Analysis of Fiat Chrysler Automobiles N.V Accounting Standards and Differences with US GAAP

This article analyzes the accounting standards of Fiat Chrysler Automobiles N.V and the differences with US GAAP. It discusses the culture and differences in cultures between the United Kingdom and the United States, and explains the applicable rules for U.S. GAAP and Fiat Chrysler Automobiles N.V standards.

COMPANY ANALYSIS ASSIGNMENT

Table of contents
Introduction................................................................................................................................2
Background of Fiat Chrysler Automobiles N.V........................................................................2
Overview of the culture and differences in cultures between the United Kingdom and the
United States..............................................................................................................................3
Significant differences in the accounting standards between Fiat Chrysler Automobiles N.V
reporting standards and the US GAAP......................................................................................4
Explain the applicable rules for U.S. GAAP and Fiat Chrysler Automobiles N.V standards. .5
Conclusion................................................................................................................................15
References................................................................................................................................16

Introduction
The current assessment is based on the analysis of Fiat Chrysler Automobiles N.V which is a
UK based company has used different accounting system as compared to the ABC Corp.
which uses the US GAAP system. The problem which the Board of Directors and the CEO
of the company face in decision making of acquiring Fiat Chrysler Automobiles N.V is that
the company uses different account standards and reporting standard which may lead to a
problem in knowing there financial position in accordance to the US GAAP hence the
hierarchy has asked for a further evaluation of the financial statement to point to the
differences and found whether there will be any problems on effects on the company's
financial position on the application of US GAAP to make an authentic decision.
Background of Fiat Chrysler Automobiles N.V
Fiat Chrysler Automobiles N.V is an Italian American multinational company headquartered
in London, England. The company is considered as the 8th largest automobile maker
company in the world. The company are two groups of a firm which eventually merged in
late 2014 one of the reign Fiat and the other one being Chrysler. Both of the company merge
and provide and range of diverse types of cars. It can be said that in the current year the
revenue of the company was valued at 133.2 Billion US dollars and Net Income 4.215 billion
US Dollars. The company is a big company in both manufacturing and financial size. It is to
be said that through the use of effective strategic decisions and financial support the company
has financial strengths and financial stability which has helped the company to effectively
operate in the country1. Now the company is multinational company has also to use
1 Chursin, A., Tyulin, A. and Yudin, A., 2016. The model of risk assessment in the
management of a company's competitiveness.Journal of Applied Economic Sciences, 11(8),
pp.1781-1790.

international standards of reporting in order to report their financial data. The company also
follows UK standards of accounting reports so that they abide the accounting set in the
domestic as well in the international basis.
Overview of the culture and differences in cultures between the United Kingdom and
the United States
Cultures have a lot of effect on the accounting and reporting practices in different countries in
the company. It can be said that culture tends to define the approach of the accountant of
accounting bodies to define standard and account reporting procedure which is to be reported
to the stakeholder. US culture for work is supported through high professionalism and
accuracy of work hence the culture is drive through the accuracy of an operation performed.
Hence in this country accounts professional tends to use such approach and culture in order
of providing accurate accounting records in their reports2. Accuracy is the major parameter
which is derived to the accounting operation from the US work culture and tends to have a
significant impact on the accounting accuracy. In the UK the work culture accounting holds
prominent place accounting is a responsible act of creating the financial stress-free situation
in work. Quality of accounting disclosure is considered to be a very significant factor which
considered under the Institute of Chartered Accountants in England and Wales the accountant
tend to follow a work culture to deliver quality and accurate accounting disclosures which are
used in accounting procedure of the company3. It can be said that in both the work culture of
2 Jonkman, J.G., Trilling, D., Verhoeven, P. and Vliegenthart, R., 2018. More or less diverse:
An assessment of the effect of attention to media salient company types on media agenda
diversity in Dutch newspaper coverage between 2007 and 2013. Journalism, 19(11),
pp.1608-1627.
3 Saini, S. and Singh, R., 2018.Service Quality Assessment of Utility Company in Haryana
using SERVQUAL Model.Asian Journal of Management, 9(1), pp.702-708.

accountancy within the country has helped the accountant and accounting procedure to be
significant accurate and reliable to the stakeholder who is using the annual reports of the
company. The accountants in the UK are focused on the creation of Universal formats of
report hence the use of IFRS is very prominent whereas Accountants in America use US
GAAP as they feel that there remarkable limitation in the International Financial Reporting
Standards4.
Significant differences in the accounting standards between Fiat Chrysler Automobiles
N.V reporting standards and the US GAAP
In the UK GAAP is used as a major framework which is used by the company's within the
country to create their accounting records and annual financial reports. The company is a
multinational firm has to also follow IFRS which International Financial reporting standard
which a framework under which financial report created by the company is internationally
accepted. Now US GAAP and IFRS are two different reporting system which is there to be
used by a firm exeperixing their operation in the United States are abide the US GAAP
reporting principle where the firm in the UK follow GAAP and IFRS to operate and report
their financials. One of the major differences which can be noticed in the process is the basis
on which these two frameworks are; also GAAP is based on a set of rules of accounting
whereas IFRS is based on the set of accounting principle which may have differed on
accounting disclosure which is made by companies using different set of frameworks5. IFRS
4 ABC Corp. 2018, Abc corp Homepage, [Retrived from http://www.abccorp.biz/ on Dec
08, 2018]
5 Tarne, P., Traverso, M. and Finkbeiner, M., 2017. Review of life cycle sustainability
assessment and potential for its adoption at an automotive company. Sustainability, 9(4),
p.670.

is limited to the net income within an income statement only where in US GAAP framework
segregation of income is to done in a significant manner which states that in some cases
information related to income may be limited which can affect the overall quality of the
report. In terms of asset valuation IFRS does not allow LIFO method of valuation hence this
can differ from the calculation done under the US GAAP method. It is to be mentioned in
inventory valuation only LIFO is considered whereas FIFO is considered to be a void method
wherein US GAAP there can be an effect on the calculation as the company under this system
can use either LIFO or FIFO. Through it can be said that as Fiat Chrysler Automobiles N.V is
using IFRS as major reporting standard the information gained from its annual report may not
comply to calculations made under US GAAP hence the values might be different and values
can either be overrated or underrated based on which ABC corp. should take the decision on
the following point.
Explain the applicable rules for U.S. GAAP and Fiat Chrysler Automobiles N.V
standards:
In this section, a detailed research is to be conducted on the U.S.GAAP standards during the
current financial year in accordance with the Fiat Chrysler Automobiles N.V the standards
are to be identified and explained in order to observe the changes and applicability of the
standards of the regulation in the operations of the organisation. The principles and
regulations that have been identified and observed are discussed as follows
1. Principle of regularity
According to the principle provided by the U.S.GAAP, it can be said that the Fiat Chrysler
Automobiles N.V in order to precede its operations and marketing activities must obtain the
principle of regularity. The principle provides regulations that require submission and
adhered of accounting information of the company operating in the market. In this context, it

can be said that the Fiat Chrysler Automobiles N.V has been operating with the principle of
regularity as per provided by the US GAAP during the year.
Principle of consistency
According to the principle provided by the U.S.GAAP, it can be said that the Fiat Chrysler
Automobiles N.V in order to precede its operations and marketing activities must obtain the
principle of consistency6. The principle provides regulations that require a complete and
detailed explanation of the accounting methods and changes that were done in the accounts of
the company during the year7. Not only that the company needs to be clear with the reasons
that caused the changes in the company accounts accounting information of the company
operating in the market. In this context, it can be said that the Fiat Chrysler Automobiles N.V
has been operating with the principle of consistency as per provided by the US GAAP during
the year.
Analysis of the company’s financial statements
Ratio Calculations
Ford Motor Company Fiat Chrysler Automobiles N.V
Ratio Formula 2015 2016 2017 2015 2016 2017
Quick
Ratio
Current
Assets -
Inventory /
Current
0.87 0.82 1.21 0.92 0.92 0.92
6
7 Ciambrone, D.F., 2018. Environmental life cycle analysis.4th ed. CRC Press.

Liabilities
Curre
nt
Assets
£
67,452.00
£
69,159.00
£
78,584.00
£
65,552.00
£
72,107.20
£
79,317.92
Invent
ory
£
41,523.00
£
44,378.00
£
42,822.00
£
39,201.00
£
43,121.10
£
47,433.21
Curre
nt
Liabili
ties
£
29,875.00
£
30,147.00
£
29,607.00
£
28,547.00
£
31,401.70
£
34,541.87
Curre
nt
Ratio
Current
Assets
/Current
Liabilities
2.257807
531
2.294059
11
2.654237
174
2.296283
322
2.296283
322
2.296283
322
Curre
nt
Assets
£
67,452.00
£
69,159.00
£
78,584.00
£
65,552.00
£
72,107.20
£
79,317.92
Curre
nt
Liabili
£
29,875.00
£
30,147.00
£
29,607.00
£
28,547.00
£
31,401.70
£
34,541.87

ties
Invent
ory
turnov
er
ratio
Cost of
Goods
Sold /
Average
Inventory
1.360476
056
1.336247
69
1.507052
45
1.167651
09
1.167651
09
1.167651
09
Cost
of
Goods
Sold
£
57,842.00
£
59,300.00
£
64,535.00
£
46,852.00
£
51,537.20
£
56,690.92
Avera
ge
Invent
ory
£
42,516.00
£
44,378.00
£
42,822.00
£
40,125.00
£
44,137.50
£
48,551.25
Fixed
asset
Turno
ver
Sales/
Average
Net Fixed
Assets
3.837561
681
3.805666
927
4.585076
499
3.842336
208
3.842336
208
3.842336
208

Sales £
1,53,986.
00
£
1,55,667.
00
£
1,68,121.
00
£
1,52,364.
00
£
1,67,600.
40
£
1,84,360.
44
Avera
ge Net
Fixed
Assets
£
40,126.00
£
40,904.00
£
36,667.00
£
39,654.00
£
43,619.40
£
47,981.34
Total
Asset
Turno
ver
Sales/Aver
age Total
Assets
1.509296
741
1.414344
512
1.458737
885
1.626881
927
1.626881
927
1.626881
927
Sales £
1,53,986.
00
£
1,55,667.
00
£
1,68,121.
00
£
1,52,364.
00
£
1,67,600.
40
£
1,84,360.
44
Avera
ge
Total
Assets
£
1,02,025.
00
£
1,10,063.
00
£
1,15,251.
00
£
93,654.00
£
1,03,019.
40
£
1,13,321.
34
Debt
Ratio
Total Debt/
Total
0.045390
836
0.045637
499
0.042602
667
0.473711
747
0.473711
747
0.473711
747

Assets
Total
Debt
£
4,631.00
£
5,023.00
£
4,910.00
£
44,365.00
£
48,801.50
£
53,681.65
Total
Assets
£
1,02,025.
00
£
1,10,063.
00
£
1,15,251.
00
£
93,654.00
£
1,03,019.
40
£
1,13,321.
34
Debt –
Equity
Ratio Long Term
Debt/
Total
Equity
0.064583
306
0.062853
496
0.057330
344
0.062155
484
0.062155
484
0.062155
484
Lon
g-
Term
Debt
£
4,931.00
£
5,023.00
£
4,910.00
£
4,578.00
£
5,035.80
£
5,539.38
Total
Equity
£
76,351.00
£
79,916.00
£
85,644.00
£
73,654.00
£
81,019.40
£
89,121.34

Interes
t
Cover EBIT
/Interest
Charge
20.57931
034
21.96819
788
28.10820
896
30.59509
202
30.59509
202
30.59509
202
EBIT £
5,968.00
£
6,217.00
£
7,533.00
£
4,987.00
£
6,483.10
£
8,428.03
Interes
t
Charg
e
£
290.00
£
283.00
£
268.00
£
163.00
£
211.90
£
275.47
Gross
Profit
Margi
n
Sales –
Cost of
Goods
Sold/ Sales
0.612088
112
0.619547
435
0.616139
566
0.692499
541
0.692499
541
0.692499
541
Sales
– Cost
of
Goods
Sold
£
94,253.00
£
96,567.00
£
1,03,586.
00
£
1,05,512.
00
£
1,16,063.
20
£
1,27,669.
52

Sales £
1,53,986.
00
£
1,55,867.
00
£
1,68,121.
00
£
1,52,364.
00
£
1,67,600.
40
£
1,84,360.
44
Net
Profit
Margi
n
Net
Income /
Sales
0.016650
864
0.017226
225
0.029681
004
0.015522
039
0.015522
039
0.015522
039
Net
Incom
e
£
2,564.00
£
2,685.00
£
4,990.00
£
2,365.00
£
2,601.50
£
2,861.65
Sales £
1,53,986.
00
£
1,55,867.
00
£
1,68,121.
00
£
1,52,364.
00
£
1,67,600.
40
£
1,84,360.
44
Retur
n on
assets
Net
income +
Interest
expenses/
Average
Total
Assets
0.016650
864
0.024395
119
0.043296
804
0.025252
525
0.025252
525
0.025252
525

Net
incom
e +
Interes
t
expen
ses
£
2,564.00
£
2,685.00
£
4,990.00
£
2,365.00
£
2,601.50
£
2,861.65
Avera
ge
Total
Assets
£
1,53,986.
00
£
1,10,063.
00
£
1,15,251.
00
£
93,654.00
£
1,03,019.
40
£
1,13,321.
34
Return
on
Equity
Net
Income/
Average
Common
Equity
0.854666
667
0.895 1.663333
333
0.801694
915
0.864285
714
0.917195
513
Net
Incom
e
£
2,564.00
£
2,685.00
£
4,990.00
£
2,365.00
£
2,601.50
£
2,861.65
Avera
ge
Comm
£
3,000.00
£
3,000.00
£
3,000.00
£
2,950.00
£
3,010.00
£
3,120.00

on
Equity
Table 1: Ratio Analysis
(Source: self-developed)
Ratio analysis is one of the most significant ways through which the analysis of the financial
position of a place can be determined. It is important to consider that through the bits of the
help of ratio analysis the comparison of one firm can be done to another firm easily and very
financial aspect of the firm can gain effectively8. A ratio is of different types and shows the
profitability of the firm, financial stability of the firm and the capital structure within the firm
through the knowledge of this the company is able to make a decision on every aspect of
company's financial components. It is to be mentioned that through ratio analysis of the
subject company and its competitor for it has become significant that the management will be
able to decide whether the company is doing good or bad based on the market performance of
the firm in comparison to a competitor in the market. Now in the context of the above ratio
calculation, it can be stated that Fiat Chrysler NV has been doing financially well and has
grown in respect to the Ford in the recent days. The profitability of the company has
increased in the recent year return on assets, net profit margin and gross margin of the
company has increased in recent years. It is to be mentioned that the company has become
more profitable to the one in comparison which shows that the profitability has grown in the
recent days9. It is to be mention that the capital structure of the firm has also grown to be
stable which meant that the debt capital and equity capital of the firm has become evident in
8 Calabrese, A., Costa, R. and Rosati, F., 2015, December.A feedback-based model for CSR
assessment and materiality analysis.In Accounting Forum (Vol. 39, No. 4, pp. 312-
327).Elsevier.

last few years which is a positive sign for the company. The share related and investment
related ration of the company has also grown in recent years. It is to mention that overall it
can be said that through the development of the company in the recovering the financial size
and efficiency of the firm has also increased in the recent days. Hence the company is grown
and acquiring such company will be beneficial for the company.
Conclusion
Concluding in the light of above context it can be said that the subjected company which is
Fiat Chrysler Automobiles N.V has been using IFRS and GAAP for their reporting of annual
financial reports. Now it has predominantly discussed that there are differences between the
two system and that basic principles and rules in both the IFRS and US GAAP are different
which is why inventory and asset valuations are different to that of US GAAP. Hence ABC
corp. should look to get financial analyst in order to analyze whether the company is a
formidable option to invest in. Although through the comparison of the company to its
Competitors financially and it was seen that it has grown and its financial growth is a positive
sign for the company as it can be profitable for the company to make an investment in a
company which growing financially.
9 Cherta, L., Portolés, T., Pitarch, E., Beltran, J., López, F.J., Calatayud, C., Company, B. and
Hernández, F., 2015. An analytical strategy based on the combination of gas chromatography
coupled to time-of-flight and hybrid quadrupole time-of-flight mass analyzers for non-target
analysis in food packaging. Food Chemistry, 188, pp.301-308.

References
Saini, S. and Singh, R., 2018.Service Quality Assessment of Utility Company in Haryana
using SERVQUAL Model.Asian Journal of Management, 9(1), pp.702-708.
Cherta, L., Portolés, T., Pitarch, E., Beltran, J., López, F.J., Calatayud, C., Company, B. and
Hernández, F., 2015. An analytical strategy based on the combination of gas chromatography
coupled to time-of-flight and hybrid quadrupole time-of-flight mass analyzers for non-target
analysis in food packaging. Food Chemistry, 188, pp.301-308.
Calabrese, A., Costa, R. and Rosati, F., 2015, December.A feedback-based model for CSR
assessment and materiality analysis.In Accounting Forum (Vol. 39, No. 4, pp. 312-
327).Elsevier.
Tarne, P., Traverso, M. and Finkbeiner, M., 2017. Review of life cycle sustainability
assessment and potential for its adoption at an automotive company. Sustainability, 9(4),
p.670.
Jonkman, J.G., Trilling, D., Verhoeven, P. and Vliegenthart, R., 2018. More or less diverse:
An assessment of the effect of attention to media salient company types on media agenda
diversity in Dutch newspaper coverage between 2007 and 2013. Journalism, 19(11),
pp.1608-1627.
Chursin, A., Tyulin, A. and Yudin, A., 2016. The model of risk assessment in the
management of a company's competitiveness.Journal of Applied Economic Sciences, 11(8),
pp.1781-1790.
Ciambrone, D.F., 2018. Environmental life cycle analysis.4th ed. CRC Press.
ABC Corp. 2018, Abc corp Homepage, [Retrived from http://www.abccorp.biz/ on Dec 08,
2018]

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