recognition, historical cost versus fair value, and the statement of cash flows: Examine the Notes to the financial statements.
1. Provide a summary commentary regarding the revenue recognition policy.
2. Disclose the elements that Apple applies historical cost and/or fair value.
3. Indicate the type of cash flow statement used.
4. Explain any unusual disclosures.
5. Assess if Apple's revenue recognition policy, use of historical cost and fair value, and cash flow statement are allowed under IFRS.
3. Disclosures regarding working capital and long-term assets: Examine the Notes to the financial statements.
1. Provide a summary commentary regarding the inventory accounting method, the depreciation method(s), and the overall composition of total assets.
2. Assess and comment on the selected methods of accounting for inventory and depreciation.
3. Are the selected accounting methods chosen by Apple permitted under IFRS?
4. What, if anything, do these selections indicate regarding Apple's tax liability?
4. Disclosures regarding working capital and long-term assets: Examine the Notes to the financial statements.
1. Provide a summary commentary regarding the long-term liabilities (i.e., bonds) and leases of Apple, if any.
2. Are the selected accounting methods chosen by Apple permitted under IFRS?
5. Disclosures regarding deferred income taxes and pensions: Examine the Notes to the financial statements.
1. Provide a summary commentary regarding deferred income taxes and pensions, if applicable.
2. If Apple has a defined benefit pension plan, what is the funded status of the plan?
3. Are there any differences between U.S. GAAP and IFRS on deferred income taxes and pensions?
6. Disclosures regarding internal control over financial reporting: Examine the Section 302 Disclosures and the auditor's report.
1. Provide a summary commentary regarding the disclosures.
2. Discuss any material departures from U.S. GAAP or any material weaknesses that were disclosed.
3. Are there any differences between U.S. GAAP and IFRS on internal control and material weaknesses?
7. Disclosures regarding international subsidiaries or other segments: Examine the Notes to the financial statements.
1. Provide a summary commentary regarding Apple's disclosure of its segments.
2. If Apple has international segments, indicate whether consolidation is accomplished through the all-current or temporal method.
3. Are there any differences between U.S. GAAP and IFRS on international subsidiaries and the all-current and temporal method?
8. Compute a two-year ratio analysis of Apple including the following ratios for the two most recent reporting periods (2014 and 2015):
1. Current ratio, acid-test ratio, inventory turnover ratio, accounts receivable turnover ratio, gross profit margin, net profit margin, return on assets, return on equity, debt to equity, times interest earned, earnings per share, and price earnings.
2. Compare the ratios to Apple's industry average. 3. Note any salient differences and look to the Notes to confirm any specific reasons for differences.
9. Download documentation of Apple's stock price movements from Yahoo Finance since Apple's reported year end date that corresponds with the documented 10K chosen as a basis for this research.
10. Find three recent news articles on Apple that have been published since the publication date of the 10K report (which was September 26, 2015) and the date of the preparation of this paper. Summarize each article in a paragraph.
11. First, define the three forms of the Efficient Markets Hypothesis. Which form is perceived to be most prevalent for U.S. financial markets? Secondly, observe the dates of the news articles and the date of the 10K, document any corresponding stock price movements that correspond to the dates of the report. Based upon these observations alone, comment on whether the efficient markets hypothesis was upheld. Note any significant reactions occurring after the date. Did the market react significantly later or not at all?
[NOTE: Remember the main objective of this paper is to support the efficient market hypothesis using the information gathered from requirements #2 through #10.]
12. Summarize your findings in a conclusion.
In addition to the above requirements, your paper should be 15 to 20 pages in length.
As was stated earlier, the paper is about both financial reporting and the efficient market hypothesis. Requirements #2-9 are about financial reporting and requirement #11 is about the efficient market hypothesis. In other words, the main objective of the assignment is to use the financial reporting information that was gathered (requirements #2 through 9) and three recent news articles (requirement #10) to support the efficient market hypothesis (requirement #11).