It balances. The CFO checked it three times and the Director of Research checked it once, with a calculator shaped like a frog.

Management characterizes net income as "positive." The CEO characterizes it as "the reason we are not going to the beach at Christmas."

Note 1. Basis of presentation. These statements cover the operations of the household's two employees, two junior executives, one beagle and one goldfish. The house, the retirement accounts and the college funds are held in separate subsidiaries and are not consolidated in this report, on the advice of the CEO, who said "absolutely not."

Note 2. Goodwill. Scout was acquired from the animal shelter in 1996 for an adoption fee of $85, an amount in excess of the fair value of his identifiable net assets (one collar, one squeaky toy). The excess is carried as goodwill and tested for impairment annually. In fiscal 1999 the goodwill was impaired twice, by a couch cushion in January and a basket of Thanksgiving rolls in November, but management has concluded that no write-down is required. He is a good boy.

Note 3. Contingent liabilities. (a) In July the CFO promised a second trip to the water park "sometime before school starts." School has started. Management believes the probability of loss is high but the amount cannot be reasonably estimated, and the matter is therefore disclosed here rather than accrued. (b) The VP of Sales claims he was promised a dog of his own "when he was ten." Management disputes this claim, notes that the household already has a dog, and believes the claim to be without merit.

Note 4. The good scissors. The good scissors are for fabric and coupons only and are not to be used on paper, tape, pizza or hair. They are kept in the CEO's top drawer. The temporary replacement purchased in April after the good scissors were found in the sandbox has been fully depreciated.

Note 5. Related-party transactions. The household received babysitting services from Grandma and Grandpa on eleven weekends during fiscal 1999, at rates substantially below market (cookies). Management believes these terms are no less favorable than could be obtained from an unrelated party, and in fact much better.

Note 6. Subsequent events. On September 9, 1999, after the close of the fiscal year, the Research division lost one of the two loose teeth referred to above. The Tooth Fairy obligation was settled in full, in quarters, under the pillow.

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