No Marshmallows, Just Term Papers
g to this case the international accounting standards are useful because they help investors to have an accurate idea about the value of a company, if companies do not use those standards then they could use different ways for presenting the information, therefore it would be really difficult for the investors to understand the real value of the company. The case explains how several economic crises have started because of the way different companies presented their financial statements actually hid some financial problems they were having. On the other hand some companies are reluctant to show their value using these standards because they realize that if they do then the value of the company will actually decrease instead of increase. One of the examples given was about the oil company Shell located in the USA. In November 2004, they reported that if they try to change the calculation of their financial documents by conforming to the international standards, the value of the company would decrease by $4.9 billion. The reduction in value came from the change in accounting for employee benefits. The second example is about a French company called L´Oreal, in their case they reported that they would lose close to 2 billion Euros due to a change in the way certain classes of stock were classified. However, some companies have experienced positive results from the switch. UK based Vodafone reported a gain of $13 billion after adopting the IASB standards. The gain was due to the company not having to amortize goodwill associated with their previous acquisitions against earnings. (Hill,2011)
In this case we believe that the real problem that companies are facing is: To decide whether to use or not use the International Accounting Standards in their company and how ethical it will be to use a different accounting standard just to increase the value of the company. Another essential part of the problem is that governments have to make a decision...