Companies have an obligation towards their shareholders as well as potential investors and other stakeholders to ensure that their financial reporting methods and techniques are in line with the set rules and regulations. There are different aspects that are measured on financial reports as investors as well as shareholders look to make informed decisions on specific companies. There are differences in the models of reporting that can be identified across different companies. Globalization has played an important part in defining the methods and models of financial reporting and preparation of financial statements all over the world. There is a difference in terms of the approaches that companies especially in the services sector are using to report that does not align with companies that have branches all over the world. It is therefore, critical to establish a model that can be used for financial reporting that engulfs different aspects of the company and gives detailed reports on financial models and applications. This paper aims at assessing and comparing Apple Inc. in the manufacturing sector and Google Inc. in the services sector to understand the differences and similarities that can be drawn from the two companies in their financial statements.
One of the aspects that needs to be noted is that the two companies have to align with the set GAPP rules of financial reporting and as such their financial reports are similar. The two companies have to ensure that they meet the set standards through giving information on the income statements, balance sheet, cash flow statements as well as the stockholders equity reports. These are requirements that have been set out by the accounting bodies to ensure all companies abide by a single approach to financial reporting and the information collected can be easily derived. However, there are differences in the approaches that the companies use before making some of these reports that do not align to the other due to the size and application of their financial tools.
One of the differences between the two companies is the segmentation of sales and expenses between different markets all over the world. Google mainly operates in the U.S and although it has other branches spread all over the world, the financial statements are aggregated to form a single report (Google Inc.). Since the level of sales and expenses are not massive, it is easy for the company to make a singular report that embodies all its branches and highlights the position of the company as a single unit. Apple on the other hand, with its operations and sales being spread to countries all over the world, segments its sales to highlight its operations and models in countries all over the world (Apple Inc.). There are regional reports that are prepared on different markets where the company operates. There is a segmentation of the income statement therefore, to meet these demands and highlight how its sales and expenses are spread in all the markets. The manufacturing sector has changed with companies looking to outsource their services for lower costs of production. This can be highlighted by Apple companys urge to offshore and outsource its production to China (Apple Inc.). These dynamics require the company to prepare segmented financial statements that highlight all the expenses that the company has had to meet to ensure that it positions itself perfectly in the market.
Globalization has also meant that companies have had to factor in the differences in currencies and make financial decisions and models based on these aspects. The exchange rates of different currencies in the world fluctuate making it difficult for accountants and financial analysts to have a concrete approach that can standardize these rates (Schroeder et al, 2013). Since the governments and economic performances or indicators shape these models, it is imperative to ensure that the companies compensate for these aspects (Google Inc.). There is a shift in the level of cumulative foreign currency translation in different countries as would be reported in the financial statements. Although this aspect does not affect Google Inc. due to its positioning and conduct of business, the same cannot be said of Apple Company. The manufacturing company has to ensure that it has compensated through accounting for these effects and getting an aggregate amount (Apple Inc.). The unrealized losses and gains from the marketable securities as well as the derivative instruments are therefore, accounted for in these records.
The shareholders equity model of reporting is also differentiated due to the size and amounts that are derived and reported by the two companies. Whereas for Google Inc. there is a report that highlights all the different aspects and models of the company, Apple divides its report into different parts. The company looks to ensure that it encompasses different aspects of the company and models that are reported through giving different segments of stockholders equity. This is imperative in ensuring that there is a pre-defined model that meets the total aspects and models that are reported making it critical in developing a working structure or model accordingly (Apple Inc.). It is important to note that amid the changes in the forms and structures of the reports, the information required has all been reported and all the aspects important to the stockholders are embedded. The stockholders equity is critical to the shareholders who are the owners of the company therefore, it forms a cognizant part of the financial reports.
The balance sheet has also been split by Apple to reflect all the aspects and critical details that are pertinent to the company. There is a difference between the methods that has been used by the company in the balance sheet that does not align with the mainstream models of reporting that are used by other companies (Deegan, 2013). The company has split the balance sheet into different sections that are critical at giving a chance to assess different aspects of the company individually (Apple Inc.). Since the company has a lot of information that is aimed at highlighting the financial position of the company. The current assets have been split with individual aspects being assessed with the property plant and equipment facing the same treatment. The service sector however, groups all its individual models and statement of financial position as a single document that highlights all the different aspects of the company (Healy and Palepu, 2012). This is due to the size of the transactions and models that are used across the company accordingly.
In conclusion, although the financial statements are similar, there is a lot of information that the manufacturing company has added to make the information highlighted feasible. This is critical in assessing how the company has reached at the recorded figures and measuring the success of the company in different regions. Depending on the country and accounting policies that should be met, manufacturing entities on most cases have more information and wider reports to meet the set requirements.
Apple Inc.Retrieved from http://files.shareholder.com/downloads/AAPL/2158269308x0x861262/2601797E-6590-4CAA-86C9-962348440FFC/2015_Form_10-K_As-filed_.pdf
GOOGLE INC. (n.d.). 10-K. Retrieved from http://www.sec.gov/Archives/edgar/data/1288776/000165204416000012/goog10-k2015.htm#s9955391788fd4df5b57cec6e6edc2a5f
Healy, P., & Palepu, K. (2012). Business Analysis Valuation: Using Financial Statements. Cengage Learning.
Deegan, C. (2013). Financial accounting theory. McGraw-Hill Education Australia.
Schroeder, R. G., Clark, M. W., & Cathey, J. M. (2013). Financial accounting theory and analysis: text and cases. Wiley Global Education.
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