International Financial Statement Assignment

International Financial
Statement

Contents
INTRODUCTION................................................................................................................................3
Question 1.............................................................................................................................................3
Question 2.............................................................................................................................................4
Question 3.............................................................................................................................................5
CONCLUSION..................................................................................................................................10
REFERENCES...................................................................................................................................11

INTRODUCTION
International Finance reporting is international accounting framework in which financial
information is properly organised and reported. There is huge requirement of International financial
reporting standards in accounting framework in more than 120 countries. It requires every
businesses to report all of their financial statements and financial position using same rules and
regulations. In this report, there is proper analysis of the convergence project i.e. Being done by
jointly by International accounting standard board and Financial Accounting Standard Board, which
came out of an agreement by the two boards (IASB and FASB) . As in this report, it has clearly
mentioned about that how they are standard setters in a coordinated manner and how they will be
improving the quality and how it had positively impacted on investors and entities . Like
convergence has made the comparison between the organisation who operates globally. In the
second part of this report, it is all about Ketsu Department stores which is one of the Japan's largest
retailer with many stores throughout Japan. The consolidated financial statements have been drawn
up with standards issued by the international Accounting Standards Committee, in that reference
how simplified balance sheet helps in investment decision making. And more preference is been
given to working capital and its need.
In third part, there is an brief analysis of the financial performance of Muji , FMCG
company of Japan with the help of ratio analysis on the basis of three parameter .The parameters are
Liquidity ratio, Profitability ratio and Solvency ratio. These three parameters are also explained
with the subheading i.e. current ratio, acid test ratio, and return on asset, gross margin ratio, profit
margin ratio, debt to equity ratio and equity ratio with proper interpretation.
Question 1
Explain what the convergence project was intended to achieve and briefly explain the current status
of the project?
International Accounting Standards Board is a London based organisation. This organisation
is given full support of industry and government and it also set standards for accounting procedures.
IASB has responsibility for maintaining International Financial Reporting standards. The parent
entity of IASB is International Accounting Standard Committee. Financial Accounting Standard
Board establishes financial reporting and accounting standards for private and public companies and
the organisations who follow Generally Accepted Accounting Principles and that too they must be
not for procure key issues in it organisations. Their main objective was to eliminate the differences
between US GAAP and Financial reporting standards. FASB is one of the most important partner of
IASB. Board works so closely with national standard setters around the world. FASB got to know
that it does not have all solutions for all accounting issue. Some of the areas of US standard could
be improved where International standards can be easily applied (Jaruga and et.al., 2007).
The convergence project was intended to achieve standardisation with high quality foe entire
world, understandable and IFRS to serve lenders, creditors and ones who are in globalized market.
IASB and FASB made their best efforts to make their financial reporting standards fully practical
and compatible. Efforts were also made for coordinating their future work programs and to make
sure that they are achieved or not. Here the standard needs an improvement of both board, for
improvement they need to work jointly. FASB has involved itself in many different activities in the
context of high quality goal, standards and to increase the convergence of accounting standards
which are used in many countries. The most essential activity of FASB is its collaboration with
IASB to make optimum utilisation of resources. For convergence, staff of both boards made short
and long term strategies. In short term attempt was to remove the differences which appeared from
improvements project which were handled by IASB. Under convergence, IASB and FASB has

undertaken many projects like business combinations. After several years, they will require the best
coordination between boards in context of setting and resource allocation.
Current status of convergence
There is a successful implementation of converging or accepting IFRS. At International level
also there is a positive impact of convergence and combination of accounting principle and
standards. Convergence has given most advantage to India in context of growth with globalization.
If any country does not play active role in process of setting standard internationally. There is an
safer route in converging process to IFRS is endorsement process and accepting temporary rid outs.
All countries have faced various difficulties and challenges earlier but after adopting all IFRSs they
got success from some particular date as it is. Many countries have adopted it even ICAI has also
taken decision to adapt IFRSs.
There is proper guidance on tax perspective, IFRS implications are also considered on direct
and indirect taxes. For more successful implementation, if companies use IFRS on daily basis for
financial reporting as well as to track the performance in budget form, management account and
forecasting (Hail, Leuz and Wysocki, 2010). It needs industry expertness but due to deficiency in
guidance in IFRS. There is also a requirement of improving the disclosures which also gives
support in viewing financial statements not for perspective of compliance but also for
communicating the performance. Basic need or compulsory need to make IFRS complaint
statements along with GAAP complaint statements. Because of complaint statements, problems can
be traced at early stage and can be corrected as soon as possible. For implementing IFRS properly
and efficiently, there is an need of deep international understanding about corporate objectives,
harmonisation goals and objectives and financial reporting objectives need to be achieved. Private
sector and government agencies should not be given stress by political pressure on International
Accounting Standards Board. The standards which are developed should be publicize and
accounting profession, corporate management and member countries all over the world should give
support to international Accounting Standard Board. Even the encouragement should be given by
International Accounting standard Board to all member bodies for adopting IFRS and to make and
remake their rules that they are queued along with IFRS. Proper rules and regulations must be
passed to the effect that if in any change or alteration in international Accounting Standard Board,
the local standards should be queued with this and local stock exchange can cooperate in taking step
forward against companies that fail to be with IFRS. To apply disciplinary procedures in non-
convergence with IFRS, governing bodies of accounting profession can be also used. Convergence
makes the reputation and relationship very well between corporate and community. These standards
will improve the efficiency of all global capital markets by improving comparability, decreasing
cost of capital and enhancing capital governance. Till now convergence of IASB and FASB has
become a great success for investor and entities that are operating globally.
Question 2
Critically discuss the advantages of convergence to BOTH investors and entities that operate
globally?
This convergence has specially focused on the big multinational companies. Convergence
helps in removing all weakness and inconsistencies in the existing revenue requirements. For
addressing revenue issues they provide a robust framework (Carmona and Trombetta, 2010). The
biggest advantage of convergence is enhancing comparability between companies in different
countries. Prior accounting standards were differing from country to country, before any of investor
compares two potential investments, they have to make the same format of accounting of both
companies and same for creditors also while evaluating creditworthiness, there are differences in
accounting standards. This brings huge variation in the financials of the company. This convergence