United States Generally Accepted Accounting Principles (U.S. GAAP) is compared to Japanese (GAAP) for unique characteristics in financial reporting. Godwin, Goldberg, & Douthett (1998) mentioned that Non-U.S. companies listed on a primary U.S. exchange may choose to provide their U.S. shareholders with financial statements prepared according to their domestic (non-U.S.) GAAP or with U.S.-GAAP statements. In addition, differences between U.S. GAAP and Japanese GAAP include the impairment of assets, the scope of subsidiaries, and retirement benefits. Currently, Wendy’s uses Non-GAAP accounting practices to supplement understanding of financial data for investors. This consists of Earnings Before Interest Taxes and Amortization (EBITA). There is a need for comparisons and transition in regards to change accounting standards in different countries. Presently, IAS provides uniformity in financial reporting and is being used by numerous countries. Currently, some countries are switching from domestic GAAP to IAS or IFRS. The transition may be easy with the use of software that allows for comparisons and options for convergence to new accounting standards. IFRS track, Microsoft Dynamics GP, and XBRL are computer software that allows for transition and convergence.
Value Relevance of U.S. GAAP and Japan GAAP
Japanese financial statements are prepared using U.S. GAAP and the value relevance provides insight on the accounting standards that are more valuable. Godwin, Goldberg, & Douthett (1998) stated that value-relevance is term as a “significant association between earnings and stockholder’s equity or and security returns” (p.1). Godwin, Goldberg, & Douthett (1998) found that U.S. GAAP financial statements offer worth-related information across Japanese GAAP declarations (Godwin, Goldberg, & Douthett, 1998). These discoveries back the reporting obligations put on transnational companies by the U.S. Securities and Exchange Commission (Godwin, Goldberg, & Douthett, 1998). The following applies to accounting standards for U.S. GAAP and Japanese GAAP:
Non-U.S. companies listed on a primary U.S. exchange may choose to either provide their U.S. shareholders with financial statements prepared according to their domestic (non-U.S.) GAAP or provide them with U.S.-GAAP statements. The SEC requires non-U.S. firms that elect to provide domestic-GAAP financial statements to also provide a reconciliation of domestic earnings and shareholders’ equity to their U.S.-GAAP counterparts. Both reporting alternatives imply a testable SEC hypothesis that U.S.-GAAP measures provide value-relevant data beyond domestic-GAAP measures. Amir, Harris, and Venuti (1993) [henceforth AHV] provide evidence that reconciliations of domestic earnings and shareholders’ equity to U.S.-GAAP are associated with price (returns) which they interpret as an indication of value-relevance. Their result holds for both aggregate reconciliations and for some specific reconciliation components. This evidence is important to the continuing policy debate over the SEC requirement that foreign companies provide either reconciliations or U.S.-GAAP statements with Form 20-F in order to be listed on a U.S. securities exchange (Godwin, Goldberg, & Douthett, 1998, pp.1-2).
- Quote paper
- ABD (All But Dissertation) Gaberella Green (Author), 2011, Service Sector and Accounting Research, Munich, GRIN Verlag, https://www.grin.com/document/273724