SWM - Mark Moore

Accounting AnalysisAn accounting analysis is crucial in determining the true value of a firm. In order toeffectively do this the key accounting policies of the firm must be looked at, as well as thevalidity and transparency of these accounting policies. This is done by evaluating the level ofdisclosure that a firm offers throughout their financial statements. Disclosure deals with theaccuracy and the amount of information that a firm chooses to divulge. This is importantbecause firms have the ability to skew figures that should be reported in an accurate report ofaccounting figures. Managers find this advantageous because they can intentionally make theircompany appear to be in a better, stronger state than what they really are. By using theminimums set forth by the SEC, firms can legally choose to keep certain information from thepublic. However, a firm that desires to provide the minimum level of disclosure should becarefully evaluated because there may be red flags throughout their accounting policies.The four key accounting policies that Schweitzer-Mauduit uses are goodwill, foreigncurrency risk, pensions and other post retirement benefits, and research and development.Schweitzer-Mauduit does a fairly good job of disclosing large amounts of information. Thedisclosure of goodwill throughout the industry is relatively okay. Schweitzer-Mauduit’spercentage of goodwill to property, plant and equipment for the 5 years do not come close tobeing over 20%; however, they are less than 2%. This shows why they have not had to impairgoodwill for the last 5 years, and shows a good level of disclosure. That being said, the otherfirms represent goodwill as an asset on the balance sheet but do not go much further beyondthat. Because Schweitzer-Mauduit and its competitors do a substantial amount of business ofoverseas, foreign currency risk is an obvious concern. Schweitzer-Mauduit provides investorswith a high amount of disclosure about its foreign currency risk and how they manage it. Theydo a good job of discussing their hedging positions and how it affects the company. Thedisclosure of pension and other post retirement benefits was disclosed at an average basis forSchweitzer-Mauduit and throughout the industry. Schweitzer-Mauduit lumps these two togetherin the liability section of their balance sheet, as well as when discussing the two. Schweitzer-Mauduit also does not disclose much about discount rates used. Schweitzer-Mauduit disclosesquite a bit of information in their research and development section as far as how and where12