Running head: CASE 3-2
Advanced Financial Accounting Theory ACCT-632
Module 2: Case 3-2
Liberty University
January 22, 2015
CASE 3-2 2
1. “Send the same set of financial statements to all users (domestic or foreign)” (Schroeder,
Clark and Cathey, 2014, p. 83).
The advantage of this approach is that it is very convenient and efficient for financial
managers. It drives consistency and standardization across the board. The financial managers do not
need to incur more time to create another set of financial statements. However, there is a
disadvantage that financial managers should use English or a consistent language to write and
present the financial reporting package (Watkins, 2012). English is a commonly used language
around the globe. To achieve the goal of globally readable format, the set of financial statements
should be in a globally used language.
2. “Translate the financial statements sent to foreign users into the language of the foreign
nation’s users” (Schroeder et al., 2014, p. 83).
The advantage of this approach is that it does not have any limitations on language (Watkins,
2012). The disadvantages are that financial managers will land up spending extra money, time and
resources translating the financial reports as well as they will be exposed to the risk of losing
meaning. There is an added concern that there may be errors with the currency that should be used.
3. “Translate the financial statements sent to foreign users into the foreign nation’s language
and currency” (Schroeder et al., 2014, p. 83).
The advantage of this approach is that it does not have any limitation for language and
currency differences. The disadvantage is that the financial managers need to incur extra costs, time
and resources in translating the financial reporting package. There may appear to be some errors in
Th
1.The Approaches to Transnational Financial Reporting
A. List some of the advantages and disadvantages of each
approach.
CASE 3-2 3
The author prefers the fourth approach because although making two reports will incur more
costs and incur more effort, it is a more clear and concise approach in the long-term taking into
account all the advantages and disadvantages for each of the other approaches. The financial
translating the financial reporting package because of cultural and language differences that are
noted (Watkins, 2012).
4. “Prepare two sets of financial statements, one using the home country’s language, currency,
and accounting principles, the second using the language, currency, and accounting principles of the
foreign country’s users” (Schroeder et al., 2014, p. 83).
The advantage of this approach is that the two financial reporting packages are entirely
separate. Readers should not have any misunderstandings between the home language reporting
package and the original financial reporting package prepared in a foreign language. The
disadvantage is that financial managers have to incur a lot of money and effort to complete the
reporting packages and to ensure that it is consistent with one another without losing its meaning and
impact (Watkins, 2012).
5. “Prepare one set of financial statements based on worldwide accepted accounting
principles” (Schroeder et al., 2014, p. 83).
The advantage of this approach is that managers do not need to spend more effort in
translating financial reporting packages and it will not have any misunderstandings (or at least
obvious or intentional misunderstandings) about the financial reporting packages. The major
disadvantage is that this approach is not entirely practical because there are many countries in the
world. Not all countries use the same accounting principles. It is a challenging task to recruit and
onboard all countries and to have them accept the same accounting principles.
B. Which approach do you favor? Why?
CASE 3-2 4
Philippians 4:14-20: describes the concept of faithful giving, faithful God. The author believes
that through the unison of the world working together, it will lead to each of the different countries to
give financial reporting information faithfully and ultimately assist with unifying the accounting
standards and principles.
reporting package can be tailored and become more relevant to the employees of that country and it
will truly reflect what is happening in that region and it will be specific to the operations of that
company in that country.
2.Bible Application
CASE 3-2 5
3. Bibliography
Schroeder, R. G. Clark, M. W. Cathey, J. M. (2014). Financial accounting theory and analysis: Text
and cases (11th ed.). Hoboken, NJ. John Wiley & Sons.
Watkins, J. (2012). Converging transnational financial reporting standards: Validating the joint
FASB/IASB concept of information quality. Ann Arbor, MI. Greenleaf Book Group Press.
