Accounting Case Study

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Date : 9-03-2008

What is the taxes ) reported on the balance sheet ? How has that amount changed over the most recent two years

Consolidated Balance Sheets

Liabilities and Shareholders ' Equity Amounts in millions June 30 2007 2006

2006

CURRENT LIABILITIES

Accounts payable 5 ,710 4 ,910

Accrued and other liabilities 9 ,586 9 ,587

Taxes payable 3 ,382 3 ,360

Debt due within one year 12 ,039 2 ,128LONG-TERM DEBT 23 ,375 35 ,976

DEFERRED INCOME TAXES 12 ,015 12

,354

OTHER NONCURRENT LIABILITIES 5 ,147 4 ,472 Decrease in year 2006 is

1533 millions . This works out a percentage of decrease in liabilities of

G in the year 2007 is 2 .15

Compare the deferred taxes ) with the shareholder 's equity and calculate the debt to equity ratio for the most recent two years . Has the proportion of debt financing and equity financing changed recently

2007 2006 Industry

Average

DEBT EQUITY RATIO 53 .12 83 .93 85 Details of how this ratio has been arrived Amount in Millions

Long-term debt 21257 35976

Other 17051 16826

br The above ratio relates to divided by conveyed as a percentage

During the year 2006 , Long term debt was 52802 and during the year 2007 it was reduced to 38309 . This denotes repayment of 14 ,409 millions during the year 2007 which would have affected

G 's liquidity substantially

Does Procter Gamble obtain more financing through notes , bonds , or commercial ? Are required debt payments increasing or decreasing over time ? Is any long-term debt classified as short-term or vice versa Why

P G is able to supplement our short-term liquidity , if necessary , with broad access to capital markets and three bank credit facilities . Broad access to financing includes commercial programs in multiple markets at favorable rates given our strong credit ratings (including separate U .S . dollar and Euro multi-currency programs .We maintain three bank facilities : a 24 billion three-year facility expiring in July 2008 , a 1 .8 billion facility expiring in August 2010 and a 1 billion facility expiring in July 2009 . The credit facilities are for general corporate purposes , including refinancing needs associated with the share buyback plan announced concurrently with the Company 's acquisition of Gillette and to support our on-going commercial program

June 30 In million

SHORT-TERM DEBT 2007 2006

Current portion of long-term debt 2 ,544 1 ,930

USD commercial 9 ,410 -

Other 85 198

12 ,039 2 ,128 The weighted average short-term interest rates were 5 .0 and 5 .3 as of June 30 , 2007 and 2006 , respectively , including the effects of interest rate swaps discussed in Note 6

P G has raised 9410 million through issue of commercial s during the year 2007 as short term debt

LONG-TERM DEBT

3 .50 USD note due October 2007 500 500

6 .1 3 USD note due May 2008 500 500

Bank credit facility expires July 2008 4 ,537 19 ,555

4 .30 USD note due August 2008 500 500

3 .50 USD note due December 2008 650 650 The above short term debts have been shown as long term debts . [This is due less than one year]

P G has issued USD commercial for 9410 millions during 2007 mainly to enhance its liquidity

A company may for the purpose of balance sheet management , can reclassify certain short term obligations such as commercial , as long-term debt and the subsequent declassification of those entries when they are restated as current liability section of the balance sheet According to SFAS 6 [Statement of Financial Accounting Standard No 6] a company may reclassify either some portion or whole of its short term obligations as long-term debt , provided the firm discloses its objective to roll over such commitments on a long-term basis and can substantiate its aptitude to do so . This is possible when the company is able to obtain sanction form its financiers [bankers] that a non-cancellable loan repayment that runs beyond the ensuing fiscal-year end . The company , in such , circumstances , is allowed to reclassify the short-term financial obligations as long-term debt and vice-versa . The above table illustrates how

G has reclassified some of its short-term debt as long-term debt and vice-versa

WORKS CITED

Form 10 k Financial Results of Procter Gamble .9 March 2008

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