Accounting Policies for Financial Statements Essay

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Accounting Policies for Financial Statements.

Financial statements analysis for year end, presented bellow are audited while financial statements for the first three quarters of September are not audited. Good Year faced uncertain market conditions in 2010 as the economy in North America and Europe was recovering from the Great Recession. The company was also faced with price increases for raw material, increase for energy costs and economic weaknesses and currency devaluation in Venezuela.

As of January 1, 2010, Goodyear, "adopted a new standard pertaining to the consolidation of variable interest entities that required us to determine whether a variable interest gives the Company a controlling financial interest in a variable interest entity". In the same period, Goodyear adopted a new accounting standard referring to transfer "of financial assets and extinguishment of liabilities." The adoption of the new standards did not have a material impact on the consolidated financial statements (2010 Annual Report).

" To maintain global competitiveness, we have implemented rationalization actions over the past several years to reduce excess and high-cost manufacturing capacity and to reduce selling, administrative and general expenses though associate headcount reductions" 2010Annual Report)

"The consolidated financial statements include the accounts of all majority-owned subsidiaries and variable interest entities in which are the primary beneficiary". Goodyear recognizes revenue when finished products are shipped and collectability is "reasonable assured". At the same time of the sale, The Company, creates provisions for returns, discounts and allowances which are recorded based on historical loss experiences, economic conditions and credit risk (2010 Annual Report).

Goodyear and tire stated in their 2010 Annual Report that "our primary sources of liquidity are cash generated from our operating and financing activities. Our cash flows from operating activities are driven primarily by our operating results and changes in our working capital requirements and our cash flows from financing activities are dependent upon our ability to access credit or other capital".

According to Morningstar Magazine, as of December 2011 the capital structure for Goodyear, is as follow: Type | % | Amount | Debt | 25.5 | 256.0 Million | Preferred | 49.8 | 500 Million | Equity | 24.8 | 249 Million | (Morningstar website)

Current Assets. Cash & Equivalents. Good year & Tire's cash and cash equivalents consist of marketable securities, with maturities of three months, or less and cash on hand. GT only holds cash and short term investments from investment grade companies. " At December 31, 2010, our cash investments with any single counterparty did not exceed $260 million." (2010 Annual Report). Cash and cash equivalents for December 31, 2009 and 2010 tabulated to $1.92 billion and 2.0 billion, respectively, which represents a slight increase year over year. As of December 31, 2010 cash and cash equivalents held by GT's "international subsidiaries included the following amounts: * $415 million or 21% in Europe, Middle East and Africa, primarily Luxemburg, South Africa and Poland ($352 million or 18% at December 31, 2009) * $393 million or 20% in Asia, primarily China, Australia and India ($217 million or 11% at December 31, 2009)\ * $368 million or 18% in Latin America, primarily in Venezuela and Brazil ($533 million or 28% at December 31, 2009)" (2010 Annual Report). In comparison, cash for the third quarter of 2011 increased by 27.69%, from $1.66 billion in 2010 to $2.12 billion. The company uses "various credit agreements and derivative contracts" with financial institution believed to be creditworthy. In an effort to minimize risk, The Company, monitors the financial strength of their financial…