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Questions
19-1. What is the unique market niche for GPS, and what does it have to offer compared to
larger banks and other financial institutions?
19-2. What do you think are the major obstacles to success for GPS in Europe?
Teaching Tips: Have students visit the Web site of the International Accounting Standards
Board (IASB) at www.iasb.org for the latest developments in international accounting and
convergence. Review the PowerPoint slides for Chapter Nineteen and select those you find
most useful for enhancing your lecture and class discussion. For additional visual summaries
of key chapter points, also review the map, figures, and tables in the text.
CLOSING CASE
H&M: The Challenges of Global Expansion and the Move to Adopt International
Financial Reporting Standards
This case explores the accounting standards of Hennes & Mauritz AB (also known as H&M), the
Swedish MNE that is a trend setter in the latest fashion trends, with the goal of giving customers
unbeatable value by offering fashion and quality at the best price. H&M must comply with the
accounting standards of its home country, Sweden, as well as the accounting standards of the
European Union. The case traces the changes H&M makes in its reporting standards over the
past few years. Prior to the move to IFRS in 2006, H&M reported its results in compliance with
Swedish GAAP. In this case H&M is dealing with multiple reporting issues and questions of
compliance.
QUESTIONS
19-3. If an investor wants to compare the financial results of The Gap, Inditex, and H&M, what
difference does it make that their financial statements are prepared according to different
GAAP? Would you expect there to be a big difference between U.S. GAAP as used by The Gap
and IFRS as used by H&M and Inditex?
19-4. What type of IFRS did H&M decide to disclose in its financial statements in 2005? In
2015?
H&M converted to IFRS in 2005. Prior to the move to IFRS, H&M reported its
financial results in compliance with Swedish GAAP —a bit of a mixture between
_________________________
ADDITIONAL EXERCISES: Multinational Accounting
Exercise 19.1. Ask the students to find the financial statements of a company headquartered
in Europe and one headquartered in the United States. Are these statements comparable?
What are the major differences in accounting standards that one might want to be aware of
when trying to compare the financial results as reported by these two companies? (LO: 1,
Learning Outcome: To examine the major factors influencing the development of accounting
practices in different countries, AACSB: Analytical Skills.)
Exercise 19.2. Have students look at Coca-Cola’s most recent financial statements. What
impact do currency fluctuations have on Coca-Cola’s business results? Are there any notes
in the financial statements that explain the handling and/or impact of currency fluctuations
on reported results? (LO: 3, Learning Outcome: To explain how companies account for
foreign-currency transactions and translate foreign-currency financial statements, AACSB:
Dynamics of the Global Economy.)
Exercise 19.3. Many transition economies such as China, Russia, and the former Soviet
satellite nations have not only different accounting standards from those found in West
Europe, North America, and Japan, but their accounting systems are seriously
underdeveloped, given the dynamics of today’s global business environment. Ask the
students to discuss the logic of those countries adopting the International Accounting
Standards as the basis of their national business accounting systems. (LO: 2, Learning
Outcome: To examine the global convergence of accounting standards, AACSB:
Multicultural and Diversity Understanding.)
