Is Consolidating U.S. and Foreign-based Financial Statements Hides Useful Information? The author makes a conclusion that consolidating U.S. and foreign-based financial statements withholds some information to both the public and their foreign counterparts. This is evident in many situations within their many business transactions and statements. The first case where crucial information about financial statements is masked is while translating foreign currency. According to the author, the literature that shows foreign currency translation is usually categorized into four groups. The first group shows surveys issues related to the many changes that occur in the management behavior. The second, on the other hand researches on effects that come after using alternative methods of translating financial statements. The third literature is one which studies the market and the many emerging behaviors related to market patterns, and the final study reveals different preferences that are used as translating methods, this is done by making early adoption and embracing SFAS. However, studies that are made in the first category, a study were conducted on almost 70 Multinational Companies from different parts of USA. It was found out that that most management of these companies were not speculative and were very defensive as far as rate variations were concerned and were not willing to give comprehensive reports about their translational losses. It seems like these managements felt more insecure by giving out real financial statements about their standing financial status (Rodriguez 70). In respect to this, they were ready to pay big costs which would be much higher than the existing average exchange depreciation. Houston in a different report states that managements of MNCs tend to decrease their financial exposure as they adopt SFAS # 52 (Houston 52). They have been very unpleased with the newly passed translational rules as they advocate for financial openness and transparency (Choi 54). This is a clear indication that most Multinational Companies to a greater extent hide some important financial information that relates to their current financial status. Example 2: If there exists a foreign debt to equity ratio of 5 in the US and the parent company’s ratio is 1.25, the two of them shows different market positions at different time. Though the ratios seem vastly different from one another, it may be said that they are healthy. This is always in reference to the environment at that particular period of time. This consolidated ratio however, is given to be 2. Practically, this number is too low for a good financial environment and it can be said to be extremely high in USA. Thus, the consolidated debt in elation to prevailing equity ratio does not give us the reality in the two environments. It is clear that it contains very little and insignificant knowledge, which in fact, might be misleading. The only best way that can be employed to clearly interpreted and analyze this debt to equity ratio is through disaggregate, which means, consolidating, and later interpreting separate numbers in respect to particular environments (Rodriguez 92). In a nutshell, consolidating US and foreign financial statements masks some of its important information. This has been proved to be true by the many cases where transparent in as far as release of
Name Professor Subject Date Consolidating U.S. and Foreign Subsidiary Financial Statements Introduction Companies are supposed to adopt integrated approaches to build a strong framework with IFRs. To b in a position to achieve this, they require to be having a fully a solution that fully integrated that should be ideal to support the adoption of IFRs…
PricewaterhouseCoopers LLP is the auditor of the Bank of America. PricewaterhouseCoopers LLP (PwC) is the firm’s registered public accounting firm and they conduct the audit of the business. The auditors (PwC) are recognized worldwide and are very popular in the auditing department.
The Home Depot is the world largest home improvement store. The firm offers its customers a wide variety of products selection at reasonable prices. Managers often make assessment of their company to the general public. It is important for potential investor to be able to understand finance in order to test the validity of the claim of the managers of public companies.
There are those transactions that are initiated by the organization towards other stakeholders to that organization, while others are initiated by the stakeholders’ towards the organization. Either way, the transactions entails either bringing some money to the organization, or taking away some money from the organization, for the purpose of paying up some expenditure it has incurred.
This financial statement allows analysis between different companies or time periods within a company to be done easily. The figures on the common size account are conveyed as percentages of a statement component like the returns. While most organizations do not report their statements in joint size, it is beneficial to calculate if you aim to evaluate two or more firms of differing dimensions against each other.
Consolidation of Financial Statements Introduction The acquisition method is predominantly applied to consolidation of financial statement from 2009. Prior to that Purchase Method of consolidation was in vogue. Pooling of interest method was adopted for consolidation prior to 2002.
These companies have provided their owners with adequate returns, with Coles-Myers' ROE playing around 15-19% within the period, while Woolworths's ROE in 2005 is 37%, 32% in 2006 and 27% in 2007. These high ROE figures are effect of financial leverage that are employed by both companies: both companies utilize debt in more than 50% of their financing.
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The additional information if included in the main report would cloud the data in it and hence decrease the efficiency of the report. But the same additional information in the form of footnotes can lead to better clarity and understanding of the financial statement
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