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Part 1 In todays world there is an essential need for financial accounting and reporting.

Financial accounting is a process that includes issuing financial reports for uses by both the company itself and external parties such as stockholders and potential investors. The existence of financial accounting in society solves several problems. It forces companies to expose their inner financial activity so the potential investors are aware of the potential future health of the business and so they arent blinded when investing. It also ensures that companies are following regulations set by several organizations such as the Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB). The financial statements released by the company are examined by investors and they are able to determine if the company is worth investing in into the future. These financial statements clearly show the balance sheet, income statement, statement of cash flows and statement of stockholders equity and help investors assess the amount of economic resources in a company. The SEC regulates this financial information. The SEC is a federal agency setup to help develop and standardize financial information presented to stockholders. The SEC requires every company they oversee to follow the GAAP. The GAAP (Generally Accepted Accounting Principles) is composed of over 2000 documents that have developed in the last 60+ years that explain the acceptable way of disclosing financial information through a financial statement. When the SEC reviews a companys financial statements, it determines if the financial information is given in a timely, truthful and acceptable fashion. If they believe an accounting or disclosure irregularity exists in the

financial statement a deficiency letter will be sent to the company. If the problem is not fixed in a timely manner, a stop-order may be issued and the company must stop issuing and trading securities on the different exchanges until the problem is fixed. Another party that regulates financial information and reporting is the FASB. The FASBs (Financial Accounting Standards Board) main objective is to establish and improve standards of financial accounting and reporting for the guidance of the public. The public in this instance includes issuers, auditors, and users of the financial information. The FASB was created in 1973 and its primary purpose is to develop GAAP within the USA in the public's best interest. The SEC designated the FASB as the organization responsible for setting accounting standards for public companies within the U.S.

Part 2 Company: Lowes Companies, Inc. (LOW) Last Stock Price: $27.19 1. Lowes Companies, Inc. lists in Note 1 of the Notes to Consolidated Financial Statements (pg. 36) that revenue is recognized, net of sales tax, when sales transactions occur and customers take possession of the merchandise. Revenues from product installment services are recognized when the installment is completed. 2. One example where historical cost information is reported in the financial statement is on page 42 of the annual report under Note 4: Property and Accumulated Depreciation. In 2009 the purchase of land is listed as $6.144 billion. This price is the historical price from the original date of purchase.

Another example is given on page 52 under the 10 year financial history. Under the comparative balance sheet inventory listed for 2007 is given as $7.14 billion. This price is the amount the inventory was worth in 2007, given that the same amount of inventory in the current economy would be a different amount.