This case gives students an opportunity to discuss how culture and the general accounting environment in a country may influence the accounting choices made by management. One of the most compelling arguments for US companies to adopt IFRS is to increase comparability between companies and countries worldwide. This case also highlights the impact of accounting decisions on financial ratios used to assess a company’s performance. Munich Windet has a higher current ratio and acid test ratio than AmsterWind, which implies they are in better position to pay short-term liabilities. This instructional case emphasizes to students that even though two companies both follow the same set of accounting rules (IFRS in this case), comparability of financial statements can still be difficult due to accounting choices, judgments, and estimates made by management. In this case, two start-up companies enter the renewable energy industry and begin retailing wind turbines. Pupils record the same transactions for the two companies in the first year, record six more transactions in which the companies apply IFRS with different accounting decisions, compile a set of financial statements, and compute ratios. Students will be able to observe how management's accounting decisions impact the financial statements' comparability through these assignments.
Author(s) Details:
Joel Strong,
St. Cloud State University, USA.
Kris Portz,
St. Cloud
State University, USA.
Please see the link here: https://stm.bookpi.org/CRBME-V2/article/view/13667
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