School of Management Assignment Help
On January 15 and 22 (weeks 1 and 2), there are no workshops, and the lectures will use up two hours, with a break in the middle. In the following weeks, the lectures will last about an hour, and the workshop presentations by students (with feedback from the lecturer) will use the rest of the time. The topics for the workshops are listed in the following pages. Each week, two groups of students will present. Your group should prepare a presentation lasting up to 20 minutes. This does not give you time for a general introduction. So, begin by stating the topic being addressed, then spend all your time answering the exact question asked. The coursework is an individually-prepared report of up to 2500 words, based on your group presentation. That is, you should write your own report, based on your group’s presentation, as adjusted for feedback from the class and the teacher. Workshop for Week 3
Finding Differences in Annual reports Read: Comparative International Accounting (CIA), chapters 2, 9 and 16. On the internet (or using Moodle), find the 2017 reports of the following companies: L’Oréal (France, parent company, i.e. using French accounting not IFRS), pp. 286-293. (http://www.loreal-finance.com/_docs/0000000179/LOreal_2017_Registration_Document.pdf) – Caterpillar (US), pp. 78-91 of Form 10-K. (https://caterpillar.gcs-web.com/static-files/0dab9f86-7e8f-4c53-b193-c7489b63f8ea) – Glaxo (UK company, but using IFRS), pp.158-168. (https://www.gsk.com/media/4751/annual-report.pdf). They are under “investor relations”; or “stockholder information”; “reports” “annual reports”. In the case of L’Oréal, it is Chapter 5 of the annual report which can be found in ‘Regulated Information’. Make sure that you look at the main Caterpillar company, not the financial services one. REQUIRED: Provide examples, from these annual reports, of international differences that you can find. You could start with the topics discussed in the lecture (e.g. formats, or valuation of inventories). Note that this exercise is about finding differences in accounting practices of the companies, not about differences in the rules. The Effects of IFRS Read CIA chapter 5. Read the empirical literature about the effects of a company moving to IFRS, or about US/IFRS differences (see Reading List for Lecture 3). REQUIRED: Present a critical literature review: – do all authors agree? – do you agree with the authors? What are the main conclusions from the literature about: – usefulness of IFRS reports, compared to those prepared under previous national GAAPs – whether IFRS is better or worse than US GAAP at providing useful information Week 5 International Versions of IFRS Practice Read CIA chapter 7. Examine the 2017 reports of these 6 German and 6 UK listed companies: German UK
- Bayer • Glaxo
- BASF • Astra Zeneca
- BMW • GKN
- Daimler • Rolls Royce
- Axel-Springer • Pearson
- Adidas • Informa
Look at the consolidated financial statements and at the notes on accounting policies. Find these through “Google Finance”, insert the company’s name, and look for “financial information”. All these financial statements are prepared under IFRS. Which choices have the 12 companies made? Use the list of topics below, which is drawn from Nobes (2006) and Kvaal and Nobes (2010) (see the reference list of Chapter 7)? In some cases, the company does not disclose a policy. For example, this is the case for several of the companies for topic 8 (investment property); note that investment property is not the same thing as investments. The list below shows you the scores for Glaxo. REQUIRED
- Are the German choices different from the UK ones? Do you think that any differences might reflect different practices in different industries?
- Are the choices different from those recorded by Kvaal and Nobes (2010) for German and UK companies in 2005/6? This paper is available on Blackboard. Note that those researchers looked at several more topics (which were IFRS options before 2012 but not now), but they did not look at government grants. If the choices are different, what might be the various explanations for that?
IFRS Policy Choices
| Topic Score for Glaxo | ||
| 1. | (a) | income statement by function a |
| (b) | by nature | |
| (c) | neither | |
| 2. | (a) | inclusion of a line for EBIT or operating profit a |
| (b) | no such line | |
| 3. | (a) | equity accounting results of associates and joint ventures included in ‘operating’ |
| (b) | immediately after | |
| (c) | after finance c | |
| 4. | (a) | balance sheet showing assets = credits |
| (b) | showing net assets b | |
| 5. | (a) | liquidity decreasing (cash at top) |
| (b) | liquidity increasing b | |
| 6. | (a) | interest paid shown as operating cash flow |
| (b) | financing cash flow b | |
| 7. | (a) | only cost for property, plant and equipment a |
| (b) | some fair value | |
| 8. | (a) | investment property at cost Not applicable |
| (b) | at fair value | |
| 9. | (a) | FIFO for inventory cost a |
| (b) | weighted average | |
| 10. | (a) | government grants for assets treated as liability (deferred income) Not applicable |
| (b) | deducted from assets |
Week 6
Are Disclosures Worth the Cost?
- Imagine that you are a standard-setter who is considering increasing the requirements for segment reporting.
- How would you assess the potential costs of this to companies?
- How would you assess the potential benefits?
- What does academic research tell us about the costs and benefits of existing requirements on segment reporting? (Critically review the empirical literature on segment reporting: see Reading List below.)
Note: You should read Chapter 18 of the textbook. For Question 4 above, you could concentrate on the references below, which are drawn from the list at the end of the chapter: *Balakrishnan, R., Harris, T.S. and Sen, P.K. (1990) ‘The predictive ability of geographic segment disclosures’, Journal of Accounting Research, Vol. 28, No. 2, pp. 305-25.
*Baldwin, B.A. (1984) ‘Segment earnings disclosure and the ability of security analysts to forecast earnings per share’, Accounting Review, Vol. 59, No. 3, pp. 376-89.
*Boatsman, J.R., Behn, B.K. and Patz, D.H. (1993) ‘A test of the use of geographical segment disclosures’, Journal of Accounting Research, Vol. 31, Supplement, pp. 46-64.
*Emmanuel, C.R., Garrod, N.W. and Frost, C. (1989) ‘An experimental test of analysts’ forecasting behaviour’, British Accounting Review, Vol. 21, No. 2, pp. 119-26.
*Herrmann, D. (1996) ‘The predictive ability of geographic segment information at the country, continent and consolidated levels’, Journal of International Financial Management and Accounting, Vol. 7, No. 1, pp. 50-73.
*Hope, O.-K., Kang, T., Thomas, W.B. and Vasvari, F. (2009) ‘The effects of SFAS 131 segment disclosures by US multinational companies on the valuation of foreign earnings’, Journal of International Business Studies, Vol. 40, No. 3, pp. 421-43.
*Mohr, R.M. (1983) ‘The segment reporting issue: a review of empirical research’, Journal of Accounting Literature, Vol. 2, pp. 39-68.
*Nichols, D., Tunnell, L. and Seipal, C. (1995) ‘Earnings forecast accuracy and geographic segment disclosures’, Journal of International Accounting, Auditing and Taxation, Vol. 4, No. 2, pp. 113-26.
*Roberts, C.B. (1989) ‘Forecasting earnings using geographic segment data: some UK evidence’, Journal of International Financial Management and Accounting, Vol. 1, No. 2, pp. 130-51.
*Thomas, W.T. (2000) ‘The value-relevance of geographic segment earnings disclosures under SFAS 14’, Journal of International Financial Management and Accounting, Vol. 11, No. 3, pp. 133-55.
Week 7
Changing Accounting
Read CIA (the relevant parts of chapters 12 to 15). Prepare a presentation including the following:
- Why was German accounting different from US/UK/IAS in the 1980s and before?
- Give examples of some of the differences in accounting practices.
- Why did the 4th Directive have little effect on Germany?
- Why did the 7th Directive have more effect? Give some examples of the effects.
- Why did some German companies use IAS/US from the mid-1990s? Why only for consolidated statements?
- When did IFRS become common/compulsory in Germany?
- Illustrate the effects (e.g. on earnings or net assets) of moving from German accounting to IFRS for large companies.
Week 8
The Fourth Directive
Read: CIA, chapters 12 and 13. The Fourth Directive (at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31978L0660:EN:HTML)
- Create a list of topic areas in financial reporting for which differences could, in principle, be found (e.g. formats, valuation of buildings, treatment of leases, etc. etc.).
- Examine the original version of the Fourth Directive to see whether each topic is covered at all, and whether the Directive’s requirements could reasonably have been expected to lead to harmonisation in the EU. Note that we are not asking you to find and use the work that others have already done. We are asking you to read through the Fourth Directive and apply it to your list in 1.
Hint: any information on IFRS or US GAAP is not relevant to this question, nor of course is information on countries outside the EU.
Week 9 Culture
Give a reasoned assessment of the arguments for and against identifying a country’s culture as an influence on its accounting.
Reading:
(a) CIA, Chapter 2.
(b) The summary of Hofstede’s ideas at http://www.geert-hofstede.com/
(c) Gray, S. J., ‘Towards a Theory of Cultural Influence on the Development of Accounting Systems Internationally’, Abacus, 24:1, 1988.
(d) McSweeney B., ‘Hofstede’s Model of National Cultural Differences and Their Consequences: A Triumph of Faith; A Failure of Analysis’, Human Relations, Vol. 55. No. 1, 2002, pp. 89-118.
Week 10
Classification in the IFRS World
Read: CIA, chapters 3, 7 and 14. Also, consult the Reading List for Weeks 4 and 8.
- Explain what would make a “good” classification in the context of international accounting.
- Are the classifications made before 2005 still relevant for some purposes in the new IFRS world?
- Think of how things could be classified in the new world of IFRS. For example:
– Split EU countries into those where IFRS is allowed for unconsolidated statements and those where it is not.
– Split African countries into those which have adopted IFRS and those that have not.
– Split countries’ national systems into those which are converging with IFRS and those which are not.
