In order to compare the financial statements of Toyota Corporation to the financ

Question

In order to compare the financial statements of Toyota Corporation to the financial statements of General Motors, it would be preferable to use:

A.

U.S. Generally Accepted Accounting Principles for both companies.

B.

International Financial Reporting Standards for both companies.

C.

U.S. Generally Accepted Accounting Principles for Toyota Corporation and International Financial Reporting Standards for General Motors.

D.

U.S. Generally Accepted Accounting Principles for General Motors and International Financial Reporting Standards for Toyota.

Explanation / Answer

Ans: )

Option B: International Financial Reporting Standards for both companies.

It is preferable to use International Financial Reporting Standards (IFRS) for both companies, as the IFRS are a globally accepted set of standards for financial reporting and accounting, and are used globally thus making them highly comparable worldwide and enabling us to freely compare the converted financial statements of General Motors to not only Toyota but other multinational automobile companies as well. On the other hand, US GAAP is exclusively used within the United States making it less comparable and creating the requirement to convert each financial statement to US GAAP.

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