Chapter 1, Introductory Cases Dublin Small Animal Clinic, Inc. 1 page; introductory

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13 pages; advanced

U.S. GAAP vs. IFRS financial statements

Non-U.S. GAAP and non-IFRS financial statements

Adjustments for changes in exchange rates

Although it is a German company, SAP reports using U.S. GAAP in Euros, so its financial statements are comparable to its primary competitors, who all report using U.S. GAAP.

For various reasons, SAP also reports results in non-U.S. GAAP in Euros because it disagrees with some U.S. GAAP rules, and reports in non-U.S. GAAP using constant currency in Euros (same exchange rate as the previous year) because it believes that for some purposes, that is more reflective of the firm’s year-to-year performance.

SAP also reports non-U.S. GAAP using constant currency in U.S. dollars for comparison with U.S. firms. Because it will be required to report using IFRS next year, SAP then reports results using IFRS in Euros, and reports non-IFRS in Euros (same changes it makes to correct for U.S. GAAP rules it disagrees with).

The case provides explanations for all of the different reports listed above and an overview of the remaining significant differences between U.S. GAAP and IFRS reporting rules. Although the case is relatively technical, it does provide an opportunity for students to consider whether there is even close to a correct answer as to what are the best accounting policies.

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