Accounting IFRS project part 1
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acc3323_course_project_specifications.docx
ACC 3323 – (11760)
International Accounting
Paper
You should choose a large company (preferably with assets over €1 Billon, or an equivalent amount) which uses IFRS and that filed a 20-F to the SEC in 2007 for the 2006 financial year. Examples of companies you can choose from are at the end of these instructions, but you are not limited to those.
The 20-F filed in 2007 was the last one with the reconciliation of IFRS to U.S. GAAP. You can find the reports in the SEC database at www.sec.gov (under "filings" and then “company filings search”).
The company still needs to exist in the present, but it does not necessarily need to still be traded in U.S. stock exchange markets.
The paper should be about 10-15 pages long, double-spaced. The paper should answer the following questions:
1) (15%) A description of the company (Note: for this part of the project use information from the present, 2016):
i. Its major products
ii. Its geographic presence
iii. Identify major US competitors.
iv. Describe broadly the world market shares in this industry. Is this industry an “IFRS dominant” industry or do most major companies use U.S. GAAP or other GAAPs?
v. In light of your answer to the previous question, do you think that a U.S. company in this industry will achieve significant comparability of its financial statements if it switches to IFRS?
General notes:
Although the project includes 4 parts, the 4th part is 50% of the grade and is the main part of the project. When you decide on dividing the workload in the team, and when deciding on how much time to devote to part 4 in the presentation, please have this in mind.
Examples of possible US GAAP/IFRS differences
1. Capitalized development costs
2. Impairment reversals.
3. Inventory write-down reversal
4. Investment property.
5. Sale and lease back transactions (when the lease-back is operating)
6. Customer loyalty programs
7. Convertible bonds
8. Prior service cost charged to income (and not to OCI)
9. Non-current deferred tax assets or liabilities that should have been current in US GAAP (see homework)
10. Differences arising from exemptions allowed in IFRS 1, that still affect the 2011 report.
11. Deferred tax on foreign currency re-measurement.
12. Potential voting rights in determining control
13. Component depreciation (look in the PP&E note).
14. Non-physical component depreciation (for example, capitalizing plant overhauls, and amortizing them).
15. Impairment of assets using value-in-use and not FV (value-in-use does not exist in US GAAP, and if the company used value-in-use it is always supposed to be higher than FV).
16. Goodwill impairment using value-in-use instead of implied goodwill.
17. Inventory write-downs (US GAAP will always have higher write-downs)
18. Inventory write-down reversals
19. Large accumulated actuarial gains and losses that might have been amortized under US GAAP
20. Pension asset limitation that reduced the pension assets in the balance sheet
21. Statement of cash flow classification differences
22. Overdraft included in cash and cash equivalents in the cash flow statement
23. Employee Stock Purchase Plan: compensatory in IFRS, but may not be in US GAAP.
24. Options with graded vesting.
25. Options to employees: difference in deferred tax.
26. Options: possible difference in diluted EPS due to different calculation of annual EPS. Does the company have many options outstanding?
27. Non-controlling interests valued not at FV but at share of identifiable assets
28. No valuation allowance on deferred tax assets in IFRS (check if the company discloses that some deferred tax assets were not recognized, and estimate whether a US GAAP would create a valuation allowance for those deferred tax assets).
29. Impairment of indefinite-lived intangibles.
30. Using the zero-profit method for some projects
31. Service contracts using percentage-of-completion
32. Decommissioning cost (asset retirement obligations) incurred in the process of producing inventory (included in inventory in IFRS, and in the cost of the plant in US GAAP).
33. Oil and gas accounting (IFRS does not have a lot of guidance)
34. The company may have used industry specific guidance in US GAAP (look into list of industries with special guidance in FASB codification)
35. Equity Method differences: where there investments that were held in previous years using the equity method and then significant influence was lost, but some of the investment still retained? Were there investments that gained significant influence this year?
36. The company could have used LIFO (use this one if you cannot find others). Estimate the possible effect using a US competitor that uses LIFO.
37. Contingent liabilities: in US GAAP the threshold for “probable” is higher. Does the company have a lot of contingent liabilities? (use this one if you cannot find others)
38. Possible effects of new rules on leases: does the company have operating leases? (use this one if you cannot find others)
39. Different structure and order of the balance sheet
40. The expenses in the income statement are by "nature" and not "function", or even when the income statement is by "function" there are special notes for the financial statements disclosing the "nature" of the expenses.
