Zachary Wall is thinking about expanding the product offerings in his company’s automotive supply store. He would like to include tires. In deciding which product lines to carry, Zachary knows that it is important to consider many factors, including quality, performance rating, price, and warranty. However, he is also interested in investigating the financial health of the tire manufacturers and has obtained recent for The Goodyear Tire & Rubber Company (“Goodyear”) and Compagnie Générale des Établissements Michelin (“Michelin”).
As it turns out, however, Zachary is having trouble comparing the two companies’ financial results. Goodyear’s headquarters are in Ohio, and it reports its financial results in U.S. dollars. Michelin’s headquarters are located in Clermont-Ferrand, France, and its are in euros. In addition, Michelin has ordered the accounts in its statement of financial position differently than Goodyear. Zachary is not sure how to read Michelin’s statement of financial position. “I had no idea that there was more than one way to prepare a statement of financial position. How can this be useful to people outside the company?”
Instructions
(a) Who are the external users of accounting information?
(b) Zachary understands that the purpose of accounting is to provide information for decision-making. He understands that currencies change from country to country (e.g., Canadian dollars, U.S. dollars, euros), but he would like to know whether you think that basic decision-making also changes from country to country.
(c) Will Zachary be able to find the information he needs about the different tires’ quality, performance rating, price, and warranty in the If not, where might he find such information?
(d) Zachary is having difficulty comparing Michelin’s statement of financial position to Good year’s because of the different ordering used by each company in its statement. Explain to Zachary whether he should be able to compare the two statements despite their ordering.
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