Accounting Principles - Paper
a) Which accounting standards or Generally Accepted Accounting Principles (GAAP) are used in preparing the financial statements of the company (International, local or US GAAP standards)? Where did you find that information?
For our accounting analysis we found the key accounting policies and related them to our identified key success factors. McDonald’s most important factors include consolidation, financial statement estimates, revenue recognition, advertising costs, compensation from stocks, property and equipment, goodwill, long-lived assets, franchise revenues, and employee benefit plans. We determined that McDonald’s has a large amount of flexibility in its accounting methods. Their depreciation methods and goodwill impairment practices are very important in their financial statements because the numbers are so substantial. McDonald’s uses a standard accounting strategy that easily compares its financial statements with its competitors. When evaluating their quality of disclosure, we determined that the company explain the choices they make and their future estimates in the Letter to the Shareholders and the Management Discussion and Analysis. Their footnotes are also very easy to understand. There was nothing in our ratios that raised a red flag for us, as all the numbers convey clear patterns in the last five years. There was no reason to undo any accounting distortions because we did not find any skeptical information that was not explained in their disclosures.
The following is a summary of significant accounting policies identified by the managers of McDonald’s.
• Consolidation: The consolidated financial statements include the accounts of the company and its subsidiaries.
• Estimates in Financial Statements: McDonald’s uses accounting principles generally accepted in the U.S. which require management to make estimates and assumptions which could differ from actual results that affect the amounts reported in the financial statements.
For our accounting analysis we found the key accounting policies and related them to our identified key success factors. McDonald’s most important factors include consolidation, financial statement estimates, revenue recognition, advertising costs, compensation from stocks, property and equipment, goodwill, long-lived assets, franchise revenues, and employee benefit plans. We determined that McDonald’s has a large amount of flexibility in its accounting methods. Their depreciation methods and goodwill impairment practices are very important in their financial statements because the numbers are so substantial. McDonald’s uses a standard accounting strategy that easily compares its financial statements with its competitors. When evaluating their quality of disclosure, we determined that the company explain the choices they make and their future estimates in the Letter to the Shareholders and the Management Discussion and Analysis. Their footnotes are also very easy to understand. There was nothing in our ratios that raised a red flag for us, as all the numbers convey clear patterns in the last five years. There was no reason to undo any accounting distortions because we did not find any skeptical information that was not explained in their disclosures.
The following is a summary of significant accounting policies identified by the managers of McDonald’s.
• Consolidation: The consolidated financial statements include the accounts of the company and its subsidiaries.
• Estimates in Financial Statements: McDonald’s uses accounting principles generally accepted in the U.S. which require management to make estimates and assumptions which could differ from actual results that affect the amounts reported in the financial statements.