The assignment below will ensure you have a thorough understanding of the nature and scope of international accounting, the accounting issues associated with foreign direct investment, and the evidence of and problems caused by accounting diversity.
Answer the following homework problems thoroughly and in complete sentences.
Access the financial statements from the most recent annual report (2022 or later) of a foreign company and a domestic company that you are familiar with to complete this assignment. Choose one company that uses U.S. Generally Accepted Accounting Principles (GAAP) and one company that does not.
Determine the accounting principles the foreign and domestic companies use to prepare financial statements.
Determine whether the foreign and domestic companies provide a set of financial statements that includes the same components (e.g., consolidated balance sheet, consolidated income statement, and consolidated cash flows statement).
List three format differences in the companies’ income statements.
List three format differences in the companies’ balance sheets.
Note any terminology differences that exist between the two companies’ income statements and balance sheets.
Assess whether the scope and content of the information provided in the notes to the financial statements is similar between the two companies.
Compare the overall presentation of the financial statements and notes to the financial statements between the two companies.
Why do some countries require parent companies to publish parent company-only financial statements in addition to consolidated financial statements? When countries require that private companies file financial statements with a government authority, what accounting principles are required to be used? What impact would either of these requirements have on a company?
The New York Stock Exchange (NYSE) provides a list of non-U.S. companies listed on the exchange on its website www.nyse.com). (Hint: Search the Internet for “NYSE List of Non-U.S. Listed Issuers.”)
Determine the number of foreign companies listed on the NYSE and the number of countries they represent.
Determine the five countries with the largest number of foreign companies listed on the NYSE.
Speculate as to why non-U.S. companies have gone to the effort to have their shares listed on the NYSE.
Foreign Co, a New Zealand company that manufactures beer, is publicly traded, with shares listed on the New Zealand Exchange. As required by law, Foreign Co uses only four ingredients in its products: malt, hops, yeast, and water. While the other ingredients are obtained locally, Foreign Co imports hops from a company located in Ireland. Historically, Foreign Co’s products were marketed exclusively in New Zealand. To take advantage of a potentially enormous market for its products and expand sales, Foreign Co began making sales in Japan 2 years ago. The company established a wholly owned subsidiary in Japan (T BEER CO) to handle the distribution of Foreign Co products in that country. In the most recent year, sales to T BEER CO accounted for 30% of Foreign Co’s sales, and T BEER CO’S sales to customers in Japan accounted for 10% of Foreign Co Group’s total profits. In fact, sales of Foreign Co products in Japan have expanded so rapidly, and the potential for continued sales growth is so great, that the company recently broke ground on the construction of a brewery in Tokyo. To finance construction of the new facility, Foreign Co negotiated a listing of its shares on the Tokyo Stock Exchange to facilitate an initial public offering of new shares of stock.
Discuss the various international accounting issues confronted by Foreign Co.
Diversity in accounting practices across countries causes problems for several groups. Answer the following questions and include an explanation of your reasoning behind your response:
In your opinion, what is the greatest problem arising from worldwide accounting diversity?
Which group is most impacted by worldwide accounting diversity?
Which group is best equipped to deal with the issue associated with accounting diversity?
APA FORMAT
