Public Company Accounting Challenges | Global One Consultant (GOC)

Public Company Accounting Challenges | Global One Consultant (GOC)

Question

Challenges for public accountants
You were recently hired by Global One Consultants (GOC), an accounting firm that specializes in helping clients list their companies on multiple stock exchanges around the world. it was done. His appointment follows the abrupt retirement of Mr. Fares, a young consultant currently serving as an advisor to the New York Stock Exchange (NYSE)-listed American Solutions Company (ASC). Part of ASC’s expansion strategy included listing on the Australian Securities Exchange (ASX).

Mr. Fares’ primary role was to assist the ASC in preparing his two annual financial statements. The first series of statements related to his compliance with NYSE listing requirements, which required the application of US GAAP. The second statement concerns his compliance with ASX requirements and requires reference to IFRS. The GOC was able to obtain the following information from records kept by Mr. Fares prior to his departure (all amounts are in US dollars):

1. In 2014, ASC undertook a long-term construction project. The company uses the percentage-of-completion method. Outline of information about this project

Summary of information

2. On January 1, 2014, ACS leased a machine from Canada Finance Company. The rental period is 8 years. The contract stipulates that he will pay $190,000 annually from January 1, 2014 through December 31 of each year, the lease start date. The machine’s useful life is estimated at his eight years, with no expected residual value. ACS uses the straight-line method. At the time of signing the lease, he had an ACS implied interest rate of 8%.
3. On January 1, 2014, ACS issued a $1,500,000 and 5% 7-year note. Interest on the bond is paid semi-manually on 30 June and 31 December. The market interest rate for a bond with similar risk and maturity was 6%. ACS recognized that GAAP allows companies to switch from the effective interest method to the fair value method without much justification. On December 31, 2018, the ASC switched to the fair value method of accounting for corporate bonds as market interest rates rose to 8%.

On the same day, the fair value of the bond issue was estimated at: $1,418,321. IFRS allows the use of fair value to account for liabilities, but there are a number of restrictions and requirements. Unfortunately, the ASC did not meet these requirements, so financial statements prepared for an ASX listing must continue to be prepared using the effective interest method.

1. ASC had both common and preferred stock. However, preferred stock is considered “claimable”. The preferred stock has a par value of $30 and a dividend of 3.25%. It is important to note that under IFRS, puttable preference shares (also known as mandatorily redeemable preference shares) are treated as liabilities, not equity. This must be reflected in the returns he must file with the ASC in order to list on the ASX.
2. As of December 31, 2018, the following balance sheet portion (some accounts may not be included in this balance sheet): Trial Balance

We provide a short note describing some of the challenges faced by accountants around the world in preparing accounting information for companies listed on various stock exchanges. (1 point)

1. Discuss the key differences between GAAP and IFRS. (1 point)
2. Presents ASC’s income statement and balance sheet as of December 31, 2018, in accordance with GAAP requirements (presents figures in US dollars and rounds to the nearest dollar; for example, amounts for construction work in progress). If is $150,667.62689, then it will be rounded to $150,668, be sure to check) round to four decimal places. For example, given the following result 0.7512869, the answer should be 0.7513, or 75.13%. (3.5 points)
3. In accordance with IFRS requirements, we provide ASC’s Income Statement and Balance Sheet as of December 31, 2018 (figures are reported in USD and rounded up to the nearest dollar). Please round all numbers to the nearest dollar). (3.5 points)

4. Which financial statements (prepared under GAAP or IFRS) provide a more attractive presentation in terms of risk (measured as total liabilities divided by total assets) and performance (measured as net income divided by total assets) Give the client a simple recommendation on what to do. . (1 mark)