Chapter 1 – Introduction to International Accounting

UK-based Astra Zeneca PLC and Swiss-based Roche Group are two of the largest pharmaceutical
companies in Europe. The following information was provided in each company’s 2016 annual report.

ASTRA-ZENECA
Annual Report 2016
Turnover* Net Operating Assets
Geographic Areas Employees
($ million) ($ million)
United Kingdom $3,964 $3,101 10,700
Continental Europe $6,674 $4,805 22,600
The Americas $10,464 $1,004 17,800
Asia, Africa and Australia $1,742 $958 6,400
*Turnover = Sales

ROCHE GROUP
Annual Report 2016
Sales Segment Areas
Geographical Information Headcount
(CHF million) (CHF million)
Switzerland 532 5,272 8,569
European Union 9,067 11,872
Rest of Europe 1,439 494 23,982*
North America 11,297 16,194 17,988
Latin America 2,393 1,493 5,816
Japan 2,243 4,229 6,381
Rest of Asia 1,805 679 5,169
Africa, Australia and Oceania 949 273 1,754
*Roche does not split Headcount in Europe other than Switzerland into European Union and Rest of Europe

Required:
Use the Unite Nations formula to determine which of these two companies is more multinational.

© Deva Djohan, 2017

Chapter 2 – Worldwide Accounting Diversity
1. Access the financial statements from the most recent annual report of a foreign company and a
domestic company with which you are familiar to complete this assignment.
a. Determine the accounting principles (GAAP) the foreign and domestic companies use to prepare
financial statements.
b. Determine whether the foreign and domestic companies provide a set of financial statements
that includes the same components (e.g., consolidated balance sheet, consolidated income
statement, consolidate cash flow statement).
c. List five format differences in the companies’ income statements.
d. List five format differences in the companies’ balance sheets.
e. Note any terminology differences that exist between the companies’ income statements and
balance sheets.
f. Assess whether the scope and content of the information provided in the notes to the financial
statements is similar between the two companies.
g. Compare the overall presentation of the financial statements and notes to the financial
statements between the two companies.

2. Access the financial statements from the most recent annual report of two foreign companies
located in the same country to complete this assignment.
a. Determine the accounting principles (GAAP) the two foreign companies use to prepare financial
statements.
b. Determine whether the two foreign companies provide a set of financial statements that includes
the same components (e.g., consolidated balance sheet, consolidate income statement,
consolidated cash flows statement).
c. List any format differences in the companies’ income statement.
d. List any format differences in the companies’ balance sheets.
e. Note any terminology differences that exist between the two companies’ income statements and
balance sheets.
f. Assess whether the scope and content of the information provided in the notes to the financial
statements is similar between the two companies.

© Deva Djohan, 2017

Chapter 3 – International Harmonization of Financial Reporting
1. How does harmonization differ from standardization?
2. What are the potential benefits that a multinational corporation could derive from international
harmonization of accounting?
3. Were the EU directives effective in generating comparability of financial statements across
companies located in member nations? Why or why not?
4. What were the three phases in the life of the IASC?
5. How does the structure of the IASB help to establish its legitimacy a global standard setter?
6. What is a principles-based approach accounting standard setting? Who uses such an approach?
7. What are the different ways in which IFRSs might be used within a country?
8. Would the worldwide adoption of IFRSs result in worldwide comparability of financial
statements? Why or why not?
9. Under what conditions should a firm claim to prepare financial statements in accordance with
IFRSs?
10. How are IFRSs currently used in the United States? What are the different ways in which IFRSs
might be used in the United States in the future?

Chapter Four – International Financial Reporting Standards

1. To determine the amount at which inventory should be reported on the December 31, Year
1, balance sheet, Monroe Company compiles the following information for its inventory of
Product Z on hand at that date:

Historical cost $20,000

Replacement cost $14,000
Estimated selling price $17,000
Estimated costs to complete and sell $2,000
Normal profit margin as % of selling price 20%

The entire inventory of Product Z that was on hand at December 31, year 1, was completed
in Year 2 at a cost of $1,800 and sold at a price of $17,150.

© Deva Djohan, 2017

 Required:
a. Use the information provided in this chapter related to the accounting for inventories
to determine the impact on Year 1 and Year 2 income related to Product Z (1) under
IFRSs and (2) under U.S. GAAP.
b. Summarize the difference in income, total assets, and total stockholders’ equity using
the two different sets of accounting rules over the two-year period.

© Deva Djohan, 2017