Chapter 10 – Analysis of Foreign Financial Statements
11. Vale S.A. (Statement of Added Value)
a. The external parties who might be most interested in Vale’s Statement of Added Value
b. Personnel; Taxes, rates and contribution less Taxes paid recover; and Remuneration on
c. Perhaps the most important story being told is the manner in which added value (AV) is
12. Babcock International Group PLC (Determine Gross Profit and Estimate Sustainable
Income)
a. Determine gross profit and gross profit margin
Note 4, Operating expenses, indicates that “Cost of sales” in 2009 was £1,685.1. Gross
profit and gross profit margin are calculated as follows:
2009
Revenue 1,901.9
b. Estimate sustainable income
Babcock reports profit for the year 2009 of £74.3, but this includes several items that are
non-recurring (and therefore not part of sustainable income) and are given special
presentation in the income statement.
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Chapter 10 – Analysis of Foreign Financial Statements
Based on the presentation of the income statement and the information provided in Note
6, the following would be a reasonable estimate of sustainable income for 2009:
13. Vale S.A. (EBITDA)
a. EBITDA is a measure of the amount of income a company generates before subtracting
b. One explanation for why Vale included Note 11 in its 2009 annual report is that the
c. EBITDA can be useful in comparing the performance of companies located in different
d. The obvious limitation in using EBITDA to evaluate a company’s performance is that by
14. Arcot Company (Restatement of financial statements – Year 1)
Reconciling Entries
[1] Inventory indirect costs
[2] Revaluation of property, plant, and equipment
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Chapter 10 – Analysis of Foreign Financial Statements
[3] Capitalized interest
14. (continued)
Worksheet for Restatement of Income and Retained Earnings to U.S. GAAP
For the year ended December 31, Year 1
(1) (2) (3) (4)
Reconciling
Adjustments
(millions of Crowns) Local GAAP Debit Credit U.S. GAAP
Sales 7,952 30 [6] 7,922
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Chapter 10 – Analysis of Foreign Financial Statements
Retained earnings, December 31 2,043 2,086
Ratio Local GAAP U.S. GAAP
Current ratio 2.63 2.65
Total asset turnover 0.43 0.43
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Chapter 10 – Analysis of Foreign Financial Statements
14. (continued)
Worksheet for Restatement of Balance Sheet to U.S. GAAP for the year ended
December 31, Year 1
(1) (2) (3) (4)
Reconciling Adjustments
(millions of Crowns) Local GAAP Debit Credit U.S. GAAP
Cash 1,272 1,272
Accounts receivable 2,064 2,064
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Chapter 10 – Analysis of Foreign Financial Statements
15. Arcot Company (Restatement of financial statements – Year 2)
Reconciling Entries
[1] Inventory indirect costs
Dr. Cost of goods sold 41
15. (continued)
Worksheet for Restatement of Income and Retained Earnings to U.S. GAAP
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Chapter 10 – Analysis of Foreign Financial Statements
For the year ended December 31, Year 2
(1) (2) (3) (4)
Reconciling Adjustments
(millions of Crowns) Local GAAP Debit Credit U.S. GAAP
Sales 8,348 8,348
Cost of goods sold
(4,610
)
4
1 [1]
(4,651
)
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