Acc501 - Case 1 Essay

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Trident University International
ACC501: Introduction to Financial Accounting
Module 1 Case Assignment

For investors to objectively analyze and rate companies they need to have access to certain financial information in order to make informed business decisions. Key financial figures such as Statement of Income, Balance Sheet Statements, and Cash Flow Statements are used to make these comparisons. To ensure that companies are reporting the same financial information several accounting and auditing standards have been created and must be followed. In the follow paper two companies, Abercrombie and Fitch and Hennes & Mauritz, will be evaluated based on their financial statements in a goal to determine which company is more
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A&F on the other hand was strictly financial based and to the point with a total of only seven pages. The accounting and auditing standards used to generate the reports also differed. H&M used International Financial Reporting Standard (IFRS) as adopted by the European Union (EU) and was prepared in accordance with IAS 34 Interim Financial Reporting as well as the Swedish Annual Accounts Act (H&M, 2012). A&F utilized the United States Generally Accepted Accounting Principles (GAAP) along with non-GAAP financial measures and audited with Generally Accepted Auditing Standards (GAAS).
Explaining the Difference in Profitability between the Two Companies Based on the 2011 annual financial report from H&M, it indicates there are 2,472 stores in 32 different countries compared to AF which only has 1045, of which 946 of them are in the United States. In terms of profitability H&M is able to stay more profitable because it is operating stores in several different markets and is able to perform better during economic financial downturn in certain countries by bolster sales in markets which aren’t being impacted as badly. A&F on the other hand essentially has all its “eggs in one basket” with a majority of its stores in the United States, so if the economy is doing poor or tax laws change it can severely impact the company’s profitability. The following section will explore the financial formulas used to determine why I believe H&M

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