Fiat Group's First-Time Adoption of IFRS
Fiat Group’s first-time adoption of IFRS
Course: Corporate valuation Authors: Hanlin Wang David Řeha Jin Zhang Joy Nguyen
On Wednesday, February 24, 2010 the SEC reiterated its support for International Financial Reporting Standards (IFRS), this was conditional upon the accomplishment of a number of milestones. The SEC staff had developed a comprehensive work plan that would help to keep the process moving forward.
Including Fiat,more and more huge cooperations are adopting IFRS accounting policies since 2000,not only because it makes more transparency in statements,but it tenses or looses the strict that enhance the efficiency and accuracy of accounting. 1. What are Fiat’s key accounting policies? Which of Fiat’s key accounting policies are affected by the adoption of IFRS?
In accordance with the case, the Italy-based Fiat Group’s revenues were mainly generated from the production and sales of passenger vehicles (including large-volume brands and luxury, high-margin brands), tractors, agricultural equipments, and light commercial vehicles. The Group’s main operations was manufacturing cars which needed as many new models, technologies, creativity, and innovations as possible. Consequently, it could be seen easily that the Fiat Group had almost relied on its Research and Development (R&D) activities. Additionally, sales were also a very important activity in every organization, so the Fiat Group was not an exception. Therefore, applying new accounting policy for revenue recognition to show that the Group’s profit was favorable was very vital. The Fiat Group first-time adopted IFRS and the reporting date of its first IFRS statement was December 31, 2005. After changing to IFRS, R&D costs were affected the most. Under Italian GAAP, R&D costs incurred were capitalized or charged to operating expenses. For the Fiat Group, it has primarily expensed its R&D costs when they were incurred. Under IFRS, the Group has capitalized
Course: Corporate valuation Authors: Hanlin Wang David Řeha Jin Zhang Joy Nguyen
On Wednesday, February 24, 2010 the SEC reiterated its support for International Financial Reporting Standards (IFRS), this was conditional upon the accomplishment of a number of milestones. The SEC staff had developed a comprehensive work plan that would help to keep the process moving forward.
Including Fiat,more and more huge cooperations are adopting IFRS accounting policies since 2000,not only because it makes more transparency in statements,but it tenses or looses the strict that enhance the efficiency and accuracy of accounting. 1. What are Fiat’s key accounting policies? Which of Fiat’s key accounting policies are affected by the adoption of IFRS?
In accordance with the case, the Italy-based Fiat Group’s revenues were mainly generated from the production and sales of passenger vehicles (including large-volume brands and luxury, high-margin brands), tractors, agricultural equipments, and light commercial vehicles. The Group’s main operations was manufacturing cars which needed as many new models, technologies, creativity, and innovations as possible. Consequently, it could be seen easily that the Fiat Group had almost relied on its Research and Development (R&D) activities. Additionally, sales were also a very important activity in every organization, so the Fiat Group was not an exception. Therefore, applying new accounting policy for revenue recognition to show that the Group’s profit was favorable was very vital. The Fiat Group first-time adopted IFRS and the reporting date of its first IFRS statement was December 31, 2005. After changing to IFRS, R&D costs were affected the most. Under Italian GAAP, R&D costs incurred were capitalized or charged to operating expenses. For the Fiat Group, it has primarily expensed its R&D costs when they were incurred. Under IFRS, the Group has capitalized