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华鼎集团有限公司研究综述
华鼎集团有限公司是一个从事电信行业的跨国公司。它是美国证券交易所的上市公司，在欧洲也有他的子公司。该公司购买的材料直接转移到其分支机构。子公司的财务报表以维护国际财务报告准则为基础,这有助于实现财务运营的稳定，此外，华鼎集团有限公司的财务报表还以美国公认会计准则为参考。
华鼎集团有限公司从事设备销售，并为供应商提供维修服务。该公司的首席执行官:赫伯特介绍国际财务报告准则。国际财务报告准则的概念是有点儿难理解的，国际财务报告准则指的就是企业广泛接受的用来有效制定财务报表的准则。
美国的财务报告急剧变化。国际财务报告准则(IFRS)已经赢得了全球跨国公司和跨国公司的子公司的普遍认可和接受。采用国际财务报告准则的企业实体必须清楚国际财务报告准则的好处和优势，以及能够区分美国公认会计准则与国际财务报告准则的差异，了解相关知识，并能够了解两种原则对制定财务报表的影响。 An Overview of RIESE CORPORATION
RIESE CORPORATION is a multinational company engaged in telecommunication.It is public company listed under US stock exchange having its subsidiaries in Europe.The company purchases the materials directly and transfers it to its subsidiaries.The financial statement of subsidiaries is maintained on basis of IFRS where as theconsolidated and financial statement to Riese corporation is maintained with the reference of US GAAP.
The company is engaged in equipment sale and servicing providing to the procurers.The CEO of the Company: Herbert Munchin Introduction to IFRSThe concept of IFRS, International Financial Reporting Standards is widely accepted by the corporate for effective presentation of their financial statements.
Financial reporting in the U.S. is changing dramatically.International Financial Reporting Standards (IFRS) has earned a global demand and recognition by the , multinational entities with their subsidiaries.The entities adopting IFRS must be well aware about the benefits and knowledge about the US GAAP & IFRS and the major differences and its impact on the financial statements. Answer 1) The impacts of IFRS on the financial statement while switching from US GAAP: Statement of Financial Position-
In view of the use of IFRS in the Financial Statements, it would have a large impact on the presentation and disclosure requirements of the financial statements over the US GAAP.
In IFRS the financial statements is to be arranged in such a manner to present the major activities in a group, for instance (operating, Investing, and financing) and by way of balance sheet items i.e, (assets, liabilities, and equity). Any financial statement based on the IFRS consists the following: Financial Position Statement Comprehensive Income Statement A statement showing the position of changes in Equity
A statement showing the Cash Flow of Financial data of the company.
Notes to the Financial Statement, including the accounting policies that are considered during the preparation of the Financial Report. This very modification in the presentation of the financial statement together with departure of financing and business activities in the comprehensive income statement and statement showing the cash flow of the funds will certain and would then enable for users of the financial statement to assimilate the key ratios from the financial information presented by the entity’s company/business or through its operating/financing performance.
Through IFRS a company can classify its assets, liabilities, and equity items in any of the stated section or category in the financial statement position and the accordingly incorporate any changes in these items in the comprehensive income and cash flow statement as specified in the IFRS to provide more relevant disclosures of financial statement position of the concern. Comprehensive Income Statement-
Through the use of the comprehensive income statement an entity have the option to present the matter of financial concern either by way of a single statement of Comprehensive Income or by separating the statement in two sections i.e, one of Comprehensive income and another one of the Income Statement. Further in the statement of changes in equity the parts of comprehensive income may not be presented.
In addition to this the business concern when switch over to the new standard it would present its financial position statement in a complete set as far as the IFRS is concerned with to disclose the financial parlance. Further there is also the requirement on the management part to show its position of Cash Flow in a statement form regarding the business concerned and thereof make the necessary disclosures in the end of the financial statement by way of notes.
This would however allow for the comparison of the effects across the financial statements on changing from the US GAAP to IFRS. Convergence between UK GAAP and IFRS and its impact on financial statement. As far as the IFRS is concerned, on switch over from US GAAP to IFRS in presentation of the financial statements there would be varied benefits to the business sector all around whether it being related to Accounting Professional, Financial Statements Users or the Company as a whole. However the switchover from US GAAP to IFRS is inevitable. The basic issues relating to convergence between US GAAP and IFRS and its sudden impact on the financial statement are outlined below:
As such the US GAAP was rules-based and IFRS on the other hand is based on certain principles, it would affect the financial statement reporting/presentation and preparation strategy and picture. Now consider Fair value, here as per IFRS the attention is put on mark-to-market instead of actual market price based fair value for the assets and liabilities and this would then help in judging the skills of management for presentation of financial results and give their comments on the changes occurred. This may help in achieving the benchmark of success for the management.
For Acquisition accounting, there is a different treatment in US GAAP over IFRS. Considering the US GAAP the option was available to select between merger /purchase accounting, then one should go for the method involving the use basis of Purchase only.
In Goodwill as per IFRS, companies have to consider the impairment of goodwill on an annual basis to determine the actual value of Goodwill on the Balance sheet. As a contrary in US GAAP the companies are allowed to amortise the goodwill and the option is available for not segregating intangible assets from goodwill. Cole, M. (November 25, 2008). DeFelice, A. & Lamoreaux, M. (February 24, 2010)
Consolidation of accounts- As per the provisions of IFRS the companieshave to consolidate their subsidiaries into the group company / the holding company
As far as IFRS is concerned the guidance in relation to Revenue Recognition is less widespread to that of US GAAP. This also have a wider impact on the presentation of the financial statement considering the use of financial statement for users and management.
Research and Development costs- The Research costs should not be reflected on the balance sheet and should be written off as it is incurred similar to a revenue expense. The development expense are treated as capital in nature and therefore capitalised and shown in the Balance sheet.
Distributable profits- Dividend is the reward that a company intends to give to their shareholder out of its surplus profit earned during the year. The dividend distribution of a company depends upon the distributable profit of the organizations.
Some major impacts on distributable profit of IFRS are – It is derived after making deduction of deferred tax liabilities, and higher provisions is required for deferred tax when the entity tend to shift from historical costs method to fair value and reports deficit of pension in income statement.
Deferred tax credit- Under IFRS the Deferred tax credit is not allowable. Derivative contracts- Some derivative contracts are not qualified as hedges under IFRS as it does not meet the criteria as per the requirement. Under the concept of GAAP the contracts are to be deferred until the transaction take place. IFRS however do not permit the deferment of such contract but rather have affect on the profit and loss account yet before the operation takes place. This enables the investors to determine the current firm value on the desired date in spite of the historical cost of such instrument. As a consequences the burden of the company is increased to calculate the fair value of the instrument. Cole, M. (November 25, 2008).
DeFelice, A. & Lamoreaux, M. (February 24, 2010) Answer 2) IFRS presents the proposed format for financial statement disclosure:
Considering from the perspective of Riese Corporation, the new format for the presentation of Financial Statements would play an essential role in the Sales forecast and determination of the Operating Income. On employing the use of this format for the Financial Information presentation the main advantage that will flow to the Riese
Corporation is as under:- Financial Statement presentation in this format would enable to attract the prudent investor’s vision towards the company.As in this new format of the financial Statement Presentationall the categories are disclosed individually in separate column, the financial data can be shown more effectively and efficient and hence would enable the users to get their required information from the Financial Report.#p#分页标题#e# The use of new format of Financial Statement Presentation will impact their decisions as follows:
The present format of Financial Statements Presentation will give the Users a clear and transparent view of the financial position of the concerned Company and enable the investors to analyze the fundamentals in a more positive and appropriate manner.
It provides a comparative view of Financial Information, Income Statement and Cash Flow of the Company at the same place and thus enable the users to make effective decision making and plan their investment in a long term perspective. Answer 3) Advantage & Disadvantage of IFRS:
The accounting standard refers to the rules of measurements of financial statements of the business entity or the public company. This enable the company to present a transparent picture of companies position to its stakeholders and other concerned entities/persons whose decision making is affected by the financials and fundamentals of the concern.
There are various advantages and disadvantages to the U.S. companies changing their systems from U.S.GAAP to IFRS. As the markets have grown to become more complex and global, the disparities between the two standards have been a significant issue as consumers and producers call for reform.
+ The first benefit of the conversion is comparability. Switching to IFRS would allow people to see various companies from different parts of world on the same plane. As willingness to trade increases, cross-border investment and integration of capital markets are easier with greater market liquidity and lower cost of capital.
+ Investor bases would increase as the financial reports are becoming comparable.
+ Companies would be able to more effectively allocate their capital. Having one standard, however, does not guarantee comparability. With the same standard,practices and enforcement can differ considerably across firms and countries. It is only natural because diversity in accounting standards would result from diversity of the countries’ institutional infrastructures.
+ IFRS has wider rules and less specific guidance applications, giving more room to interpretation. Thus, IFRS incorporates the value judgment of an accountant in its financial report. These value judgments can easily be influenced by incentives a company may have, causing a variety of ways to implement IFRS. This further interferes with creating a global standard.
+The five principal areas where there are disparities are fair values, revenue recognition, share-based payment, financial liabilities and equity, and consolidation.
+In the area of consolidation, one of the specific differences is the order of the inventory.
+ GAAP uses the Last-In-First-Out (LIFO) method, which means that goods purchased currently are sold first and that the remaining items that have been purchased in the earlier will be considered subsequently.
LIFO method results in lower gross profit, which reduces the tax burden of the company. IFRS, however, does not accept the LIFO method. Implementing
IFRS would “trigger a big tax hike for the company”. This would probably diminish a company’s position because of a higher tax burden. Thus, the differences between the standards in the various areas affect a firm holistically.
+ The second benefit of the conversion is cost savings, primarily for multinational companies.
+IFRS is a set of standards of higher quality. Answer 4) As per SEC, transition to IFRS states the following summarization: The roadmap spells out seven milestones that would influence the SEC’s 2011 decision on whether to move forward. The milestones are: • Improvements in accounting standards
• Improvement in the ability to use interactive data for IFRS reporting ADVANTAGES AND DISADVANTAGES
There are many advantages and disadvantages of converting from GAAP to IFRS. Advantages • The use of one common global reporting language. • It will allow for comparability over all financial markets, regardless of the country of origin. • It will provide enriched information to the investors for their improved decision making. • It will provide more flexibility to the companies in applying accounting principles. IFRS is more principles based, whereas GAAP is more rules based. Transactions will be required to be reported using substance over form criteria. More professional judgment will be exercised which will lead to better disclosure to support those judgments. • There is the potential for reduced financial reporting complexity, especially for large, multinational companies that currently prepare many different sets of financial statements in many different forms. • All levels of management, including the audit committee, will have to be more involved in financial reporting and aware of transactions.
• In the end, companies should be more efficient and have the advantage of cost-savings. Disadvantages • Small companies that have no dealings outside of the United States have no incentive to adopt IFRS unless mandated. • Incompatibility may arise as companies claim to have converted to IFRS but in reality have only selected the portions that best fit their needs. • There is no incentive for early adoption due to the fact that it could be a colossal waste of time and resources. Also, companies would be required to have two sets of records, one GAAP, one IFRS, during this time just in case IFRS is not adopted. • Many feel that during this financial crisis that the world is currently experiencing, a conversion of this magnitude is too much to ask of executives and management. • A minimum of two years of financial information prior to conversion would need to be maintained on two sets of books, both GAAP and IFRS, to meet the requirement of financial statements to contain three years of financial data. |
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