From the form 10 k item 7 the required information is provided for by the discussion. The management discussion contains the required elements as required by the security and exchange commission. The historical information for the previous years has been accurately derived from the financial information of the company. The assumptions made by the management on the underlying information the estimates and the determination of the financial health of the company provide a reasonable basis for all disclosures provided by the form 10 K. A critical observation, inspection and testing of the financial statement including their confirmation shows that the item complies with the requirements of the SEC. Evidential matter from the section as provided by the management and comparison with the provided ratios shows that the items reflect the financial health of the company and the statements can be relied upon to make investment decisions (AICPA, 2016).
The overview section provides the financial performance of the company in the year 2016 compared to 2015. It shows the areas that have reported improved performance and those that had a decline, for example, operating income derived from the motorcycle segment. The section gives the reasons for such declines including reduced shipment, manufacturing costs and foreign exchange losses. The provision for credit losses also affected the operating income from the financial services. The section also compares the performance of the different segments including the U.S and the global market. The item makes the reference where additional information can be obtained for the said section (AICPA, 2016).
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The management discussion also identifies some of the matters like forward-looking and risk that affect the item. The length and details, however, make it hard to obtain all the significant matters which can be identified in an examination. Previous information from the summary of item seven offered base knowledge on the financial statements of the company as well as its operations. Similarly, comparison of the historical performance and the financial information as provided by the item clearly shows the trend and accuracy of the financial statement and how management has reported such changes. The review of the item has allowed the acquisition of adequate information concerning the entity. Using the knowledge gained, it is possible to conclude that there were no material misstatements in the item and also to consider the potential for the occurrence of such issues. There was no information that came to the attention from the section. It shows that the presentation contains the required elements according to the rules of the SEC. Similarly, it indicates that the financial information of the previous year was accurately derived from the financial statements of 2015 (David, 2016; 2015).
The performance measures as discussed by the management discussion and analysis section includes the performance goals and results, the financial statements, systems, controls and legal compliance and the future prospects based on the current and demand risk and uncertainties (David, 2016; 2015).
The future prospects of the company as indicated in the discussion shows that the company makes its presentation based on a forward-looking approach where it is focused on establishing a safe harbor for the liabilities. The statements can easily be identified and the financial reports have footnotes that direct the reader to the appropriate section where they can access additional information that can be used to clarify information as reported by the financial statements. The company uses terms like believes, plans, estimates, anticipates or expects to show its future plans and how it plans to achieve some of the goals and to address some of the shortcomings or challenges that might occur and the company continues with its operations. Focusing on future plans allows the company to anticipate risks and establish risk mitigation approaches that can be used to deal with any eventualities that might affect the ongoing operations or future plans. It is the responsibility of the management to see potential threats and prepare the company for any eventualities likely to have adverse effects (David, 2016; 2015).
The management discussion sector also provides an outlook of the company and how it anticipates future operations. The company, for example, states that the company announced different expectation s for the following year. It includes items like shipment if goods which are expected to be flat in the U.S and how retail sales are expected to face challenges due to a declining industry in the U.S and prices, increased competitive discounts, product competition uncertainties in the global market. Davidson anticipates that retail sales for the motorcycle segment will be affected positively by increasing demand in the global market, success in the current customer base, new product development and the expansion of the international dealership (David, 2016; 2015).
The long-term strategy as discussed by the company shows that it is poised to report increased performance in the coming years driven by the strengthening of the global market. The section identifies the important sections for long-term growth. It developed ten-year objectives which deal with the volume of anticipated production, new product development, international market development, improved returns for the invested capital and business growth. The long-term strategy aims at growing a riding culture in the U.S and internationally (David, 2016; 2015).
The company also compared the financial performance of two years indicating increases and declines using figures and percentages. Such an approach gives the reader an opportunity to understand the performance of the company at a glance. The comparison is then followed by a detailed explanation of the performance. The discussion gives a detailed analysis of the different elements of the financial statements allowing for further understanding of the presented information. Additionally, the segment results give a clear picture of changes that took place in the different segments for the two years. the section gives a detailed explanation of the factors that affected the comparison of the revenues, costs, and gross profits. The presentation is followed by a discussion as to what led to the identified changes and how the company can address the issue. Other issues under discussion include registration and shipment data for motorcycles (David, 2016; 2015).
The management discussion and analysis discusses other issues like accounting standards that have not been adopted by the company, the critical accounting estimates, the contractual obligations commitment and contingencies and off-balance sheet arrangements. Additionally, the liquidity and capital resources for the company for the year involved a discussion on the future prospects of Davidson and its ability to raise adequate cash flows that allow it to invest in future. From the discussion, it is evident that there are many positive outlooks for the company and its future looks bright. Similarly, the financing of the company activities will continue to benefit from debt and internal operations. The future plans as indicated in the discussion are achievable if the company meets several factors including its business strategy (David, 2016; 2015).
The performance measures are comparable with those found in the text. Despite slight differences in the wording and presentation, they address the same issue and follow the requirements of the SEC. The performance measure gives insightful information for the analysis of the company for investment, and auditing purposes. They can be used by potential investors to determine the future prospects of the company.
References
AICPA. (2016). Management’s Discussion and Analysis
CPACanada. (2014). Management's discussion and analysis: Guidance on preparation and disclosure. Retrieved from https://www.cpacanada.ca/en/business-and-accounting-resources/financial-and-non-financial-reporting/mdanda-and-other-financial-reporting/publications/guidance-for-mda-preparation-and-disclosure
Davidson. (2016). Harley-Davidson, Inc Annual report. Retrieved from http://www.annualreports.com/Company/harley-davidson-inc
Davidson. (2015). Harley-Davidson, Inc Annual report. Retrieved from http://www.annualreports.com/Company/harley-davidson-inc
