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US GAAP vs IFRS

1. Under the U.S. GAAP, financial assets and liabilities such as securities and other financial instruments can fall into three categories: available for sale, held for trading, and held to maturity. It is important to consider how these financial assets and liabilities are reported on income statements. For instance, depending on the standards under U.S. GAAP and IFRS 9 Financial Instruments, assets and liabilities may be measured at fair value or at amortized cost. For this Discussion, locate and select a multinational company. Consider the measurement requirements for assets and liabilities in the company's host country and home country. Think about the implications of these differences on the company's financial reporting.
I will write a brief description of the multinational company you selected. Analyze measurement requirements for assets and liabilities in the company's host country and home country. Evaluate implications of these measurement differences on the company's financial reporting. Be sure to support your response with references to this week's Learning Resources. (half page)

2. According to the Course Text, trade across international markets has grown tremendously and represents a significant portion of the world economy. This increase in international trade has been accompanied by an increase in trade across the foreign exchange (FX) market. As with any trade and investments, trade and investments in the FX market pose a risk for multinational companies as well as for investors. The FX market is by nature inherently risky, and risks such as those associated with exchange rates and interest rates require companies and investors to effectively assess, manage, and reduce risk. To do so, international managers can use instruments such as foreign currency transactions, hedging foreign exchange risk, and accounting for derivatives. Consider how international managers utilize these instruments to manage risks when operating in international markets. Think about how publicly traded multinational companies report these types of instruments and transactions to users of financial statements (Half page).

Solution Preview

The multinational company selected is Wal-Mart. It is an American multinational retail corporation that runs chains of large discount stores and warehouse stores. It is the world's largest corporation. It is a US corporation that has operations in several countries including the UK. The home country accounting in US GAAP and the host country accounting in the UK is IFRS. Under the IFRS, held to maturity impairment losses can be reversed up to amount of the original impairment, however, these are not permitted by the US GAAP. In case of trading securities the IFRS and US GAAP are similar. In case of available for sale securities, the IFRS changed to recognized gain or loss through OCI except for impairment losses. In case of Wal-Mart the 2013 annual report shows that the company uses derivative financial instruments for hedging and ...

Solution Summary

The answer to this problem explains differences between US GAAP and IFRS. The references related to the answer are also included.

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