Financing Reporting Cycle Exam

The financial reporting cycle in a big corporation

1/ Composition of an accounting team.

The top responsibility is in the hands of the Financial Director in the country or for the selected area..level Under him he has several accountants specialized in specific accounting areas (customer suppliers cash &banks) working with the statutory GAAP. At the same level of the accountants,referring to the FO, the are several controllers working in financial planning and analysis and translating the financial statements from the statutory to the mother company GAAP.

2/ How do you understand Statutory GAAP?

General Accepted Accounting Principles; are accounting rules used to prepare, present, and report financial statements for a wide variety of entities, includingpublicly-traded and privately-held companies, non-profit organizations, and governments.

3/ Why is JCI using US GAAP?

Because JCI incorporated in the USA and presents the financial statements conforming to the US law

4/ What does IFRS mean?

IFRS means International Financial Reporting Standards

5/ What does an accounting team at a regional level?

works with the GAAP ofthe mother company consolidating at regional level the various country statements of the area

7/ How can you explain the difference between “POC percentage of completion” and “AT” at completion? Take an example

In the POC you are allowed to recognize at the end of the exercise on your P&L a percentage of revenues based on the percentage of costs you had in a the project whichrequires more than one year to be completed.

With the AC method you are allowed to recognize the revenues only in the exercise in which you complete the project.

8/ How can you explain the difference between LIFO and FIFO (last in first out and first in first out) and can you see the consequences of using one or the other system?

FIFO is based on the assumption that items are soldin the order acquired, the cost of the most recent purchases remains in the inventory. LIFO is based on the assumption that the most recently purchased items are sold first, the cost of the earliest purchased remains in the inventory.







9/ Why do you think that is very important for the partners to know which GAAP has been used?

The adoption of one particular GAAP can affectdeeply values contained in financial statements.
The main differences between GAAPs are in the depreciation system (concerns the evaluation of investments over a specific threshold), evaluation of long term debts and the evaluation of payables and receivables. In conclusion, partners interested in evaluating your financial position should consider which GAAP you use to have a clearanalysis.



10/ What do you about the new system of depreciation methods?

The system has gone through a radical change with the introduction of the Salvage Value. This gives the opportunity at the end of the depreciation period to maintain a pre established value for the investment, which should be calculated forecasting the possible market value of the item at the end of the period. Furthermore,with the introduction of the Unit Of Production method we can use a more realistic depreciation linked to the actual use of the item which should allocate a realistic quantity of costs to the P&L.



































The audit of the financial statements


*11/ Why do you think a company has to go through an Audit?

A financial audit isthe examination by a third independent art o the financial statements. Is important for a company to go through an Audit cause, as a third part, it can better understand the business of the company and the environment in which it operates and determine the risks. Also check the standard legislation.

13/ Why did the Audit methodology change in 2000?

It changed as a consequence of the Enron...