This material may consist of step-by-step explanations on how to solve a problem or examples of proper writing, including the use of citations, references, bibliographies, and formatting. This material is made available for the sole purpose of studying and learning - misuse is strictly forbidden.1. Introduction
The adoption of the International Financial Reporting Standards (IFRS) by American companies that follow the Generally Accepted Accounting Principles (GAAP), but have international operations is primarily a matter of regulatory compliance. This is especially so for multinational companies such as the Starbucks Corporation (“Starbucks”) which operates in many countries and territories where IFRS has been adopted. To comply with the regulatory requirements in countries such as the United Kingdom and others in the European Union, Starbucks is required to prepare its financial statements for its subsidiaries based in these countries in accordance with IFRS. Consequently, the parent company’s general purpose financial reports that an entity like Starbucks produces must contain financial information that is useful to users and that can guide users’ decisions about the company. Some decisions that users base on financial reports include buying and selling of a company’s equity and debt instruments, as well as credit decisions.
Due to the decision-making element of financial reports and usability of these reports by different parties that deal with a company, it is important for multi-national enterprises (MNEs) that follow GAAP to produce reports that truly reflect their state to be useful for users in countries that follow IFRS. Therefore, the information contained in a multinational company’s general purpose financial reports must show a fair representation of the entire company in...