Posted: March 23rd, 2015

Costco (US) vs Metro (German)

Costco (US) vs Metro (German)

PROJECT DESCRITION

GENERAL REQUIREMENTS:

NB: Make sure that while analyzing the differences in business practices in the US vs German company you provide your opinion if each difference is an obstruction / advantage / impartial for the successful collaboration between two companies/countries and explain why.
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Costco (US) vs Metro (German)

Required Course Materials:

Accessibility:

Financial Accounting Standard Board (FASB) and International Accounting Standard Board (IASB) websites: www.fasb.org, www.ifrs.org, and www.websites4accuntants.com

10K files from Edgar, Security and Exchange Commission website, US Generally Accepted Accounting Principles (GAAP) and International Financial reporting Standards, (IFRS), SeekINF database.

FASB ASC/ Excel Software

Section 1.
To complete section 1 you should use 10K filing to be found on the Edgar , SEC website or/and the annual report to be found on the company’s website directly

A + B + C (3-4 Pages)

A)    Provide the brief history of each company
B)    Analyze the actual differences in corporate governance between the German and the US firms.
C)    Analyze the differences in the companies’ structure, i.e. segments, business lines, foreign subsidiaries. Discuss the impact of foreign exchange on the firm.  That would include management’s discussion on the impact of the changing value of the functional currency and the currency of the foreign company on performance and financial results, the comparison of the translation methodologies of the firms.

Section 2

Measurement + Disclosures (10 Pages)

1. Analyze the differences in measurement

Select only those properties, which you believe are different

NB: You need to go to the companies’ websites to identify the distinctive accounting methods used to measure different accounting properties. Remember, firms use IFRS for the consolidated (group) accounts, and therefore the differences will be identified only for individual accounts on the companies’ websites.

The second major source of differences is the issue of measurement of accounting items reported on the Balance Sheet, Income Statement, and the Cash Flow Statements.

Key Measurement Issues
?    Historical Cost
?    Depreciation
?    Inventory Measurement
?    Research and Development
?    Retirement Benefits
?    Taxation
?    Pooling-of-Interests (if it is still used)
?    Goodwill
?    Foreign Currency Translation

Measurement describes how particular items that appear in the Financial Statements and Notes are calculated and valued. Measurement is one of the key causes of accounting diversity.

The following are brief descriptions of major areas of global financial reporting diversity:

?    Depreciation in Anglo-American and Nordic countries tends to be based on the concept of useful economic life, whereas in the Germanic, Latin, and Asian countries, the tax rules generally encourage more accelerated methods.
?     Inventory measurement is generally based on the principle of “lower of cost or market,” with some variation in the meaning of market value in some countries, or cost in others. LIFO (last in, first out) is sometimes permitted for tax purposes (e.g., United States, Japan) but more often it is not (United Kingdom, Germany, France, Italy, Brazil).
?     Retirement benefits are accounted for in different ways. In Anglo-American and Nordic countries a liability is created on the basis of accrued and/or projected benefits likely to be payable to employees. In contrast, some Latin and Asian countries have a more pay as you go approach.
?    Construction contracts are generally accounted for using the percentage of¬ completion method in Anglo-American and Latin countries, but the completed contract method tends to be used in the Germanic countries.
?     Research and Development costs are usually expensed immediately in the Anglo-American and Germanic countries, although capitalization of development expenses is permitted in the United Kingdom.
?    Accounting for taxation is a major area of differentiation between Anglo American countries and the Germanic, Latin, and Asian countries. Since the latter groups’ approach to the measurement of accounting income is strongly influenced by tax rules, they have little need for a detailed system of deferred income tax accounting. In contrast, in the US, UK and Canada, income for tax purposes often bear little or no resemblance to income calculated by GAAP. A detailed system of income tax allocation is thus required.
?    Business combinations (mergers/acquisitions) and the resulting goodwill have been probably the largest sources of discord among the Anglo-American countries. While the purchase method is generally required, controversy centers on how to account for the treatment of that portion of the purchase price that cannot be accounted for by the value of assets received (goodwill).

2.Analyze the differences in Disclosure
No instruction provided.

Section 3
Conclusion (1 Page)

Section 4
Citation

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