Reply to the two posts below. I have attached the requirements for this assignment as well.
Holly Logan
Liberty University
Acct 302: Intermediate Financial Accounting II
Communication Case 12-8
Since all publicly traded companies use EDGAR, the Electronic Data Gathering, Analysis, and Retrieval system, Ford Motor Company’s end-of-year financials were available on the Securities and Exchange Committee’s website. (Ford Motor Company, 2024) The most recent 10-K filing released on February 7, 2024 for the year ending December 31, 2023 gave the financial picture of Ford Motor Company of both 2023 and 2022. The trend of spending money on purchasing marketable securities and other investments, listed on the balance sheet, has steadily decreased from 27,491 million in 2021, 17,458 million in 2022, to 8,590 million in 2023. The cash flow of the sales of maturities of marketable securities and other investments reflect higher than the purchases with 33,229 million in 2021, 19,117 million in 2022, to 12,700 million in 2023. Marketable securities are also listed under assets in the consolidated balance sheet with a positive 18,936 million reported in 2022 and 15,309 million in 2023. Within the note nine to the financial statement of cash, cash equivalents, and marketable securities, the 15,309 million asset was made up of securities for the U.S. government, U.S. government agencies, non-U.S. government and agencies, corporate debt, equities, and other marketable securities. The two highest amounts include securities to the U.S. government and Corporate debt which make up 10,749 million alone. Net unrealized losses recognized during the year of 2022 and 2023 on all equity securities were a $968 million and $23 million loss, respectively. No investments were reported by the equity method. Within the comparative income statement, 2023 was the first year in which Ford Motor Company reported a gain on available for sale securities of $326 million; whereas, losses of $209 million and $576 million were reported in 2021 and 2022, respectively. Ford Motor Company reported acquisitions of finance receivables and operating leases within their cash flows from investing activities which resulted in a loss of $54,505 million in 2023.
From these findings, Ford Motor Company seems to be steering away from investing in the marketable securities with their purchasing amount trending downward within the last three years with a heavy focus on U.S. government and corporate debt securities which makes up more than two-thirds of their asset amount of marketable securities. The unrealized losses on all equity securities within the past two years meant that the market rate of interest rose after these were purchased which caused the fair value of the bond to fall.
References
Ford Motor Company. (2024). 10-K: Annual report for year ending December 31,2023. https://www.sec.gov/ix?doc=/Archives/edgar/data/37996/000003799624000009/f-20231231.htm
Jimmy George
ThursdayMay 16 at 8:10pm
Manage Discussion Entry
Hi Everyone,
The International Accounting Standards Board (IASB) has undertaken various initiatives pertaining to the application of the equity method in accounting, particularly focusing on asset transfers between entities categorized as investor and investee, such as associates or joint ventures (Bradury, 2017). IAS 28 mandates that an investor accounts for its investment in associates using the equity method, necessitating a minimum holding of 20% of voting power for identification as an associate; otherwise, the presumption of lacking significant influence prevails (Deloitte, 2003). Manifestations of significant influence include board representation, involvement in policymaking, substantial transactions, personnel interchange, and provision of crucial technical data (Deloitte, 2003). IAS 28 provides guidelines for applying the equity method in conjunction with investment accounting for associates and joint ventures, encompassing entities exercising joint control or significant influence over an investee (Deloitte, 2011). These relationships encompass various forms such as significant influence, joint arrangements, joint control, joint ventures, joint venturers, and equity method. Renault, in the present context, adopts the equity method wherein joint ventures are initially recognized at cost, with the extent of investors’ voting rights determined by their interest in the joint venture entity (Deloitte, 2011).
The equity method delineates a scenario where an investor lacks control but possesses significant influence over the investee entity (Spiceland et al., 2023). Consequently, Renault neither controls Nissan nor Mitsubishi but exerts significant influence. Within the framework of the equity method, Renault’s significant influence implies the ability to participate in crucial financial and operational decisions of the investee (Deloitte, 2011). Despite contractual limitations preventing Renault from exerting substantial influence over the appointment of Nissan’s directors or swaying votes in their favor during meetings, Renault held two seats on Nissan’s Board of Directors in 2019 (Spiceland et al., 2023). Thus, it appears that Renault’s influence is contingent upon its participation in the Alliance Board established in March 2019, comprising four members, including representatives from Renault such as the Chairman of the Board and the Chief Executive Officer. The Renault-Nissan alliance signifies a strategic collaboration wherein all parties contribute, distinct from a merger, which presents challenges due to cross-cultural differences when companies from disparate countries are involved (Gill, 2012).
Both International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Accounting Principles (GAAP) mandate the utilization of significant influence investees under the Equity Method (Spiceland et al., 2023). However, a notable distinction arises regarding the adjustment of accounting policies of investees to align with those of investors, as required by IAS 28 but not mandated under U.S. GAAP (Spiceland et al., 2023). Renault’s adherence to adjusting for fair value of assets and liabilities aligns with GAAP principles. Notably, IFRS lacks the provision of a fair value option for most investments that do not qualify for the equity method (Spiceland et al., 2023). Despite this, adjustments made by Renault appear consistent with IFRS guidelines. Within the framework of IAS 28, which governs the application of the equity method, only IFRS standards are historically referenced.
The adjustments made for harmonization, particularly concerning the fair value of assets and liabilities, demonstrate consistency with International Financial Reporting Standards (IFRS). Under the equity method, adjustments are necessitated at cost. In line with the findings of the article “Accounting Standards Harmonization and Financial Statement Comparability,” harmonization yields a significant and visible enhancement in financial statement comparability through a systemic transformation in information preparation and disclosure. Accounting standards harmonization entails aligning activities or processes to conform with others. Consequently, when two firms report identical economic activities under the same standards, the measurement processes should ideally exhibit perfect correlation (Wang, 2014).
References
Deloitte. (2011). IAS 28 — Investments in Associates (2003). Iasplus.com. https://www.iasplus.com/en/standards/ias/ias28
Deloitte. (2011). IAS 28 — Investments in Associates and Joint Ventures (2011). Iasplus.com. https://www.iasplus.com/en/standards/ias/ias28-2011
Gill, C. (2012). The role of leadership in successful international mergers and acquisitions: Why Renault-Nissan succeeded and DaimlerChrysler-Mitsubishi failed. Human Resource Management, 51(3), 433–456. https://doi.org/10.1002/hrm.21475
Spiceland, Sepe, J., Nelson, M. W., & Tomassini, L. A. (2009). Intermediate Accounting. McGraw-Hill.
WANG, C. (2014). Accounting Standards Harmonization and Financial Statement Comparability: Evidence from Transnational Information Transfer. Journal of Accounting Research, 52(4), 955–992. https://doi.org/10.1111/1475-679x.12055
