Accounting Information Systems 15th Global Edition by Marshall B. Romney Solution manual
1. Shareholders. Annual reports meet the statutory requirement that publicly held corporations are to report annually to stockholders and report on the stewardship of management to both current and potential stockholders. The annual report gives shareholders financial and operating information such as income from operations, earnings per share, the Balance Sheet, Cash Flow Statement, and related footnote disclosure that potential shareholders need to evaluate the risks of and potential returns on investment. However, the volume of data presented in annual reports can result in information overload that reduces the value of the reports. Confusion can result from reducing technical concepts to common concepts or by the presentation of duplicate messages by different forms of media.
2. Creditors. The annual report of public companies provides financial information as well as trend information. This allows creditors to project financial solvency and to evaluate the company’s ability to repay loans.
3. Employees. The annual report gives the employees information such as a description of the company's pension plan and the employee stock incentive plan. This gives employees a base from which to compare their benefits program to those of other companies. Annual reports also provide employees with a year-end review of the results to which they have contributed during the year. In this sense, the annual report provides reinforcement and rewards. The annual report also informs or reminds employees of the organization's values and objectives and sensitizes them to the aspects of the organization with which they are not familiar. On the other hand, the employee already knows how the organization is performing so the annual report does not provide any substantive additional information.
4. Customers. The annual report provides customers with trend information and management performance information. They can use this to assess the company's past and current performance.
5. Financial analysts. The set of audited comparative financial statements provides the basis for analysis done by financial analysts. Notes, which are an integral part of the statements, describe or explain various items in the statements, present additional detail, or summarize significant accounting policies. Financial analysts are the most sophisticated class of users of annual reports. However, some data may be too condensed. Analysts may also need information in addition to that provided in annual reports to facilitate their analyses.
f. Annual reports are public and accessible to anyone, including competitors. Discuss how this affects decisions about what information should be provided in annual reports.
</para></listitem></orderedlist>Management may omit information entirely from the annual report or disguise it because competitors have access to annual reports. The objective of reporting should be to reveal as much as possible without giving away proprietary information or a competitive edge.
1.3 United Services Automotive Association (USAA) is one of the largest diversified financial services companies in the United States, with close to $75 billion in assets under management. One reason for its success is the use of IT to lower costs and improve customer service. USAA operates one of the most advanced and successful information systems in the world. Most of its communication with its widely scattered customers, mostly military officers and their families, is digital. It was the first U.S. bank to implement a remote deposit capture application for the iPhone.
Early on, USAA made a strategic choice to become one of the more technology-intensive companies in the world. It views IT as a strategic weapon and uses it in several ways, including the following:
When customers call, USAA personnel greet them personally by name. Unlike many diversified companies, a customer representative can handle inquires and transactions about all of USAA’s products using a highly integrated database.
USAA uses its extensive database to keep track of minute details, such as which auto parts are fixed most frequently. It also uses its database to find ways to reduce claims costs. For example, USAA discovered that repair shops would rather charge up to $300 to replace a windshield with punctures than to charge $40 to repair it. USAA began offering to waive the deductible if the owners would repair the windshield rather than replace it.
USAA spent extensively to develop an image-processing system that digitizes all paper documents sent in by claimants. It takes only a few keystrokes for a policy service representative to retrieve pictures of all the documents in a customer’s file. The system can sort and prioritize documents so that employees are always working on the most important and urgent tasks.