China Petroleum & Chemical Corporation (Sinopec) provides two sets of financial

Question

China Petroleum & Chemical Corporation (Sinopec) provides two sets of financial statements in its annual report. One set of financial statements in prepared in accordance with Chinese (PRC) Accounting Rules and Regulations and the other is prepared in accordance with IFRS. The company also provides a reconciliation of IFRS net income and net assets of U.S GAAP. Sinopec reported the following amounts under three different sets of accounting rules in its 2006 annual report: Determine the percentage difference in net profit attributable to shareholders and average total equity attributable to equity shareholders for 2006 under the three different sets of accounting rules. Calculate return on average total equity (Profit attributable to shareholders/ Average total equity) for 2006 under the three different sets of accounting rules. Determine the percentage difference in return on average total equity under the three sets of rules. Which of the three measures of return on avera

Explanation / Answer

a. Taking U.S.GAAP as the base rule U.S.GAAP PRC& GAAP IFRS PRC& IFRS Net profit attributable to Equity shareholders 2006 54862 50664 55408 % age difference 100 -7.65 1.00 -8.56 Total Equity attributable to Equity shareholders 2006 262297 254875 262297 Total Equity attributable to Equity shareholders 2005 222803 215623 222803 Av.Total Equity attributable to Equity shareholders 2006 242550 235249 242550 % age difference 100 -3.01 0.00 -3.01 b. Return on Av.Total Equity attributable to Equity shareholders 2006( N/P by Av. Equity) 22.62 21.54 22.84 -4.79 1.00 c. % age difference in Return 100 -4.79 1.00 -5.72 d. Assessing as per PRC is more useful as it is more conservative

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