ACC501 MOD1 CASE Essay

Submitted By hunceker1
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Pages: 9

Introduction to Financial Accounting

Module 1 - CASE

For
Dr.

Intro Abercrombie & Fitch Co. (A&F) an American-based fashion retailer that has more so focused on their profitable men, women and kids objective market. They operate by way of retail stores and direct-to-consumers through their website. Hennes & Mauritz (H&M) a middle-market clothing company based in Stockholm, Sweden. They opened their first store in 1947 and have expanded to approximately 2,226 stores located in thirty-eight countries. The purpose of this paper is would be to highlight financial aspects from two very similar type fashion industries that fall under different accountant regulations for their overseeing purposes. As one is an international company and the other is a domestic company. A&F represents the iconic ideal American brand, with its casual luxury approach, while H&M takes on a hipper, more European flamboyant style.

Accounting Standards
In America we want to attach a set of rules to everything, the GAAP is a common set of accounting principles, standards and procedures that companies like A&F use to compile their financial statements. GAAP is set by policy boards. The GAAP has simply become the commonly accepted way of recording and reporting accounting information.

We can say that there is at least a minimum level of consistency imposed on financial statements thank to the GAAP. We know that companies should and are to be expected to follow GAAP rules when reporting their financial data via financial statements. If companies are not following the GAAP standards and procedures for a financial statement you should be on your guard. The need for global consistency is a must in today’s business environment. H&M compiles in accordance with IFRS international accounting standards, as adopted by the EU and the Annual Accounts Act. As the business environment becomes increasingly global and companies routinely list on the stock exchange in many countries, the need for consistent worldwide the reporting standards becomes more and more of a hotter topic. The IFRS, which was formerly known as International Accounting Standards, presents the needs and address these issues. The goal of IFRS is to create comparable, reliable and transparent financial statements that will allow for cross-border capital raising and trade. Auditing Standards
H&M’s audit opinion is addressed to the “Annual General Meeting of H&M,” because they are the company’s decision-making body not the the “Board of Directors and Shareholders” like A&F's. H&M’s Audit Report begins with “we have audited” (H&M (pg35), 2010) while A&F’s begins with “in our opinion” (A&F (pg94), 2010). Clearly differences in auditors, as some auditors will alter the introduction in order to give a perception of how a company has come to the conclusions that you are about to find in their published report. H&M’s auditors listed what they audited and for which financial year. Additionally, H&M’s auditors set a clear expectation for their responsibility by express their opinion based on the audit and that the said audit will give a “high, but not absolute, degree of assurance that the annual accounts… are free from material misstatement” (H&M (pg33), 2010). The annual report was prepared in accordance with the generally accepted accounting principles of Sweden and the consolidated accounts in accordance with IFRS, both of which gave “a true and fair view of the company’s and Group’s earnings and financial position”. (H&M (pg33), 2010) As A&F's financials “present fairly” and were prepared in accordance with the “accounting principles generally accepted in the United States of America”. (A&F (pg94), 2010) A&F's Audit info mentioned the company's internal controls based on the assessed risk (A&F (pg87), 2009) while H&M's did not. Also, the last paragraph of H&M’s Audit Report is dedicated to recommendations to the Annual General Meeting, but…