H&M Accounting and Exposures
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If an investor wants to compare the financial results of The Gap, inditex, and H&M what difference does it make that their financial statements are prepared according to different GAAP? Would you expect there to be a big difference between US GAAP as used by the The Gap and IFRS as used by H&M and inditex? (I dont think there is a big difference since the all use IFRS)
What are the major sources of influences on H&M accounting standards and practices?
What type of exposure could the CFO of H&M in the US be subjected to since H&M is based in Sweden and the financial statements are prepared according to IFRS? (IASB? Maybe?)
Payments and liabilities may also be subjected to exposure. Explain the operational hedging strategies that may offset exposure
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Solution Summary
The differences between GAAP and IFRS and exposures to H&M because of differences in accounting.
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H & M Accounting
If an investor wants to compare the financial results of The Gap, inditex, and H&M what difference does it make that their financial statements are prepared according to different GAAP? Would you expect there to be a big difference between US GAAP as used by the Gap and IFRS as used by H&M and inditex?
The underlying framework for both US GAAP and IFRS is the same but there are differences in recognition, disclosure requirements, measurement, etc. While GAAP is considered more rule based accounting system, IFRS is known as principle based accounting system. GAAP is used in the US while IFRS is used in over 110 countries, including those in European Union.
Underlying assumptions
The GAAP framework does not recognize the going concern assumption, which is given prominence by IFRS
Objectives of financial statements
The focus of GAAP is to provide separate objectives to business and non-business entities, i.e. separate information is provided to these entities which are relevant to them. IFRS provides same information to business and non-business entities.
Intangibles
In US GAAP, intangibles are recognized at fair value while in IFRS intangible assets are recognized only if they would have economic benefit in the future and have measured reliability.
Asset Valuation
GAAP values ...
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