B comment on other differences ifrs relative to us

This preview shows 6 out of 8 pages.

B. Comment on other differences (IFRS relative to U.S. GAAP) that you might notice on the balance sheet. Liabilities and equity are also reversed using IFRS. Equity accounts are listed above the liability accounts. In addition, issue capital is commonly called common stock in the U.S. Treasury stock is usually the last item listed in stockholders’ equity, but that is not the case under IFRS. C . What is the current ratio for the year’s ending March 31, 2006 and 2007? 2006 Current ratio = 091 , 8 493 , 8 = 1.0496 2007 Current ratio = 160 , 8 434 , 8 = 1.0336 The current ratio has decreased slightly. D. What is the ratio of long-term debt to equity for the year’s ending March 31, 2006 and 2007? 2006 long-term debt to equity ratio = 853 , 7 826 , 7 = 0.9965 2007 long-term debt to equity ratio = 412 , 8 419 , 7 = 0.8819 2006 Non-current liabilities to equity ratio = 853 , 7 535 , 10 = 1.3415 2007 Non-current liabilities to equity ratio = 412 , 8 098 , 10 = 1.2004 Both ratios indicate a decreasing leverage ratio. E . Are there any typical balance sheet ratios that can’t be computed using the IFRS- based financial statement? No, all the same balance sheet ratios can be computed. 11 - 6
Image of page 6

Subscribe to view the full document.

PROBLEM 11-1 LO2 A. Are expenditures reported on BP’s income statement reported by function or by nature of the expense? Be specific. Do you think that this format is more or less useful for users of the financial statements? BP’s income statement lists expenses by nature. This can be determined by examining the expenses. Instead of listing cost of goods sold, the expenses are listed as purchases, production and manufacturing expenses, and depreciation expenses. B . On the BP income statement, what is the earnings from affiliates usually referred to in the U.S.? In the U.S., investments in affiliates are typically equity method investments where the investor owns between 20 and 50% of the outstanding stock. C . On ExxonMobil’s income statement, are the expenses listed by function or by nature? ExxonMobil’s income statement discloses expenses using a combination of function and nature. This can be determined by examining the expenses. Some expenses are listed by the function, such as selling, general and administration expense while other expenses such as manufacturing costs are expensed by nature (such as crude oil purchases, production and manufacturing expenses, and depreciation). D. Compare the performance of BP relative to ExxonMobil. Is it easy to compare the numbers from companies using IFRS to companies using U.S. GAAP? BP ExxonMobil 2008 2007 Growth 2008 2007 Total Revenues 367,053 291,438 25.9% 477,359 404,552 18.0% Profit for the year 21,666 21,169 2.3% 45,220 40,610 11.4% Profit/Revenues 5.9% 7.3% 9.5% 10.0% Looking at the growth in revenues and the bottom line profit margin percentage (profit divided by revenues), ExxonMobil’s revenues grew at 18% resulting in an 11.4% growth in profits. BP’s revenues grew at almost 26%, which resulted in a modest 2.3% growth in net income. Because the two companies prepare the income statement prepared using either the nature or the function of the expenses, direct comparisons of certain items, such as gross margin, are more difficult without extensive reading of the footnotes.
Image of page 7
Image of page 8
You've reached the end of this preview.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern