Kodak 2005 Annual Report Download - page 66

64
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Eastman Kodak Company:
We have completed integrated audits of Eastman Kodak Company’s 2005 and 2004 consolidated fi nancial statements and of its internal control over
fi nancial reporting as of December 31, 2005, and an audit of its 2003 consolidated fi nancial statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.
Consolidated fi nancial statements and fi nancial statement schedule
In our opinion, the consolidated fi nancial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the
fi nancial position of Eastman Kodak Company and its subsidiaries at December 31, 2005 and 2004, and the results of their operations and their cash
fl ows for each of the three years in the period ended December 31, 2005 in conformity with accounting principles generally accepted in the United
States of America. In addition, in our opinion, the fi nancial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all
material respects, the information set forth therein when read in conjunction with the related consolidated fi nancial statements. These fi nancial
statements and fi nancial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on
these fi nancial statements and fi nancial statement schedule based on our audits. We conducted our audits of these statements in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit of fi nancial statements includes
examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements, assessing the accounting principles used
and signifi cant estimates made by management, and evaluating the overall fi nancial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As discussed in Note 1 to the consolidated fi nancial statements, the Company changed its method of accounting for share-based payments on
January 1, 2005. As discussed in Note 1 to the consolidated fi nancial statements, the Company changed its method of accounting for asset
retirement obligations as of December 31, 2005.
Internal control over fi nancial reporting
Also, we have audited management’s assessment, included in Management’s Report on Internal Control Over Financial Reporting appearing under
Item 9A, that Eastman Kodak Company did not maintain effective internal control over fi nancial reporting as of December 31, 2005, because of
the effect of the Company not maintaining effective controls over the accounting for income taxes, based on criteria established in Internal Control
-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management
is responsible for maintaining effective internal control over fi nancial reporting and for its assessment of the effectiveness of internal control over
fi nancial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control
over fi nancial reporting based on our audit.
We conducted our audit of internal control over fi nancial reporting in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over fi nancial reporting was maintained in all material respects. An audit of internal control over fi nancial reporting includes obtaining an
understanding of internal control over fi nancial reporting, evaluating management’s assessment, testing and evaluating the design and operating
effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinions.
A company’s internal control over fi nancial reporting is a process designed to provide reasonable assurance regarding the reliability of fi nancial
reporting and the preparation of fi nancial statements for external purposes in accordance with generally accepted accounting principles. A company’s
internal control over fi nancial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly refl ect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of fi nancial statements in accordance with generally accepted accounting principles, and that receipts
and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the fi nancial statements.
Because of its inherent limitations, internal control over fi nancial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.