# Comparing and Contrasting IFRS and FASB

## Question

1. Compare and contrast IFRS and FASB for the following areas:
a. Earnings per share
b. Inventories
c. Cash and cash equivalents

2. Using a 2014 Annual Report for Unilever, what are identified as the key accounting policies and calculate the profitability ratios for the company? Why are profitability ratios important for analyst?

3. Greek Products Company produces widgets that are sold all over the world. It can produce 500 units of widgets for 4500 euros as follows:
Commodities 1000
Direct labor 2000
The selling price is on a cost-plus formula. If you want a 20% gross profit over cost, what is the selling price? If Greek Products wants only to charge 9.00 euros, how much must cost be reduced if the company still wants a 20% gross profit using target costing methods?

4. Describe the reasons why financial managers might want to manage their financial exposures. What instruments might be used to manage the risk? What are some of the concerns that financial managers have in using these instruments since the Great Recession?

5. Describe the differing types of taxes that an international company use deal with. What is the purpose of tax treaties? Should corporations be allowed to relocate to other countries to reduce or eliminate taxes?

## Solution Preview

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1.
a) In FASB, Basic EPS exclude the common shares (and any related earnings effect) that are to be redeemed or repurchased in calculating EPS. Apply the two-class method of calculating EPS. For diluted EPS, no further adjustment to the numerator or the denominator is necessary.
In IFRS, Basic EPS treat the shares as outstanding (and include any earnings impact in the numerator). For diluted EPS, we apply the reverse treasury stock method to the extent that the instrument is dilutive.
b) In FASB, inventories are measured at Lower of cost or market and First-in, first-out (FIFO); last-in, first-out (LIFO);...

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