|Focus on Finance|
Inside the quarterly earnings process
Behind the scenes of financial reporting
BY JOHN MORROCCO
It starts with a news release early in the morning before the stock market opens. Then Chairman and CEO Phil Condit and Chief Financial Officer Mike Sears conduct a webcast conference call with financial analysts and the media, followed by television and radio appearances. It’s earnings day—the day that the company reports its financial results for the latest quarter.
The Finance team at World Headquarters then reviews the quarter-end financial statements from the business units. The Corporate Controller’s office is responsible for consolidating these inputs with all the financial transactions conducted by World Headquarters during the quarter. The Corporate Controller’s office also reviews the consolidated statements to ensure they meet appropriate accounting standards and gives its final “blessing” of the numbers.
Simultaneously, the Financial Planning and Analysis team is also reviewing the quarterly financial statements and forecasts provided by the business units. Their analysis helps provide two important products. One is an internal measure of how the company is performing to its business plan. The other is an assessment of future performance, along with associated risks and opportunities.
This assessment is used by the company’s senior leadership to develop an outlook for future performance. This outlook, sometimes called “guidance” by financial analysts, provides investors and the public with the company’s financial projections over a two-year period.
The entire process is monitored by Boeing’s Internal Audit staff, which also keeps an eye on the processes followed, and the company’s external auditors, Deloitte & Touche. External auditors are located in each of the business units, as well as at World Headquarters. Every quarter they review the financials, asking questions and corroborating the numbers. Additionally, they conduct audits of major transactions that may have occurred, which are rolled into an annual audit of the company’s books. Finally, the Audit Committee of the company’s Board of Directors also reviews the financial statements.
And the process doesn’t stop with the earnings day news release and conference call. Investor Relations and Communications people continue the dialogue throughout the day, answering questions from financial analysts and the media to help them further understand the details.
Finally, in addition to the earnings news release and conference call, the company is required to file a more formal and comprehensive statement of its quarterly financial results with the U.S. Securities and Exchange Commission, which is charged with ensuring investors receive meaningful and accurate information. In SEC parlance the quarterly filings are called 10–Qs, while the filing for the full year’s results, or annual report, is called a 10–K. Company 10–Qs must be filed within 45 days of the close of the quarter and 10–Ks within 90 days of the close of a company’s fiscal year. The SEC is phasing in shorter deadlines for these filings over the next few years as a result of new Congressional legislation.
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