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Posts Tagged ‘sec reporting’

IFRS reporting & equality in reporting . . . .

October 6th, 2008 Comments off

I’m a bit off in the last week as I have not been reading all the info that has been getting published with respect to the pending IFRS standards. However, one of the primary drivers in the adoption of IFRS is to have standardized reporting for public entities, whether there in Italy, France, or here in the U.S.. So once these new standards have been rolled out then we’ll be able to view each company in the same light and make equal comparisons? Wrong. A reader of SEC reporting for a handful of companies in a similar industry can easily start to see the differences in the manner in which those companies report. Yes, there are standards that they all need to follow, but that doesn’t mean those standards extend to every section of a 10-Q or K.

Let’s jump into a very simple example, and with some brands that most consumers are pretty familiar with . . . K-Swiss, Skechers, and Heely’s. As I read through each one of their most recent 10-Q filings, I wanted to learn a little more about how each one of these companies was tracking their Cost of Goods. The observation that prompted my curiousity was the drastic differences in Gross Margins between these three entities.

The worst performer of the group appeared to be Heely’s, but they also took the approach of burdening their COGS with every cost element that touched the flow of product through the design & manufacturing process. These costs included all freight, warehousing, tooling, tooling depreciation, royalty expenses, shrinkage, quota fees, and agent fees/commissions. This same approach is also taken by Skechers. However, compare this to K-Swiss, who didn’t break out the different elements of COGS, but recorded their warehousing fees within their SG&A expenses. Ultimately, you have Gross Margin levels that range from the mid-30% to high-40% range. While some of the discrepancies can be attributed to performance levels and buying efficiencies, it’s clear from the K-Swiss example that not all margins are created equal.

While all of this ultimately flows to the bottom line and it’s only a mapping issue prior to the EPS calculation, there’s the management of perceptions when it comes to comparisons with your peers. “You’ve got a lower Gross Margin so you can nearly be performing as well as Company XYZ….”. Not necessarily the case so make sure you know how you’re presenting your financials in comparison to your competitors.

Thanks for reading . . . .

Jeffrey Ishmael

Pending projects – September topics planned

August 29th, 2008 Comments off

Today is really turning into one of those days where it’s not quite coming together for a quality update and I’ve really tried to focus on Quality versus Quantity in my postings. Maybe it’s partly due to the looming holiday weekend & that its also been an incredibly busy week. Between a client project I’ve been working this week, as well as “meetings” with a number of other companies, recharging the batteries are key this weekend.

However, I have been thinking about all the topics I do want to address in the coming weeks. I’ve been trying to schedule more time to address these since I think they’ll be very interesting subjects to table. I really want to address points #2 and #3 since these have the potential to have far reaching implications in the conversion to IFRS. Some of what I had in mind:

1. Further breakdowns of the Sales & Operations Planning (S&OP) process and the development of a white paper on this topic.
2. Revenue recognition and the differences between IFRS and GAAP.
3. Fair Value reporting and the differences between IFRS and GAAP.
4. Overviews of the Budget/Forecast process as it relates to a traditional 4-quarter view versus the implementation of a rolling 5-quarter approach.
5. SEC reporting and the differing levels of transparency between companies in the same industry. (Not all 10-K’s are created equal….)

I also need to compile a few of my multiple updates into a single white paper, such as the Internal Audit thread. I’ve also created an account on SlideShare where I plan on posting some of my slide presentations. Looks like it’s going to be a busy month ahead…..

Thanks for reading . . . .