(a) What criteria does P&G use to classify "Cash and cash equivalents" as reported in its balance sheet?

(b) As of June 30, 2014, what balances did P&G have in cash and cash equivalents? What were the major uses of cash during the year?

(c) P&G reports no allowance for doubtful accounts, suggesting that bad debt expense is it reasonable that a company like P&G would not have material bad debt expense? Explain.

Attached is the balanced sheet and notes to the financial statement.

52

The Procter & Gamble Company

Amounts in millions of dollars except per share amounts or as otherwise specified.

Notes to Consolidated Financial Statements

NOTE 1

SUMMARYOFSIGNIFICANTACCOUNTING

POLICIES

Nature of Operations

The Procter & Gamble Company's (the "Company," "Procter

& Gamble," "we" or "us") business is focused on providing

branded consumer packaged goods of superior quality and

value. Our products are sold in more than 180 countries and

territories primarily through retail operations including mass

merchandisers, grocery stores, membership club stores, drug

stores, department stores, salons, high-frequency stores and

e-commerce. We have on-the-ground operations in

approximately 70 countries.

Basis of Presentation

The Consolidated Financial Statements include the

Company and its controlled subsidiaries. Intercompany

transactions are eliminated. Prior year amounts have been

reclassified to conform with current year presentation for

amounts related to discontinued operations (see Note 13)

and segment reporting (see Note 12).

Use of Estimates

Preparation of financial statements in conformity with

accounting principles generally accepted in the United States

ofAmerica (U.S. GAAP) requires management to make

estimates and assumptions that affect the amounts reported

in the Consolidated Financial Statements and accompanying

disclosures. These estimates are based on management's

best knowledge of current events and actions the Company

may undertake in the future. Estimates are used in

accounting for, among other items, consumer and trade

promotion accruals, restructuring reserves, pensions, post-

employment benefits, stock options, valuation of acquired

intangible assets, useful lives for depreciation and

amortization of long-lived assets, future cash flows

associated with impairment testing for goodwill, indefinite-

lived intangible assets and other long-lived assets, deferred

tax assets, uncertain income tax positions and contingencies.

Actual results may ultimately differ from estimates, although

management does not generally believe such differences

would materially affect the financial statements in any

individual year. However, in regard to ongoing impairment

testing of goodwill and indefinite-lived intangible assets,

significant deterioration in future cash flow projections or

other assumptions used in estimating fair values versus those

anticipated at the time of the initial valuations, could result

in impairment charges that materially affect the financial

statements in a given year.

Revenue Recognition

Sales are recognized when revenue is realized or realizable

and has been earned. Revenue transactions represent sales

of inventory. The revenue recorded is presented net of sales

and other taxes we collect on behalf of governmental

authorities. The revenue includes shipping and handling

costs, which generally are included in the list price to the

customer. Our policy is to recognize revenue when title to

the product, ownership and risk of loss transfer to the

customer, which can be on the date of shipment or the date

of receipt by the customer. Aprovision for payment

discounts and product return allowances is recorded as a

reduction of sales in the same period the revenue is

recognized.

Trade promotions, consisting primarily of customer pricing

allowances, merchandising funds and consumer coupons, are

offered through various programs to customers and

consumers. Sales are recorded net of trade promotion

spending, which is recognized as incurred, generally at the

time of the sale.

Most of these arrangements have terms of

approximately one year. Accruals for expected payouts

under these programs are included as accrued marketing and

promotion in theAccrued and other liabilities line item in

the Consolidated Balance Sheets.

Cost of Products Sold

Cost of products sold is primarily comprised of direct

materials and supplies consumed in the manufacture of

product, as well as manufacturing labor, depreciation

expense and direct overhead expense necessary to acquire

and convert the purchased materials and supplies into

finished product. Cost of products sold also includes the

cost to distribute products to customers, inbound freight

costs, internal transfer costs, warehousing costs and other

shipping and handling activity.

Selling, General andAdministrative Expense

Selling, general and administrative expense (SG&A) is

primarily comprised of marketing expenses, selling

expenses, research and development costs, administrative

and other indirect overhead costs, depreciation and

amortization expense on non-manufacturing assets and other

miscellaneous operating items. Research and development

costs are charged to expense as incurred and were $2.0

billion in 2014, 2013 and 2012. Advertising costs, charged

to expense as incurred, include worldwide television, print,

radio, internet and in-store advertising expenses and were

$9.2 billion in 2014, $9.6 billion in 2013 and $9.2 billion in

2012. Non-advertising related components of the

Company's total marketing spending include costs associated

with consumer promotions, product sampling and sales aids,

which are included in SG&A, as well as coupons and

customer trade funds, which are recorded as reductions to

net sales.

Other Non-Operating Income, Net

Other non-operating income, net, primarily includes net

acquisition and divestiture gains and investment income.

The Procter & Gamble Company

53

Amounts in millions of dollars except per share amounts or as otherwise specified.

Currency Translation

Financial statements of operating subsidiaries outside the

U.S. generally are measured using the local currency as the

functional currency. Adjustments to translate those

statements into U.S. dollars are recorded in other

comprehensive income (OCI). Currency translation

adjustments in accumulated OCI were gains of $1.4 billion

and $353 at June 30, 2014 and June 30, 2013, respectively.

For subsidiaries operating in highly inflationary economies,

the U.S. dollar is the functional currency. Re-measurement

adjustments for financial statements in highly inflationary

economies and other transactional exchange gains and losses

are reflected in earnings.

Cash Flow Presentation

The Consolidated Statements of Cash Flows are prepared

using the indirect method, which reconciles net earnings to

cash flow from operating activities. The reconciliation

adjustments include the removal of timing differences

between the occurrence of operating receipts and payments

and their recognition in net earnings. The adjustments also

remove cash flows arising from investing and financing

activities, which are presented separately from operating

activities. Cash flows from foreign currency transactions

and operations are translated at an average exchange rate for

the period. Cash flows from hedging activities are included

in the same category as the items being hedged. Cash flows

from derivative instruments designated as net investment

hedges are classified as financing activities. Realized gains

and losses from non-qualifying derivative instruments used

to hedge currency exposures resulting from intercompany

financing transactions are also classified as financing

activities. Cash flows from other derivative instruments

used to manage interest, commodity or other currency

exposures are classified as operating activities. Cash

payments related to income taxes are classified as operating

activities. Cash flows from the Company's discontinued

operations are included in the Consolidated Statements of

Cash Flows.

Cash Equivalents

Highly liquid investments with remaining stated maturities

of three months or less when purchased are considered cash

equivalents and recorded at cost.

Investments

Investment securities consist of readily marketable debt and

equity securities. Unrealized gains or losses from

investments classified as trading, if any, are charged to

earnings. Unrealized gains or losses on securities classified

as available-for-sale are generally recorded in OCI. If an

available-for-sale security is other than temporarily

impaired, the loss is charged to either earnings or OCI

depending on our intent and ability to retain the security

until we recover the full cost basis and the extent of the loss

attributable to the creditworthiness of the issuer. Investment

securities are included as available-for-sale investment

securities and other current assets or other noncurrent assets

in the Consolidated Balance Sheets.

Investments in certain companies over which we exert

significant influence, but do not control the financial and

operating decisions, are accounted for as equity method

investments. Other investments that are not controlled, and

over which we do not have the ability to exercise significant

influence, are accounted for under the cost method. Both

equity and cost method investments are included as other

noncurrent assets in the Consolidated Balance Sheets.

Inventory Valuation

Inventories are valued at the lower of cost or market value.

Product-related inventories are primarily maintained on the

first-in, first-out method. Minor amounts of product

inventories, includi

ng certain cosmetics and commodities,

are maintained on the last-in, first-out method. The cost of

spare part inventories is maintained using the average-cost

method.

Property, Plant and Equipment

Property, plant and equipment is recorded at cost reduced by

accumulated depreciation. Depreciation expense is

recognized over the assets' estimated useful lives using the

straight-line method. Machinery and equipment includes

office furniture and fixtures (15-year life), computer

equipment and capitalized software (3- to 5-year lives) and

manufacturing equipment (3- to 20-year lives). Buildings

are depreciated over an estimated useful life of 40 years.

Estimated useful lives are periodically reviewed and, when

appropriate, changes are made prospectively. When certain

events or changes in operating conditions occur, asset lives

may be adjusted and an impairment assessment may be

performed on the recoverability of the carrying amounts.

Goodwill and Other IntangibleAssets

Goodwill and indefinite-lived intangible assets are not

amortized, but are evaluated for impairment annually or

more often if indicators of a potential impairment are

present. Our annual impairment testing of goodwill is

performed separately from our impairment testing of

indefinite-lived intangible assets. The annual evaluation for

impairment of goodwill and indefinite-lived intangible assets

is based on valuation models that incorporate assumptions

and internal projections of expected future cash flows and

operating plans. We believe such assumptions are also

comparable to those that would be used by other

marketplace participants.

We have acquired brands that have been determined to have

indefinite lives. We evaluate a number of factors to

determine whether an indefinite life is appropriate, including

the competitive environment, market share, brand history,

product life cycles, operating plans and the macroeconomic

environment of the countries in which the brands are sold.

When certain events or changes in operating conditions

occur, an impairment assessment is performed and

54

The Procter & Gamble Company

Amounts in millions of dollars except per share amounts or as otherwise specified.

indefinite-lived assets may be adjusted to a determinable

life.

The cost of intangible assets with determinable useful lives

is amortized to reflect the pattern of economic benefits

consumed, either on a straight-line or accelerated basis over

the estimated periods benefited. Patents, technology and

other intangible assets with contractual terms are generally

amortized over their respective legal or contractual lives.

Customer relationships, brands and other non-contractual

intangible assets with determinable lives are amortized over

periods generally ranging from 5 to 30 years. When certain

events or changes in operating conditions occur, an

impairment assessment is performed and remaining lives of

intangible assets with determinable lives may be adjusted.

FairV alues of Financial Instruments

Certain financial instruments are required to be recorded at

fair value. Changes in assumptions or estimation methods

could affect the fair value estimates; however, we do not

believe any such changes would have a material impact on

our financial condition, results of operations or cash flows.

Other financial instruments, including cash equivalents,

other investments and short-term debt, are recorded at cost,

which approximates fair value. The fair values of long-term

debt and financial instruments are disclosed in Note 5.

NewAccounting Pronouncements and Policies

In May 2014, the FASB issuedASU 2014-09, Revenue

from Contracts with Customers (Topic 606). This guidance

outlines a single, comprehensive model for accounting for

revenue from contracts with customers. We will adopt the

standard on July 1, 2017. We are evaluating the impact, if

any, that the standard will have on our financial statements.

No other new accounting pronouncement issued or effective

during the fiscal year had or is expected to have a material

impact on the Consolidated Financial Statements.

Consolidated Balance Sheets CURRENT ASSETS Cash and cash equivalents Available-for-sale investment securities Accounts receivable NVENTORIES Materials and suppl Work in process Finished goods Total inventories Deferred income taxes Prepaid expenses and other current assets Assets held for sale TOTALCURRENTASSETS PROPERTY PLANT ANDEQUIPMENT.NET GOODWILL TRADEMARKS AND OTHER INTANGIBLE ASSETS, NET OTHER NONCURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Accounts payable Accrued and other liabilities Liabilities held for sale Debt due within one year TOTAL CURRENT AB TIES LONG-TERM DEBT DEFERRED INCOME TAXES OTHER NONCURRENTLIABILITIES TOTAL LIABILITIES SHAREHOLDERS' EQUITV Convenible Class A pretened stock, stated value SI per share (600shares authorized) Non-Voting Class B preferred stock, stated value SI per share 0200 shares authorized Common stock, stated value $1 per share (10,000 shares authorized, shares issued 2014.4009.2, 2013 4,009.2 Additional paid-in capital Reserve for ESOP debt retirement Accumulated other comprehensive incomeRloss) Treasury stock, at cost shares held: 2014 2984, 2013- 1.2669) Retained earnings Noncontrolling interest TOTAL SHAREHOLDERS' EQUITY TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY Gambl Company 49 8558 s 5947 2.128 1704 1.742 6.759 3678 21,066 53.704 55,188 5.798 144,266 12A32 33,726 19.111 10,535 1.137 0.352) (7.662 01966) 69,976 44,266 S