22 Jun Read and review the selected case study from the required text, and answer the analysis questions. After reviewing the background section of the Swisscom AG?in your textbook, provide
Read and review the selected case study from the required text, and answer the analysis questions.
After reviewing the background section of the Swisscom AG in your textbook, provide answers to the following questions:
1. Use the information in Note 27 to restate Swisscom’s consolidated financial statements in accordance with U.S. GAAP. Begin by constructing debit/credit entries for each reconciliation item, and then post these entries to columns 2 and 3 using the worksheets provided in the textbook.
2. Calculate each of the following ratios under both IFRS and U.S. GAAP, and determine the percentage differences between them, using IFRS ratios as the base:
- Net income / Net revenues
- Operating income / Net revenues
- Operating income / Total assets
- Net income / Total shareholders’ equity
- Operating income / Total shareholders’ equity
- Current assets / Current liabilities
- Total liabilities / Total shareholders’ equity
3. Which of these ratios is most (least) affected by the accounting standards used?
From: Doupnik, T., & Perera, H. (2014). International accounting (4th ed.) (pp. 535–536). New York, NY: McGraw-Hill Education.
Sheet1
| Courtney Hofland | |||||
| 6/25/21 | |||||
| Case Study 10-1 | |||||
| Swisscom AG | |||||
| Name of Acct. | Debit | Credit | |||
| A. | Prop. Plant & Equip. | 54 | |||
| Dep. & Amortization | 5 | ||||
| Interest Expense | 13 | ||||
| Retained Earnings | 46 | ||||
| B. | Prop. Plant & Equip. | 107 | |||
| Other Long-term Liabilities | 98 | ||||
| Restructuring Charges | 205 | ||||
| C. | Dep. & Amortization | 5 | |||
| Prop. Plant & Equip. | 5 | ||||
| D. | Other None-Current Assets | 475 | |||
| Dep. & Amortization | 188 | ||||
| Goods and Services Purch. | 370 | ||||
| Retained Earnings | 293 | ||||
| E. | Investments | 50 | |||
| Equity of Net Loss/ Affiliate | 50 | ||||
| TOTAL | 982 | 982 | |||
| Restating Swisscom's Financial Statements From IFRS to U.S. GAAP | |||||
| IFRS | Debit | Credit | U.S. GAAP | ||
| Consolidated Statement of Operations | |||||
| Net Revenues | 9,842 | 9,842 | |||
| Capitalized Costs and Changes in Inv. | 277 | 277 | |||
| TOTAL | 10,119 | 10,119 | |||
| Goods and Services Purchased | 1,666 | 370 | 1,296 | ||
| Personnel Expenses | 2,584 | 2,584 | |||
| Other Operating Expenses | 2,090 | 2,090 | |||
| Depreciation & Amortization | 1,739 | 5 | 1,937 | ||
| 5 | |||||
| 188 | |||||
| Restructuring Charges | 1,726 | 205 | 1,521 | ||
| Total Operating Expenses | 9,805 | 9,428 | |||
| IFRS | Debit | Credit | U.S. GAAP | ||
| Operating Income | 314 | 691 | |||
| Interest Expense | -428 | 13 | -415 | ||
| Financial Income | 25 | 25 | |||
| Income (Loss) Before Income Taxes | -89 | 301 | |||
| and Equity in Net Loss of Affiliated | |||||
| Companies | |||||
| Income Tax Expense | 1 | 1 | |||
| Income (Loss) Before Equity in Net | -90 | 300 | |||
| Loss of Affiliated Company | |||||
| Equity in Net Loss of Affiliated Comp. | -325 | 50 | -275 | ||
| Net Income (Loss) | -415 | 25 | |||
| IFRS | Debit | Credit | U.S. GAAP | ||
| Consolidated Retained Earnings | |||||
| Statement | |||||
| Trade Accounts Receivable | 2,052 | 2,052 | |||
| Inventories | 169 | 169 | |||
| Other Current Assets | 34 | 34 | |||
| Total Current Assets | 2,255 | 2,255 | |||
| Non-Current Assets | |||||
| Property, Plant, and Equipment | 11,453 | 54 | 11,609 | ||
| 107 | |||||
| 5 | |||||
| Investments | 1238 | 50 | 1288 | ||
| Other Non-Current Assets | 220 | 475 | 695 | ||
| Total Non-Current Assets | 12,911 | 13,592 | |||
| Total Assets | 15,166 | 15,847 | |||
| IFRS | Debit | Credit | U.S. GAAP | ||
| Liabilities and Shareholder's Equity | |||||
| Statement | |||||
| Current Liabilities | |||||
| Short-Term Debt | 1178 | 1178 | |||
| Trade Accounts Payable | 889 | 889 | |||
| Accrued Pension Costs | 789 | 789 | |||
| Other Current Liabilities | 2213 | 2213 | |||
| Total Current Liabilities | 5069 | 5069 | |||
| Long-Term Liabilities | |||||
| Long-Term Debt | 6200 | 6200 | |||
| Finance Lease Obligation | 439 | 439 | |||
| Accrued Pension Costs | 1488 | 1488 | |||
| Accrued Liabilities | 709 | 709 | |||
| Other Long-Term Liabilities | 338 | 98 | 240 | ||
| Total Long-Term Liabilities | 9174 | 9076 | |||
| Total Liabilities | 14243 | 14145 | |||
| Shareholder's Equity | |||||
| Retained Earnings | 1352 | 2131 | |||
| Unrealized Market Value Adj. on Sec. | 39 | 39 | |||
| Available for Sale | |||||
| Cumulative Translation Adjustment | -161 | -161 | |||
| Total Shareholder's Equity | 1230 | 2009 | |||
| Total Liabilities and Shareholder's | 15473 | 794 | 794 | 16154 | |
| Equity | |||||
| Ratios | IFRS | U.S. GAAP | Difference | ||
| 1. Net Income/ Net Revenues | -4.22% | 0.25% | -105.92417061611400% | ||
| 2. Operating Income/ Net Revenues | 3.19% | 7.02% | 120.06269592476500% | Most Affected | |
| 3. Operating Income/ Total Assets | 2.03% | 4.28% | 110.83743842364500% | ||
| 4. Net Income/ Total Shareholder's Equity | -33.74% | 1.24% | -103.67516301126300% | ||
| 5. Operating Income/ Total Shareholder's Equity | 25.53% | 34.40% | 34.743439091265200% | ||
| 6. Current Assets/ Current Liabilities | 51.00% | 0.51% | -99.00% | Least Affected | |
| 7. Total Liabilities/ Total Shareholder's Equity | 11.58% | 7.04% | -39.205526770293600% | ||
| Differences=(U.S. GAAP-IFRS)/IFRS | |||||
| Through these figures we can conclude Current Assets/ Current liabilities being the least affected by specified accounting standards in reference to documentation and Operating Income/ Net Revenues affected most by specified accounting standards. |
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