Using company LVMH
Examining the initial adoption of IFRS accounting policies is important since over 120 countries now require or permit IFRS financial reporting for listed or private entities. In particular, many U.S. companies must adopt IFRS because their foreign parents or investors report under IFRS, and the Securities and Exchange Commission allows foreign companies in the U.S. to use IFRS for SEC reporting purposes. The purpose of this case is to enhance your understanding of the objective of general-purpose financial reporting, the concept of comparability in the IASB’s Conceptual Framework for Financial Reporting that flows from that objective, and relevant guidance on the initial adoption of IFRS accounting policies.
Imagine that you are the head of Global Financial Reporting and your firm’s Chief Financial Officer has asked you to respond to the questions listed below. The firm is now formulating strategic plans for its divisions, which requires a solid understanding of the impacts of U.S. GAAP to IFRS conversion. Because most of your competitors use either IFRS or U.S. GAAP, a strong understanding of key differences between IFRS and U.S. GAAP is crucial in key business-planning activities. In responding to the questions, use annual reports from 2003 – 2007, before and after the adoption of IFRS in the European Union. Your responses to the questions should address the requirements in detail, providing citations of sources used. Submit in memo form.
The central accounting concept of this case is the comparability of financial statements after adopting new IFRS accounting policies. Review the IASB Conceptual Framework. Based upon your understanding of the IASB Conceptual Framework, discuss whether your company’s conversion to IFRS enhances the qualitative characteristic of comparability or detracts from comparability among periods. Is your company’s notes and disclosures under IFRS comparable with the financial reporting before IFRS? Provide evidence of a similar and dissimilar disclosure. Make sure that it is for the same account.
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