Tue. Aug 4th, 2020

Swisscom AG Consolidated Financial Statement

7 min read

Swisscom AG Consolidated Financial Statement Note 27 acknowledges the differences between statements prepared under IFRS and those prepared under the U.S GAAP. The note states that the financial statements of Swisscom were prepared in accordance with IFRS. It also indicates that the application of GAAP would have affected the balance sheet and the net income. Using information presented under this note, the financial statements of Swisscom were restated. The recasting is as presented in the tables below and it helps in showing how differences in accounting standards affect reporting quality (Lin, Riccardi & Wang, 2012).
Reconciliation Entries Debit Credit a. Property, plant and equipment 54 Depreciation and amortization 5 Interest expense 13 Retained earnings 46 b. Property, plant and equipment 107 Other long-term liabilities 98 Restructuring charges 205
c. Depreciation and amortization 5 Property, plant and equipment 5 d. Other noncurrent assets 475 Depreciation and amortization 188 Goods and services purchased 370 Retained earnings 293 e. Investments 50 Equity in net loss of affiliate 50
Total 982 982 Using the reconciliation entries as presented above, the consolidated statement of operations and the balance sheet were recast as shown in the worksheet below. The recasting resulted in a net income of 25 under the U.S. GAAP as compared to a net loss of 415 under the IFRS. This indicates that the entries and accounting procedures under IFRS can result in material understatement of the earnings of a corporation. This helps in explaining the reason why having standardized reporting requirements are set and also explain why any change in the reporting standards by the organization must be accompanies by the restating of previously produced statements.
The understatement of the profitability of the organization resulted from understatement in elements reported differently under GAAP as compared to IFRS. The main elements include elements of depreciation and the restructuring costs considering that there are those costs that ought to be capitalized while others need to be expenses in the current period. These entries also include the interest expense.
From the consolidated statement of retained earnings, the analysis indicates that the total retained earnings on 1/1/97 were at (151) under IFRS while under GAAP, the retained earnings were found to be 188. Considering the net income information, the retained earnings position of the organization would be at 2,131 under the GAAP compared to a lower value of 1,352 as reported under IFRS. This indicates the implications that the different reporting standards have on the retained earnings of the organization.
Focusing on the balance sheet, the organization reported no material changes in the current assets under both IFRS and GAAP. However, the influence of the different standards on the measurement, recording, and reporting of depreciation and loss on investments has major implications on the fixed or long-term assets of the organization (Jamal et al, 2008). This is why the total non-current assets were reported at 12,911 under IFRS and found to be 13,592 under the GAAP. Similarly, there were implications on the long-term liabilities of the organization owing to the treatment of interest on borrowed funds. This is the reason why the total long-term liabilities were found to be 9,174 under IFRS and lower at 9,076 under GAAP. Other than the retained earnings component, no changes were made to the shareholder’s equity.
(1) (2) (3) (4) Reconciling Adjustments IFRSs Debit Credit Note U.S. GAAP Consolidated Statement of Operations Net revenues 9,842 9,842 Capitalized cost and changes in inventories 277 277 Total 10,119 10,119
https://www.coursehero.com/file/p4rsb63/Chapter-09-Analysis-of-Foreign-Financial-Statements-Case-9-1-Swisscom-AG/ 100%
https://www.coursehero.com/file/p7858qo/Required-1-Use-the-information-in-Note-27-to-restate-Swisscoms-consolidated/ 100%
https://www.coursehero.com/file/p76gi6f/Long-term-investments-1188-62-9-1126-Deferred-charges-436-34-4-402-Total-assets/ 100%
https://www.coursehero.com/file/p3cmr3/Long-term-investments-1188-62-9-1126-Deferred-charges-436-34-4-402-Total-assets/ 100%
https://www.iwu.edu/~golson/acc340/340solutions/chapter09.doc 100%
(1) (2) (3) (4) Reconciling Adjustments IFRSs Debit Credit Note U.S. GAAP Consolidated Statement of Operations Net revenues 9,842 9,842 Capitalized cost and changes in inventories 277 277 Total 10,119 10,119
Goods and services purchased 1,666 370 d 1,296 Personnel expenses 2,584 2,584 Other operating expenses 2,090 2,090 Depreciation and
https://www.coursehero.com/file/p76gi6f/Long-term-investments-1188-62-9-1126-Deferred-charges-436-34-4-402-Total-assets/ 100%
https://www.coursehero.com/file/p7858qo/Required-1-Use-the-information-in-Note-27-to-restate-Swisscoms-consolidated/ 100%
https://www.coursehero.com/file/p5kjkmg/Other-noncurrent-assets-475-Depreciation-and-amortization-188-Goods-and/ 100%
https://www.coursehero.com/file/p4rsb63/Chapter-09-Analysis-of-Foreign-Financial-Statements-Case-9-1-Swisscom-AG/ 100%
https://www.iwu.edu/~golson/acc340/340solutions/chapter09.doc 100%
http://documentslide.com/documents/chapter-09-563fa6d0012b1.html 100%
https://www.coursehero.com/file/p3cmr3/Long-term-investments-1188-62-9-1126-Deferred-charges-436-34-4-402-Total-assets/ 100%
Goods and services purchased 1,666 370 d 1,296 Personnel expenses 2,584 2,584 Other operating expenses 2,090 2,090 Depreciation and amortization 1,739 5 a 1,937 5 c 188 d Restructuring charges 1,726 205 b 1,521
Total operating expenses 9,805 9,428 Operating income 314 691 Interest expense (428) 13 a (415) Financial income 25 25 Income (loss) before income taxes and equity in net loss of affiliated companies (89) 301
https://www.coursehero.com/file/p76gi6f/Long-term-investments-1188-62-9-1126-Deferred-charges-436-34-4-402-Total-assets/ 100%
https://www.coursehero.com/file/p4rsb63/Chapter-09-Analysis-of-Foreign-Financial-Statements-Case-9-1-Swisscom-AG/ 100%
https://www.coursehero.com/file/p3cmr3/Long-term-investments-1188-62-9-1126-Deferred-charges-436-34-4-402-Total-assets/ 100%
https://www.coursehero.com/file/p7g2lsl/Depreciation-and-amortization-5-Property-plant-and-equipment-5-iv-Other/ 100%
https://www.iwu.edu/~golson/acc340/340solutions/chapter09.doc 100%
http://documentslide.com/documents/chapter-09-563fa6d0012b1.html 100%
Total operating expenses 9,805 9,428 Operating income 314 691 Interest expense (428) 13 a (415) Financial income 25 25 Income (loss) before income taxes and equity in net loss of affiliated companies (89) 301
Income tax expense 1 1 Income (loss) before equity in net loss of affiliated companies (90) 300 Equity in net loss of affiliated companies (325) 50 e (275) Net income (loss) (415) 25
https://www.coursehero.com/file/p76gi6f/Long-term-investments-1188-62-9-1126-Deferred-charges-436-34-4-402-Total-assets/ 100%
https://www.coursehero.com/file/p4rsb63/Chapter-09-Analysis-of-Foreign-Financial-Statements-Case-9-1-Swisscom-AG/ 100%
https://www.coursehero.com/file/p3cmr3/Long-term-investments-1188-62-9-1126-Deferred-charges-436-34-4-402-Total-assets/ 100%
https://www.iwu.edu/~golson/acc340/340solutions/chapter09.doc 100%
Income tax expense 1 1 Income (loss) before equity in net loss of affiliated companies (90) 300 Equity in net loss of affiliated companies (325) 50 e (275) Net income (loss) (415) 25
Consolidated Ret Earnings Statement Retained earnings,
https://www.iwu.edu/~golson/acc340/340solutions/chapter09.doc 100%
https://www.coursehero.com/file/p4rsb63/Chapter-09-Analysis-of-Foreign-Financial-Statements-Case-9-1-Swisscom-AG/ 100%
https://www.coursehero.com/file/p3cmr3/Long-term-investments-1188-62-9-1126-Deferred-charges-436-34-4-402-Total-assets/ 100%
Consolidated Ret Earnings Statement Retained earnings,
1/1/97 (151) 46 a 188 293 d Net loss (415) 25 Profit distribution declared (1,282) (1,282) Conversion of loan payable to equity 3,200 3,200 Retained earnings, 12/31/97 1,352 2,131
https://www.iwu.edu/~golson/acc340/340solutions/chapter09.doc 100%
https://www.coursehero.com/file/p4rsb63/Chapter-09-Analysis-of-Foreign-Financial-Statements-Case-9-1-Swisscom-AG/ 100%
https://www.coursehero.com/file/p3cmr3/Long-term-investments-1188-62-9-1126-Deferred-charges-436-34-4-402-Total-assets/ 100%
1/1/97 (151) 46 a 188 293 d Net loss (415) 25 Profit distribution declared (1,282) (1,282) Conversion of loan payable to equity 3,200 3,200 Retained earnings, 12/31/97 1,352 2,131
(1) (2) (3) (4) Reconciling Adjustments IFRSs Debit Credit Note U.S. GAAP Consolidated Balance Sheet Assets Current assets Cash and
https://www.coursehero.com/file/p4rsb63/Chapter-09-Analysis-of-Foreign-Financial-Statements-Case-9-1-Swisscom-AG/ 100%
https://www.coursehero.com/file/p5v939r/Income-loss-before-equity-in-net-loss-of-aFliated-companies-90-300-Equity-in/ 100%
https://www.iwu.edu/~golson/acc340/340solutions/chapter09.doc 100%
(1) (2) (3) (4) Reconciling Adjustments IFRSs Debit Credit Note U.S. GAAP Consolidated Balance Sheet Assets Current assets Cash and
cash equivalents 256 256 Securities available for sale 51 51 Trade accounts receivable 2,052 2,052
https://www.iwu.edu/~golson/acc340/340solutions/chapter09.doc 100%
https://www.coursehero.com/file/p7fakmh/GAAP-Consolidated-Balance-Sheet-Assets-Current-assets-Cash-and-cash-equivalents/ 100%
https://www.coursehero.com/file/p7g2lsl/Depreciation-and-amortization-5-Property-plant-and-equipment-5-iv-Other/ 100%
http://www.chegg.com/homework-help/questions-and-answers/instructions-restate-broadwell-s-consolidated-financial-statements-accordance-us-gaap-ente-q12001823 100%
http://www.chegg.com/homework-help/questions-and-answers/instructions-restate-broadwell-s-consolidated-financial-statements-accordance-us-gaap-ente-q11949731 100%
http://studylib.net/doc/7458607/chapter-9 100%
https://www.coursehero.com/file/p4rsb63/Chapter-09-Analysis-of-Foreign-Financial-Statements-Case-9-1-Swisscom-AG/ 100%
cash equivalents 256 256 Securities available for sale 51 51 Trade accounts receivable 2,052 2,052
Inventories 169 169 Other current assets 34 34 Total current assets 2,562 2,562 Non-current assets Property, plant and equipment 11,453 54 a 11,609 107 b 5 c Investments 1,238 50 e 1,288
Other non-current assets 220 475 d 695 Total non-current assets 12,911 13,592 Total assets 15,473 16,154 Liabilities and shareholders’ equity Current liabilities Short-term debt 1,178 1,178 Trade accounts payable 889 889
Accrued pension cost 789 789 Other current liabilities 2,213 2,213 Total current liabilities 5,069 5,069 Long-term liabilities Long-term debt 6,200 6,200 Finance lease obligation 439 439 Accrued pension cost 1,488 1,488
Accrued liabilities 709 709 Other long-term liabilities 338 98 b 240 Total long-term liabilities 9,174 9,076 Total liabilities 14,243 14,145 Shareholders’ equity Retained earnings 1,352 R/E 2,131 Unrealized market value adjustment on securities available for sale 39 39
Cumulative translation adjustment (161) (161) Total shareholders’ equity 1,230 2,009 Total liabilities and shareholders’ equity 15,473 794 794 16,154 Based on the information provided,
https://www.coursehero.com/file/p6bse3u/Credit-Note-US-GAAP-Consolidated-Balance-Sheet-Assets-Current-assets-Cash-and/ 73%
https://www.iwu.edu/~golson/acc340/340solutions/chapter09.doc 73%
https://www.swisscom.ch/content/dam/swisscom/en/ghq/investor_relations/documents/1998_form20-f_en.pdf 73%
Cumulative translation adjustment (161) (161) Total shareholders’ equity 1,230 2,009 Total liabilities and shareholders’ equity 15,473 794 794 16,154 Based on the information provided, ratios were computed as follows for both the IFRS and the GAAP financial statements.
Ratios IFRSs U.S. GAAP Difference* 1. Net income/Net revenues -4.22% 0.25% -106.02% 2. Operating income/Net revenues 3.19% 7.02% 120.06% 3. Operating income/Total assets 2.03% 4.28% 110.79% 4. Net income/Total shareholders’ equity -33.74% 1.24% -103.69%
5. Operating income/Total shareholders’ equity 25.53% 34.40% 34.73% 6. Current assets/Current liabilities 0.51 0.51 0.00% 7. Total liabilities/Total shareholders’ equity 11.58 7.04 -39.20% * Difference = (U.S. GAAP – IFRSs) / IFRSs The analysis indicates that the Operating income/Net revenues is the ratio most affected by the accounting standards used. This is because the items of the financial statements affected by the different reporting standards are majorly elements of expenditure and these include the interest expense and the depreciation (Van der Meulen, Gaeremynck & Willekens, 2007). On the other hand, the current ratio is unaffected by the accounting standards used because current assets and current liabilities are measured and reported similarly under the two frameworks herein assessed.

Copyright © All rights reserved. | Newsphere by AF themes.