Respond to two of your fellow students’ or instructor posts in a substantive manner. Each response should have a minimum of 100 words and be respectful of others’ opinions and beliefs that differ from your own. Support your position in your writing when responding.
Minimum of 200 words each
Jonathan’s Post:
Hello classmates!
GAAP and IFRS Comparison
In the event that Walmart used the International Financial reporting Standards (IFRS),
there would be a few key differences observed in their financial reporting, as well as
some similarities. Initially, it would be observed that the same key financial statements
are provided for both sets of accounting standards – a balance sheet, an income
statement, a statement of cash flows, and a statement of stockholders’ equity (Porter &
Norton, 2018). It would be noted that there would be a significant increase in disclosures
in the statements provided by Walmart should they use IFRS due to the reduction in
detailed guidance. There would also be a sequencing difference on some reports
depending on the standard used.
Another key similarity in the statements would be the measurement of income, due to
the joint revenue recognition standard issues in 2014 by both the IASB and the FASB.
However, there would be a measurable difference in the inventory line item – the U.S.
GAAP keeps a standard on the value of inventory, whereas under IFRS inventory being
valued higher or lower can be adjusted in later periods and offered as a disclosure,
allowing for more volatility in inventory value than under the U.S. GAAP (Porter &
Norton, 2018). This same concept is also applicable to assets under IFRS, allowing
revaluing of assets if supporting evidence can be provided.
Pros and Cons
Outside of the benefits of being able to utilize information to adjust values of assets up
or down for future periods, additional pros for Walmart in adopting IFRS for financial
reporting would be the ability to list on foreign stock exchanges, gain more interest and
press in foreign countries, navigate partnerships in foreign countries more easily, and fall
in line more with the rest of the global economy. On the other hand, Walmart would not
be able to list on the NYSE as a domestic company, which would be an extreme con, and
for a company the size of Walmart, it would require a significant amount of retraining
and standard re-setting, as well as a significant amount of effort with the U.S.
government to understand a path forward (Walton, 2011).
Legal & Ethical Challenges
One of the points that has been brought up in past courses with references to Walmart
possibly expanding into Egypt has been the lack of success in the region by itself and
other similar companies. While using the IFRS would more easily allow Walmart to
compete on foreign exchanges, it would create difficulty as a U.S. based company. It may
create ethical issues due to having mostly operated in a stricter environment using U.S.
GAAP. Walmart would potentially have the ability to re-evaluate assets, inventory, etc.
for its international segments of its financial statements and opt for more disclosures
versus hard data on their documents. Legally, I do not believe this would create any
issues in the expansion country, however there would be legal challenges at home in the
U.S. due to being a domestic company using IFRS.
One final thought – switching from not having the ability to revalue assets such as
inventory and then all of a sudden being able to do so would create a potential for
ethical dilemma should Walmart believe they took a financial hit for assets that they
should not have, or that they find new evidence supporting a raising of inventory or
asset value that was previously lowered (Malinovskaya, 2013).
Thank you,
Jonathan
N V Malinovskaya. (2013). Regulatory issues of the accounting reporting in the transition
to IFRS. RUDN Journal of Economics, 3, 111–124. Retrieved
from https://library.uagc.edu/index.aspxLinks to an external site.
Porter, G., & Norton, C. (2018). Using financial accounting information: The alternative to
debits and credits (10th ed.). Retrieved from https://www.cengage.comLinks to an
external site.
Walton, P. J. (2011). An executive guide to IFRS. [electronic resource] : content, costs
and benefits to business. Wiley. Retrieved from https://library.uagc.edu/index.aspxLinks
to an external site.
https://library.uagc.edu/index.aspx
https://www.cengage.com/
https://www.cengage.com/
https://library.uagc.edu/index.aspx
https://library.uagc.edu/index.aspx
Joshua’s Post:
In comparing the differences if, Walmart were to use the International Financial
Reporting (IFRS) rather than the Generally Accepted Accounting Principle, you can
formulate a convincing argument for the use of IFRS. Walmart has a substantial presence
in the United States and a growing presence globally. If Walmart were to use IFRS across
all their location it would be easier maintaining financial statement and presenting, clear
financial performance due to using one standard. As the two most common financial
statements companies use being, IFRS and GAAP, provide different benefits or
disadvantages.
As a company using GAAP, it is ruling base and include more detailed standards
with less disclosure. On the other side of a company using IFRS it is principle based and
fewer less detailed standard with more requirement of disclosures. Benefits of Walmart
using IFRS would be the ability to be flexible with their statement of cash flow; having
cash receipts classified as either operating or investing activities, as where GAAP they
are always classified as operating activities. A disadvantage of Walmart using IFRS would
be that the company would have to present balance sheets with classifications for
current and long-term liabilities. This would force Walmart to be more transparent in the
reporting of financial standing.
In New Zealand, Walmart using IFRS, convergence could present zero legal
challenges as New Zealand already requires IFRS accounting for companies. If Walmart
were to keep the use of GAAP standards, it could face many legal and ethical challenges
due to the requirements and standards IFRS puts on its company. Walmart would have
to be more transparent and would face more accountability throughout operations in the
new location.
References:
Porter, G., & Norton, C. (2018). Using financial accounting information: The alternative to
debits and credits (10th ed.). Retrieved from https://www.cengage.comLinks to an
external site.
Walmart 2022 Annual Statement. Retrieved
from https://stock.walmart.com/financials/annual-reports/default.aspxLinks to an
external site.
JOSH
https://www.cengage.com/
https://www.cengage.com/
https://stock.walmart.com/financials/annual-reports/default.aspx
https://stock.walmart.com/financials/annual-reports/default.aspx
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
