Accounting Homework
Assume you have been hired as a consultant to Emerson Manufacturing Company located at 1 Main St., Concord, MA 01742. Currently, Emerson only operates in the United States. In your discussions with Addison Emerson, the CEO of the company, you learn that Emerson is currently evaluating two initiatives that would turn it into a "global" company: (1) setting up a sales office in Spain and (2) acquiring an interest in a manufacturing company in India. Mr. Emerson has asked your advice about the potential positives and negatives of expanding globally.
Also, in reviewing the financial statements for the potential acquisition target in India, Mr. Emerson noticed that they were prepared using International Financial Reporting Standards (IFRS). Mr. Emerson, who is not an accountant, asks you if IFRS is the same thing as United States Generally Accepted Accounting Principles (US GAAP). He says, "My controller says that we have to follow certain rules (US GAAP) when we put together our financial statements. I assume that since English is a common language used around the world, the same thing applies to accounting, and that US GAAP is followed by companies in other countries such as Spain and India."
Write a letter to Mr. Emerson addressing all of the following:
i. What are the complications, complexities, and challenges of operating a global business? In other words, what issues will Mr. Emerson have to consider that he didn't have to consider when operating domestically? Identify at least two complications or complexities and explain why they are complications or complexities. Also, discuss how they might affect the financial results of Emerson Manufacturing (e.g., potential effect on revenues, expenses, assets, liabilities, etc.). Are there any ethical considerations for operating a global business?
ii. Is Mr. Emerson's assumption about US GAAP being used world-wide correct?
iii. What are International Financial Reporting Standards? Who determines these standards? What is the process for standards being passed and becoming part of IFRS? (be very specific - there's a multi-step process)
iv. Identify one area where the accounting rules are different between US GAAP and IFRS and provide details on how the accounting differs. I'm not talking about a difference in approach (i.e., principles-based vs. rule-based) but rather the treatment of a specific asset or liability, such as inventory or development costs for example.
v. Provide a review of the history of convergence of accounting standards - speak about the US specifically and worldwide in general. Find actual milestones.
vi. Discuss the desirability of, and the problems with, achieving convergence, as well as the consequences of not achieving it. Based on the SEC's actions and statements, what is expected to happen in the future related to convergence in the US?
Format your homework according to the following formatting requirements:
i) The answer should be typed, using Times New Roman font (size 12), double spaced, with one-inch margins on all sides.
ii) The response also includes a cover page containing the title of the homework, the student's name, the course title, and the date. The cover page is not included in the required page length.
iii) Also include a reference page. The Citations and references must follow APA format. The reference page is not included in the required page length.