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Presented below is an excerpt from the financial statements of H. J. Heinz Company.

Segment and Geographic Data

The company is engaged principally in one line of business—processed food products—which represents over 90% of consolidated sales. Information about the business of the company by geographic area is presented in the table below

There were no material amounts of sales or transfers between geographic areas or between affiliates, and no material amounts of United States export sales.

Foreign

(In thousands of U.S.

dollars)

Domestic

United Kingdom

Canada

Western Europe

Other

Total

Worldwide

Sales

\(2,381,054

\)547,527

\(216,726

\)383,784

\(209,354

\)1,357,391

$3,738,445

Operating income

246,780

61,282

34,146

29,146

25,111

146,685

396,465

Identifiable assets

1362,152

265,218

112,620

294,732

143,971

816,541

2,178,693

Capital expenditures

72,712

12,262

13,790

8,253

4,368

38,673

111,385

Depreciation expense

42,279

8,364

3,592

6,355

3,606

21,917

64,196

Instructions

(a) Why does H. J. Heinz not prepare segment information on its products or services?

Short Answer

Expert verified

Segment reporting is not possible in one core product or service.

Step by step solution

01

Meaning of Segment reporting

Segment reporting is a method of representing financial statement items by segment. Section-by-section findings are displayed later. Annual financial statements, augmented with segment data from segment reporting, give a more detailed picture of a company's financial position, asset position, and profit position.

02

Explaining the reason for not preparing segment information

Since H.J. Some companies like Heinz only have one core product or service, it's hard to make fragmented data available in a meaningful way. The principal indicates that a certain segment controls 90% of the company's sales, profits, and identifiable assets. Although segmented figures are not given in this example, the industry-leading segment should be recognized.

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Most popular questions from this chapter

(Disclosure of Estimates) Nancy Tercek, the financial vice president, and Margaret Lilly, the controller, of Romine Manufacturing Company are reviewing the financial ratios of the company for the years 2017 and 2018. The financial vice president notes that the profit margin on sales ratio has increased from 6% to 12%, a hefty gain for the 2-year period. Tercek is in the process of issuing a media release that emphasizes the efficiency of Romine Manufacturing in controlling cost. Margaret Lilly knows that the difference in ratios is due primarily to an earlier company decision to reduce the estimates of warranty and bad debt expense for 2018. The controller, not sure of her supervisor’s motives, hesitates to suggest to Tercek that the company’s improvement is unrelated to efficiency in controlling cost. To complicate matters, the media release is scheduled in a few days.

Instructions

  1. What, if any, is the ethical dilemma in this situation?

(Dividend Policy Analysis) Matheny Inc. went public 3 years ago. The board of directors will be meeting shortly after the end of the year to decide on a dividend policy. In the past, growth has been financed primarily through the retention of earnings. A stock or a cash dividend has never been declared. Presented below is a brief financial summary of Matheny Inc.’s operations.

(\(000 omitted)

2018

2017

2016

2015

2014

Sales revenue

\)20,000

\(16,000

\)14,000

\(6,000

\)4,000

Net income

2,400

14,000

800

700

250

Average total assets

22,000

19,000

11,500

4,200

3,000

Current assets

8,000

6,000

3,000

1,200

1,000

Working capital

3,600

3,200

1,200

500

400

Common shares:

Number of shares

Outstanding (000)

Average market price

2,000

\(9

2,000

\)6

2,000

$4

20

-

20

-

Instructions

  1. Compute the return on assets, profit margin on sales, earnings per share, price-earnings ratio, and current ratio for each of the 5 years for Matheny Inc.

An annual report of Ford Motor Corporation states, “Net income a share is computed based upon the average number of shares of capital stock of all classes outstanding. Additional shares of common stock may be issued or delivered in the future on conversion of outstanding convertible debentures, exercise of outstanding employee stock options, and for payment of defined supplemental compensation. Had such additional shares been outstanding, net income a share would have been reduced by 10¢ in the current year and 3¢ in the previous year. . . . As a result of capital stock transactions by the company during the current year (primarily the purchase of Class A Stock from Ford Foundation), net income a share was increased by 6¢.” What information is provided by this note?

What type of disclosure or accounting do you believe is necessary for the following items?

a) Because of a general increase in the number of labor disputes and strikes, both within and outside the industry, there is an increased likelihood that a company will suffer a costly strike in the near future.

b) A company reports a material unusual and infrequent loss on the income statement. No other mention is made of this item in the annual report.

c) A company expects to recover a substantial amount in connection with a pending refund claim for a prior year’s taxes. Although the claim is being contested, counsel for the company has confirmed the client’s expectation of recovery.

Under IFRS, share dividends declared after the statement of financial position date but before the end of the subsequent events period are:

a) accounted for similar to errors as a prior period adjustment.

b) adjusted subsequent events, because they are paid from prior year earnings.

c) not adjusted in the current year’s financial statements.

d) recognized on a prospective basis from the date of declaration

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