Volkswagen : A German Car Manufacturer

2007/2008 Edition This PricewaterhouseCoopers publication is for those who wish to gain a broad understanding of the key similarities and differences between IFRS, US GAAP and Swiss GAAP FER. No summary publication can do justice to the many differences of detail that exist between IFRS, US GAAP and Swiss GAAP FER. Even if the guidance is similar, there can be differences in the detailed application, which could have a material impact on the financial statements. It needs to be stressed that this brochure deals with the main differences only. Many more pages would be needed to be

The automotive industry globally involves the processes of manufacturing as well as sales of cars and other automobiles. The business of this industry is also inclusive of retailing activities like services; sale of spare parts, gas-station retails etc. by the year 2015, and the growth rate of the industry is expected to have a rise of 5.5% (Market Line, 2012). Moreover, as per International Organization of Motor Vehicle Manufacturers, this industry is the leading driver in terms of global economic progress and the largest employer. The changing trends and rising demand for technically advanced cars are giving out more opportunities. This essay is going to be a presentation on the analysis of the Volkswagen positioning strategy with respect to the Porters models of competitive strategies. This essay would be vital, as this analysis would help in revealing the company’s competitive and strategic position in the industry.

Explanation: Both IFRS and GAAP have different requirements about the measurement and process for revaluating fixed assets to fair value.

There are subtle differences between the presentation of the IFRS statement of financial position and the US GAAP balance sheet. One primary difference is that IAS 1.66-.67 requires for the statement of cash position to be classified by current or non-current assets and liabilities, while US GAAP has no requirement for the balance sheet to be classified by current or non-current assets and

There are several differences between the International Financial Reporting Standards (IFRS) and the U.S. Generally Accepted Accounting Principles (GAAP). The IFRS is considered more of a "principles based" accounting standard in contrast to U.S. GAAP which is considered more "rules based." By being more "principles based", IFRS, arguably, represents and captures the economics of a transaction better than U.S. GAAP. As a team me collaborated to answer the following seven questions.

Current U.S. GAAP comprises of broader revenue recognition concepts and numerous requirements for certain industries and transactions, which can result in different accounting for economically similar transactions. On the contrary, IFRS provides less guidance on revenue recognition such as for multiple-element arrangements. The lack of guidance is most noticeable among IFRS’s two main revenue recognition standards, IAS 18 Revenue and IAS 11 Construction Contracts. These

Assessing the impairment of long-lived assets are slightly different. At first both GAAP and IFRS test for impairment if indicators exist, but it is the test that is different. GAAP has two steps that need to be followed in order to assess the impairment. First, it needs to assess if the impaired asset is recoverable, if not, then it proceeds to the next step, which is to calculate the impairment loss. IFRS has only one step, which is to calculate the recoverable amount. If the recoverable amount is less than the carrying amount – value of asset after deducting depreciation – then the carrying amount needs to be reduced to the recoverable amount and the difference between them is the impairment loss (Earnest & Young, 2011 a).

The additional depreciation under IFRS causes IFRS-based income in 2014 to be $25,000 smaller than U.S. GAAP income. IFRS-based stockholders’ equity is $575,000 larger than U.S. GAAP stockholders’ equity. This amount is equal to the revaluation surplus ($600,000) less the additional depreciation in 2014 under IFRS ($25,000), which reduced retained earnings.

Chevis (2014) addresses two of the bigger, but lesser-known, differences between GAAP and IFRS. The two differences addressed, contingencies and depreciation, are the interpretations an accountant has to make on terms not specifically defined by IFRS or GAAP. IFRS is considered to be more “aggressive” for investors while GAAP is considered “conservative” (p. 19). Smith (2012) states IFRS is more principle based, while GAAP is more ruled based. GAAP documents would total over approximately 25,000 pages if printed. IFRS documents would total approximately 2,000 (p. 21).

The International Financial Reporting Standards (IFRS) is the accounting framework used by the European Union, Japan, Canada, and other world economic leaders. The IFRS is based on the tenets of understandability, reliability, and comparability. It is based off the International Accounting Standards (IAS) and had the opportunity to be built from accounting ideas and principles used across the world. In recent years it also has had the chance to look at the United States Generally Accepted Accounting Principles (GAAP) and modify the rules to enhance clarity and consistency, intentionally setting itself apart from U.S.

GAAP and IFRS are significantly different in various ways. GAAP is based on rules and prefers a risk-and-reward model. On the other hand, IFRS is based on standards and prefers a control model. The meaning of this is that GAAP makes decisions as a result of literature and research. IFRS, on the other hand, makes the decisions based on patterns that lead to the formation of facts. Categorization costs are considered as capitalized in IFRS and as expenses in the GAAP. There are also significant differences in the valuation of assets, revenue recognition, assessment of impairment of long-lived assets, correction of errors and financial statement presentations (Epsten and Eva 40-60). However, they are both sets of complete financial statements that require the companies to use the same policies and principles of accounting.

This paper seeks to analyze the GAAP and the IFRS, their mandate and functions. Further, it shall compare the differences and similarities of the two standards which have such great implications to the functions of accountants, attorneys, corporate directors and

I. Volkswagen is one of the world’s best-known car manufacturers; unfortunately it has damaged its credibility and reputation with the recent emission scandal that the company was involved in. Volkswagen failed in establishing the triple bottom line, social responsibility, and sustainability.

technology project. The BPTO produced weekly status reports and monthly budget reviews helping the company gauge where it was heading towards. Thus the alignment started advancing (Austin, 2007).

The US Generally Accepted Accounting Principles (GAAP) is a set of international accounting rules which originated from the United States. US GAAP can be defined as a set of accounting principles, standards and procedures that companies use to compile their financial statements (Elliott & Elliott, 2008). The International Financial Reporting Standards (IFRS) on the other hand are accounting rules originating from the United Kingdom. International Financial Reporting Standards (IFRS) are a set of accounting rules designed with a common global language for business affairs so that financial accounts of companies are understandable and comparable across international boundaries (Devinney, Pedersen & Tihanyi, 2010).