Please give me question 8 answer orate Financial Reports Across Borders 5-179 an
ID: 2399092 • Letter: P
Question
Please give me question 8 answer
orate Financial Reports Across Borders 5-179 annual report from a foreign company that interests you and review ining its significant accounting policies. Discuss the main financial would be concerned about in comparing this company to a Ob note conta domestic company in the same industry re considerable differences in the timeliness and reliability of financial data across countries? How are these likely to affect financial statement 7. Are there sis of companies across countries? ope with accounting principles differences in several different ways. proach(es) Discuss at least two of these coping mechanisms and explain which ap you favor, and why Non-U.S. companies listed on U.S. stock exchanges are not required to base their financial statements on U.S. GAAP. However, some companies continue to provide reconciliation disclosures that quantify any material differences between their reported net income and what their net income would be under U.S. GAAP. What are the most frequently disclosed types of material differences? Is U.S. GAAP net income usually larger or smaller than net income as reported under home-country GAAP? Why? Other companies base their financial statements on IFRS. What are some of the significant differences likely to be? 10. Explain how environmental differences can influence ratio computations in Japan and Korea. How do these environmental differences complicate cross-border analysis? I. There are certain rules of thumb that are considered appropriate for financial ratios in a country. For example, current ratios of 2:1 and quick ratios of 1:1 are generally regarded as being desirable. Why might it be inappropriate to apply these rules of thumb when evaluating the liquidity of firms from other countries? EXERCISES rations and the need to tap capital providers in several countries I rather than country-specificExplanation / Answer
The accounting principles strongly effects the analysis of investor in different ways and Mostly few of the accounting principles strongly effect the decision making process which has been taking by Investor, Which are conservatism and Materiality and Revenue Recognition principles which significantly influence the decision makers who are going to invest or pour the money in the company or organisation
Coping Mechanism with Accounting Principles
Conservatism
It Always emphasis to revalue the assets at net realisable value at the end of each accounting period.
As an investor sometimes has a huge wrong decision will be taken based on the value reflected in the balance sheet as because It represent Minimum value of realisation but does not shown future realised gain amount on the same or other assets on the date of balance sheet . because market changes from time to time, while valuing the land , building, are keep on increasing rather than decreasing , in these assets it is shown only the Lower minimum realisation value but not full amount which we can maximum realised value because In case of assets it should be shown at cost rather than Expected realised amount and In case of Inventories cost or net realisable value shall be recorded rather than actual marketable Gains.
But Investor should also consider the relevant market value of estimatable assets or inventories during his assessment as accounting principle only record anticipated loss but not expected profit.
Materiality
Which is Most significant accounting principle which influence the investor in several ways
Any amount which is significantly influence the decision of user of financial statements is called Materiality.
For 100 Million Dollars Company, 10 Millions is a significant amount for which evidences and documents are made available and rules must be complied ,made Available the required documents, Lack of evidence And what Purpose is used will impact the trustiness of Management while recording books of accounts and Utilisation of available funds in the company
However For 10000 Million Dollars Company 10 Millions is not a significant amount as because it doesn’t have minimum 1% value of the company and also it is impossible to record every penny of the company in some of circumstances and Estimations
The Investor shall not assess just by looking at the balance sheet and Should assess by taking into reasonable causes too..