Problem:
The United States uses Generally Accepted Accounting Principles (GAAP) as the basis of financial reporting. The International Financial Accounting Standards (IFRS) is an alternative way to report financials. This article from Ernst and Young compares the two methods of financial reporting.
Ernst & Young's US GAAP vs. IFRS: The Basics
https://www.ey.com/Publication/vwLUAssets/IFRS_vs_US_GAAP_Basics_March_2010/$FILE/IFRS_vs_US_GAAP_Basics_March_2010.pdf
After reading the article from Ernst and Young, answer the following questions:
Q1. How does the GAAP reporting method cause cash flows to differ from net income?
Q2. How are the features of the Income Statement, Balance Sheet, and Statement of Cash Flow utilized in both the GAAP and the IFRS reporting methods?
Q3. Does it make sense to adapt a worldwide standard for financial reporting? Should this be mandated or voluntary?
Q4. Calculate some of the potential costs and benefits of switching from GAAP to IFRS.
Capital Rationing
Q5. Compare and contrast the Internal Rate of Return (IRR), the Net Present Value (NPV), and Payback approaches to capital rationing. Which do you think is better? Why?