financial statements compare fasb gaap methodology with iasb ifrs at a recent staff 4508207

Financial Statements

Compare FASB (GAAP) Methodology with IASB (IFRS)

At a recent staff meeting, the VP of Finance appeared confused. The controller has assured him that the parent company and each of the subsidiary companies had properly accounted for all transactions during the year. After several other questions, the VP finally asked, “If it has been recorded properly, then why must you spend so much time and make so many changes to the amounts reported by the individual companies when you prepare the consolidated financial statements each month? You should be able to just add the reported balances together.”

Provide an answer to the VP of Finance, using a memo format. Support your response by including FASB references. Compare and contrast the FASB (GAAP) methodology with that on IASB (IFRS).

Answer Preview……………….

I totally comprehend your genuine concern about the time that is being spent on the consolidated financial statements each month. However, be rest assured that this process is necessary for the running of the organization. Looking at an example which involves a different company, called Disney contains ownership of mini subsidiaries. The transactions that normally occur between the subsidiaries and Disney makes an affiliation like Disney merchandise or Pixar entertainment. In companies like Pixar and Disney all assets and sales that involve intercompany should be eliminated (Carini, 2017). Failure to eliminate them causes overstatement of the companies. This is so because they will show in both companies (Baker, Christensen and Cottrell, 2012). This example provides a perfect reason why the balances cannot be added together in the calculations. If addition of a transfer from one subsidiary to the parent, automatically chances are that it will show on both sides on both books……………………

APA 303 words

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