Financial Statements Of The Firm 's Foreign Subsidiaries

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Case 2: Ruckman, Inc. Chris Gilmore’s first week at Ruckman, Inc., provided him with quite a difficult task: to review the financial statements of the firm’s foreign subsidiaries, prepare the consolidated statements, and finally convert them from the United States’ Generally Accepted Accounting Principles (GAAP) to International Financial Reporting Standards (IFRS). Familiarizing himself with the company and his task at hand, he discovered that the job was both time consuming and convoluted, with the U.S. Securities and Exchange Commission (SEC) requiring converting companies to begin the process years in advance, including the presentation of the last three years of balance sheets. To complete his task, Chris has to understand the…show more content…
Furthermore, the idea of accounting standards made accountability for firms’ finances simpler, as numbers could more accurately be tracked, making issues like stocks and taxes less convoluted from company to company. In theory, if companies’ numbers were not comparable, then the stock markets would be extremely inefficient or simply obsolete. Following the Stock Market crash around the 1930’s, citizens lost faith in the market and the overall economy. Because of this, government leaders needed to rebuild their peoples’ hope, and responded by creating the SEC – an organization with the responsibility of regulating financial practices among publically traded companies. To do so, they enlisted the aid of the American Institute of Certified Public Accountants (AICPA). A few years after their partnership with the Commission, the two collectively created the Committee on Accounting Procedure (CAP), which later evolved to become GAAP. Since then, The Generally Accepted Accounting Principles has been the primary method of accounting in the United States. These principles were initially developed to protect American companies, investors, and other stakeholders, with their main objective to provide information that could impact company decisions in the future. Determined and then run by the country’s accountants, the method worked well following World War II, when the United States unquestionably became a
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