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14 Accounting Principles Board Opinion No. 30, Reporting the Results of Operations (New York:
AICPA, July 1973), para. 20.
15 AICPA, Accounting Trends and Techniques (New York: AICPA, 2007), Table 3-18.
16 Hampshire Group, Ltd., annual report, 2006, 19.
17 Procter & Gamble Company, annual report, June 2008, 63.
18 Netflix, Inc., annual report, 2004, F-14.
19 This statement needs some expansion. With the exception of barter transactions, almost all
expenses involve a cash outflow at some point in time. In the case of depreciation, the cash outflow
normally takes place when the depreciable assets are acquired. At that time, the cash outflow is
classified as an investing cash outflow in the statement of cash flows. If the depreciation were not
added back to net income in computing operating cash flow, then cash would appear to be reduced
twice—once when the assets were purchased and a second time when depreciation is recorded and
with it net income is reduced.
20 Securities and Exchange Commission, Regulation S-X, Rule 5-02.6 (Washington, DC: SEC).
21 SEC, Staff Accounting Bulletin No. 40 (Washington, DC: SEC).
22 Winnebago Industries, Inc., annual report, August 2007, Note 3.
23 PepsiCo, Inc., annual report, December 2007, Note 5.
24 Guidance in this area is found in SFAS No. 109, Accounting for Income Taxes (Norwalk, CT:
FASB, February 1992).
25 SEC, Regulation S-K, Subpart 229.300, Item 303(a)(3)(i) (Washington, DC: SEC).
26 Conagra Foods, Inc., annual report, May 2008, 18.
27 A hedge of foreign currency exposure is achieved by creating an offsetting position to the financial
statement exposure. The most common offsetting position is established by the use of a foreign
currency derivative. These issues are discussed more fully in Chapter 15.