You Are Comparing the Financial Statements of Two Companies, Ready

question 31

Essay

You are comparing the financial statements of two companies, Ready PLC and Marlet Inc., which operate in the same industry but different countries. Ready, Inc. is a British company and prepares its financial statements using British accounting rules. Marlet is a U.S company and prepares its statements using U.S. GAAP.
The following differences in accounting methods are noted: $\begin{array}{c}\begin{array}{|l|c|}\hline&\text { Ready }\\\hline \text { Goodwill } & \begin{array}{l}\text { Goodwill is immediately } \\\text { written-off directly to } \\\text { stockholders' equity }\end{array} \\\hline \text { Inventory costing } & \begin{array}{l}\text { FIFO is used for financial } \\\text { reporting and tax purposes }\end{array} \\\hline \begin{array}{l}\text { Research and } \\\text { Development costs }\end{array} & \text { Capitalized and amortized } \\\hline\end{array}\begin{array}{l|}\hlineMarlet\\\hline\text{Goodwill is capitalized and amortized over 40 years}\\\\\\\hline\text{LIFO allowed for tax and financial reporting purposes}\\\\\hline Expensed\\\\\hline\end{array}\end{array}$
You want to restate the financial statements of Marlet in order to make them comparable with Ready PLC. Identify the adjustments you would make, and the effect on the financial statements.

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Definitions:

Moving Average

A statistical method to analyze data points by creating a series of averages of different subsets of the full data set, often used in time series analysis.

Forecasted Value

is a predicted value based on historical data and analysis, often used in statistics and economics.

Time Periods

Time periods are distinct intervals or spans of time that may be used for analysis, observation, or defining temporal constraints for specific activities.

Additive Model

A statistical model where the effects of different variables are summed together to predict the outcome.