Assignment Sample on Accounting Policies
Introduction
The study deals with the accounting policies of the companies. The study brings out the importance to be adopted to prepare financial statements as it helps in making strategy by comparing to older statements. The proper evaluation of 20 companies is found in detail in brief within the conducted study.
Question 1:
Discussion on accounting policies
Accounting Policies: Accounting policies are a set of rules & guidelines that are used to be chosen by an entity for preparing its financial statement. These policies constitute a framework and all companies use it. There are different kinds of policies. It can be aggressive and conservative. These policies are chosen according to the company’s motive. There are manifold reasons to follow policies by companies: It assists the companies to form a standardization style throughout the life of the company, it provides a proper framework to describe financial statements to the companies (Ali and Ahmed, 2017). It helps the government to retain or give an analysis on their financial statements. It provides benefits to the investors, basically accounting policies provide a glance at the company performance during the financial year. Hence it adds an advantage to the investors so that comparison can be made with other company’s financial statements.
The entities can choose their accounting policies with the company’s motive. Some of them are listed below with their objectives and benefits.
IAS 16 – This policy gives a subsequent measurement of property, plant and equipment, the method of depreciation. It is established with the idea of recognition about asset value, and measurement of the assets and depreciation made over an asset and gets the final value of the asset. Impairment losses are recognized in regards to the assets (Sysoieva et al. 2019). Properties, Plants and Equipment are known to be tangible assets, those are held for making use in the production process and expected to remain in usage for more than a year. So their value must be calculated with the help of accounting policy.
IAS 38- This policy deals with the subsequent measurement of Intangible assets. This indulges in the treatment of intangible assets. This policy provides recognition to the entity about intangible assets. This clarifies the computation of carrying value of intangible assets with certain requirements of revealing disclosures (Vasilenko et al. 2019.). The scope of the standard is to explore and evaluate assets, evaluate the expenditure.
IAS 40 – This standard gives a subsequent measurement of investment property. This is applied to the property held for earning rentals or for the purpose of appreciation in the capital. The investment, which is made for the properties initially, computed at cost leaving some of the exceptions. A derecognized investment property must be made when it is ascertained that the investment property will last longer. The profit and loss on the disposal account must be calculated to reach the difference where the disposals can be determined as gain made or incurred the loss (Plaksiienko et al. 2019).
IAS 2 – This Standard deals with cost formulas for inventories. This standard involves stock to be computed at a lower cost. LIFO and FIFO. It provides proper guidance over cost formulas that are assigned to costs.
IFRS 3- This provides an initial measurement of Non- controlling interest. This standard improves the reliability, relevancy and compatibility of the source information within the financial statements of the business.
IAS 1- This standard provides the form of the income statement, which occurs expenses by their nature or by function (Degos et al. 2018). This is a form of comprehensive income where single statements or two statements are shown.
Question 2:
List of 20 companies
| Name of the companies | Business sector | Accounting policies |
| 1.Volkswagen Group | Automotive | IAS 40 policy |
| 2. Samsung | Electronics | IFRS 3 |
| 3. Nestle | Nutriments and beverages | IAS 2 |
| 4.Hitachi | Engineering | IAS 40 and IAS 38 |
| 5. ArcelorMittal | Steel | IAS 40 and 38 |
| 6. Panasonic | Engineering | IFRS 3 |
| 7. ChemChina | Chemicals | IAS 40 and 38 |
| 8. Pfizer | Pharmaceuticals | IAS 2 |
| 9. Pegatron | Electronics | IAS 16 |
| 10. Fujitsu | Electronics | IAS 16 |
| 11. SABIC | chemicals | IAS 2 |
| 12. China Minmetals | Metals | IAS 40 |
| 13. Johnson & Johnson | Products dealing in personal care | IAS 2 |
| 14.Eni | Oil & gas | IFRS |
| 15. Boeing | Aerospace & Defence | IAS 1 |
| 16. Sony | Electronics | IAS 40 |
| 17. Procter & Gamble | Consumer goods | IAS 2 |
| 18. Christian Dior | Luxury goods | IAS 1 |
| 19. PepsiCo | Nutriments & Beverage | IAS 2 |
| 20. Unilever | Consumer goods | IAS 2 |
Question 3:
Elaboration on a financial statement about the listed company
- Volkswagen Group. The company engages in the production of automobiles, motorcycles, internal combustion like engines, and turbo machinery. The product output was in 2020 – 8,900,000. The operating income of the come was around 11.667 billion pounds, its net income was around 8.334 billion pounds, its total asset and total equity was around 487.114 billion pounds and 127. 47 billion pounds (Nurunnabi, 2017). This should follow the accounting policy of IAS 38 and 40 so the proper attainment of financial statements is received. This will give recognition about the asset as well as the income and loss of the company.
- Samsung: This is a multinational company providing electronics such as air conditioners, digital televisions, mobile phones, computers; etc the popularity has gained differently with the decades and spread its brand all over the world. The Company with the improvement in the accounting policy increased its production. The framework of the policy depends on the standard of the policy. The operating cost income and loss of the company can be ascertained through the adoption of policy like IFRS 3 (Howieson, 2017). This policy brings reliability to its assets compared to the
earlier times.
- Nestle: This company is involved in making food and beverages products. It deals mainly with perishable commodities. The overall production cost, procurement of raw materials, supply of the product, investment in assets and properties need to be aligned in a framework so that recognition of every step would be met. Therefore operating the firm relating to the financial statement of the year shall be executed (Ye et al. 2018). The policy should be IAS 2 must be relevant to it. This method includes the LIFO and Fife method. This goes with the perishable commodity very well.
- Hitachi: This company indulges in making electronics, industrial machinery, auto parts, supercomputers, rolling stocks, power plants etc. This is a Japanese company whose revenue was 8.765 trillion in Japanese currency in 2020. The operating income of the company was in 2020 – 661.10 trillion in Japanese currency, net income was 89.2 billion yen, the total asset and total equity were 9.873 trillion and 4.266 trillion Yen respectively. The policy of accounting is found to be IAS 40 and IAS 38 because all the assets, plant, and equipment found its recognition.
- ArcelorMittal: The company is based on making steel. The production cost with procurement of goods, labor charge, everything which prevails in the production process needed. The framework of the production process must be needed (Hesselink et al. 2019). It is found that IAS 40 and IAS 38 is prevalent in this company.
- Pfizer: This company is involved in making commodities like medicine, drugs. It indulges in pharmaceuticals. The perishable commodities include LIFO and FIFO method. It is found that the IAS 2 policy of accounting is prevalent to this as two methods are included in it.
- Panasonic: This is a Japanese company engaged in making products such as electronics, real estates, all kinds of batteries, software, home appliances, etc. The company made 8.003 trillion of Yen in 2020. The operating income was 411.6 billion of Yen, the total asset and equity were 6.012 trillion and 1,967 trillion in Yen. It is found that IFRS 3 is prevalent in this (Rishika, 2018). The policy provides control over the non-controlling interest of the unit as it provides financial statements according to its available assets and liabilities.
- ChemChina: This Company engaged in making chemicals. The policy that is found to be prevalent in IAS 2. This policy
- Fujitsu: This Company is engaged in producing electronics products. The five-year summary of its financial shows increments in financial position through financial statements. In 2020, the profit for the year was 170,306 Yen, total assets were 3,187,445 Yen and total equity was 1,348,435 Yen, the operating cost was 347,263 Yen. The overall financial statement was made through the IFRS accounting policy (Rishika, 2018).
- Pegatron: This company is engaged in making electronics. It is found that the policy is prevalent to this was IAS 16. This policy goes with the adoption of the depreciation method. This provides recognition of the current value of an asset.
- SABIC: This company makes chemicals. The policy that is prevalent to this is IAS 2.
- China Minmetals: This Company is engaged in making different types of metals. The policy is found to be IAS 40.
- Johnson & Johnson: The Company produces products regarding personal care. The company made a sale to its customer of $ 42,097. The net earnings were around $ 15119, the company made provision to tax on income was $ 2,209. The percentage return on sale was 24.5%. The percentage made on average shareholders’ equity was 25.4%. Overall depicts the financial statement of this company. It is found that the policy is prevalent is IAS 2 which depicts according to its product (Palea, 2018). This company produces complete kits relating to personal care products such as powder, oil soap, body wash, face wash. Hence, prevalent accounting policy is found in this company.
14.Eni: This organization produces oil & gas. It is found that the accounting policy of IFRS prevails.
- Boeing: This Company is involved in airlines making products. This produces aerospace and defense. The policy is found in the financial statement of the company is IAS 1. The feature of this policy is to recognize the expenses by their nature and occurrence. A brief idea about the expense can be known by making a financial statement about the company.
- Sony: This Company engaged in making electronics such as mobile, headphones, television. The operating cost of the firm is 78,306 billion yen, the profit made in 2020, is 5, 07564 billion yen, the total equity and assets are 352,845 and 2,057,757 respectively. The accounting policy is founded IAS 40 (Palea, 2018). As previously it is described, the objective of this policy is to give recognition of the asset value. This company deals in large equity, shareholders, current assets, plant and machinery. The efficiency of the policy can be known by preparing financial statements of the company.
- Procter & Gamble: This Company makes consumer goods. The overall good cost, production of goods management is done. This company deals in a very large area. The overall production process includes an accounting policy to be adopted so that every asset and liabilities get recognition and steps to be taken very effectively (Srivastava, 2020). IAS 2 is founded in this firm.
- Christian Dior: Luxury goods and being made in this company. The revenue of the firm is found to be $ 60,071, profits are made by $3,288.4, market value achieved is $ 73,386. the firm is found the policy 1AS 1
- PepsiCo: Nutriments and beverages are the specialties of this company. The company mainly follows the IAS 2 policy, as the commodity nature wise is perishable, which ought to adopt LIFO and FIFO method (Srivastava, 2020).
- Unilever: This Company’s turnover increased by 2.4% in 2020, operating margin decreased from 16.8% to 16.4% in 2020. The IAS 2 policy is found.
Conclusion
The research provides deep insight about the accounting policies and its standard, the policies framework benefit derived in the making of financial statements of the company. The research shows the different policies of accounting usage adopted by different companies according to its motive. The insight provides how the investors show their interest in making a big investment by comparing one has provided financial statement with the other one. The overall concept of accounting policy revolves around the business world. The IFRS policy of accounting prevails in the companies mentioned above. The recommendation can be known through the financial statement report of the companies prepared every year.
References
Degos, J.G., Levant, Y. and Touron, P., 2018. The history of accounting standards in French-speaking African countries since independence: The uneasy path toward IFRS. Accounting, Auditing & Accountability Journal.
Howieson, B., 2017. The phoenix rises: The Australian accounting standards board and IFRS adoption. Journal of International Accounting Research, 16(2), pp.127-154.
Nurunnabi, M., 2017. IFRS and Saudi accounting standards: A critical investigation. International Journal of Disclosure and Governance, 14(3), pp.191-206.
Palea, V., 2018, September. Financial reporting for sustainable development: Critical insights into IFRS implementation in the European Union. In Accounting forum (Vol. 42, No. 3, pp. 248-260). No longer published by Elsevier.
Plaksiienko, V.Y., Melikhova, T.O., Yermolaieva, M.V., Chernenko, K.V. and Lipskyi, R.V., 2019. Formation of Accounting and Tax Policy of the Company. Academy of Accounting and Financial Studies Journal, 23, pp.1-6.
Rishika, A., 2018. IMPACT OF IND AS ON FINANCIAL PERFORMANCE OF ENERGY COMPANIES.
Srivastava, A., 2020. A study of Effects and implications of differences between Indian GAAP and IFRS. KnE Social Sciences, pp.1370-1392.
Sysoieva, I., Balaziuk, O. and Pylypenko, L., 2019. Modelling of enterprise’s accounting policy: theoretical aspect. Baltic Journal of Economic Studies, 5(1), pp.188-193.
Vasilenko, M.E. and Titova, N.Y., 2019. Accounting policy the system of enterprise economic security. Amazonia Investiga, 8(22), pp.254-260.
Ye, Q., Gao, J. and Zheng, W., 2018. Accounting standards, earnings transparency and audit fees: convergence with IFRS in China. Austr
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