Verizon Communication Inc.
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Companies compile corporate annual reports with the aim of communicating their performance results and outlooks for future to their investors, the Board of Directors, and other stakeholders. For common people, company’s annual report provides quite structured information about its activities, while for educated investors it becomes a valuable research tool that helps to stay updated on company’s yearly performance and outlook. Current paper reviews the main sections of the 2011 annual report for Verizon Communications Inc., company’s financial performance for the year, as well as the management’s discussion on the internal control environment of the company.
The 2011 annual report for Verizon Communications Inc. consists of seven major sections (Verizon Communications Inc., 2011). Financial and corporate highlights provide results for the year in a short but clear way. In the letter to shareowners, Lowell McAdam, the Chairman and the Chief Executive Officer, outlines key financial results, technological achievements and strategic prospects for 2012 and acknowledges the contribution of employees, Board of Directors, and customers to the success of the company. The next section gives credit to the vision set by Ivan Seidenberg, the former CEO who transformed the company around the growth trends and reshaped the whole telecommunications industry. The section proceeds with description of company’s innovations, solutions, activities, and corporate responsibility, which are discussed in such subsections as innovation, transformation, empowerment, shared success, solutions, philanthropy, sustainability, and Verizon credo. The section ends with key indicators of corporate social responsibility performance and sustainability. Then, there is the section with selected financial data and management’s discussion and analysis of financial condition and results of operations, where key factors such as trends, markets, market risks, competition, regulations, critical accounting estimates, results of operations and their comparison over years are provided. The next section contains consolidated financial statements and notes to consolidated financial statements that highlight significant accounting policies applied by Verizon Communications Inc. in compliance to generally accepted accounting principles (GAAP). The report continues with the list of the Board of Directors members and corporate officers and executive leadership. Lastly, the report ends with the section of investor information that provides clear guidance on whom and how to contact for specific requests and queries.
According to Lowell McAdam, strong financial performance of Verizon Communications Inc. is attributed to company’s ability “to build truer connections with customers and communities by using unique platforms to meet crucial needs across America and the world.” The increase in unadjusted corporate revenues by 6.2 percent came from growing segments of wireless, video, and enterprise strategic services. A 6.3 percent and 21 percent growth in wireless retail service revenues and wireless data revenues respectively 2011 were due to fast deployment and market expansion of fourth-generation wireless network based on 4G LTE technology. Verizon Communications Inc. achieved growth by 20.1 percent in FIOS revenues by transforming consumer wireline business around video and broadband and establishing 735,000 new FIOS internet and 701,000 new FIOS video connections. The company pays significant attention to strategic partnerships with large-business, government and wholesales customers by building the necessary infrastructure to serve the business market. For this reason, Verizon Communications Inc. acquired Terremark Worldwide Inc., a global provider of information technology infrastructure and cloud services, and a provider of cloud software technologies. These acquisitions enhanced company’s competitive positions in serving business and government customers and added to overall financial performance. Although the management of Verizon Communications Inc. expects intensifying competition in traditional, non-traditional and emerging services, they also believe in the company’s ability to run business effectively and profitably through changing economic conditions due to differentiating networks and capability to provide enhanced communications experiences to customers.
The highest money value asset of Verizon Communications Inc. is plant, property and equipment, which amounts to $88,434 million less accumulated depreciation (Verizon Communications Inc., 2011). However, Wireless licensing and Goodwill, amounting to $73.3 billion and $23.4 billion respectively, are a significant component of company’s consolidated assets that account for 42% of total assets. These assets are treated as indefinite-lived intangible assets that are tested for impairment on annual basis rather than amortized (Verizon Communications Inc., 2011).
The management of Verizon Communications Inc. represented by Lowell C. McAdam, the Chairman and CEO, Francis J. Shammo, Executive Vice President and Chief Financial Officer, and Robert J. Barish, Senior Vice President and Controller, takes all the responsibility for establishing and maintaining ample internal control over financial reporting of the company (Verizon Communications Inc., 2011). The effectiveness of internal control over financial reporting was evaluated in accordance to Internal Control-Integrated Framework, the COSO criteria, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Effectiveness of internal control environment and absence of material weaknesses in company’s financial reporting were attested and proved to be reasonable in assuring the reliability of financial statements by an independent audit conducted by Ernst & Young LLP in February 2012 (Verizon Communications Inc., 2011).
Annual report for Verizon Communications Inc. for 2011 provides reliable financial information for investors’ evaluation of company’s performance. It covers all significant activities, developments, achievements, operation results, and factors influencing the performance of the company for the year. Management’s discussion of operations, as well as consolidated financial statements and notes to them provide significant insight to company’s performance. The reliability of financial reporting is controlled by the management of Verizon Communications Inc. and attested by independent auditing firm Ernst & Young.