What could management override mean? I recently discovered it in the Key Audit Matters as part of the 2022 annual report of Associated British Foods. The auditors consider that there could be ‘pressure on management to manipulate revenue recognition’. And they go on: “There is a risk that management may override controls intentionally to misstate…
Sanofi in their 2021 annual report agree with me: “Unsuccessful management of environmental, social and governance matters could adversely affect our reputation and we may experience difficulties to meet the expectations of our stakeholders.” The key word here is ‘unsuccessful’. Unsuccessful management of any part of the business could result in the company experiencing difficulties…
Back in 2021 Reuters published an article entitled: “Bristol-Myers, Sanofi ordered to pay Hawaii $834 million over Plavix warning label.” [1] Explaining that the two companies engaged in unfair and deceptive business practices for more than 10 years. So I decided to follow how they report and record the penalty in their financial statements. The…
Regulations and accounting standards require companies to declare risks as part of their annual reports but many of them are not risks at all, they are business as usual. Take for instance competition. All companies without exception have competitors and all companies consider the competition as a major risk. From the risk statements of the…
Companies on both side of the Atlantic are required to describe the material risks threatening their business. The stated objective is to help potential investors decide whether to invest in the company and to help actual shareholders to assess the risk of their investment. American companies list their risks in their annual report, Form 10K…
Having announced in their accounting policies that research and development expenses are expensed as incurred, pharmaceutical companies [1] then show capitalised research and development costs in their balance sheet. But they hide them away and make them difficult to find. Glaxo Smithkline for instance hide them under the heading “Licensed patents amortised brands etc” which…
Development expenses under IFRS rules must be CAPITALISED. Development expenses in USA under FASB standards must be EXPENSED. Yet ironically pharmaceutical companies treat development expenses in the same way. I examined the financial statements of four large pharmaceutical companies in USA and four in Europe and compared their treatment of development expenses. [1] US companies…
The American accounting profession spoil their structured approach to GAAP by announcing there are three, perhaps four accounting assumptions [1] which accountants must understand before applying their Generally Accepted Accounting Principles. The first American assumption states that a business is separate from its owners. Under IFRS, this American assumption is considered so obvious it is…
It is interesting that the one most important accounting rule (or principle) not included in the US accounting principles or GAAP is what IFRS call the ‘accrual basis of accounting’. Paragraph 27 of IAS 1, Presentation of Financial Statements states clearly: “An entity shall prepare its financial statements, except for cash flow information, using the…
In spite of not using the same word ‘principle’, eight of the ten American accounting principles exist as part of the rules to be followed in International Financial Reporting Standards, IFRS. For instance, one of the ten GAAPs is the Principle of Permanence of Methods. Procedures used to prepare financial reports must be consistent under…