The objective of this research project is to make sure you are aware of similarities and differences in the financial reporting using US GAAP in comparison to IFRS and be able to use the EDGAR system on the SEC website to view US and International accounting annual reports. Make sure you review the following resource if you are not familiar with the EDGAR system: Quick Edgar Tutorial http://www.sec.gov/edgar/quickedgar.htm or contact me with questions.
You need to access the SEC Edgar system https://www.sec.gov/edgar/searchedgar/companysearch.html
and search for the following companies to locate McDonald’s Corporation 10-K, for year ended December 31, 2019 (CIK 0000063908) and Nokia Corporation 20-F (CIK 0000924613) for the year ended December 31, 2019. Nokia is an international company, so this company must file a 20-F as their annual filing and McDonalds is a US company so they file a 10-K. Do not use the interactive data for McDonalds or Nokia, since I want you to get familiar with the complete 10-K and provide page numbers to reference the information you are providing me in this project. You should be using the page numbers listed on the filing of the 10-K or 20-F in the SEC EDGAR system.
Answer the following questions in the order that I am listing each question, and number each question so I can easily find your answer for each question. Your answers need to only focus on the 2018 numbers provided within the annual report. In your response to each question, you need to clearly state the answer and you need to give the page number from the annual report of the 10-K or 20-F where you found your information (make sure you are using the page number at the bottom of the page you are using as your reference). I know there are interactive reports, but I want the page numbers of the statements as shown on the 10-K or 20-F report.
Part 1: McDonalds
- Using Item 1A. Risk Factors and Cautionary Statement Regarding Forward-Looking Statements and Item 7 Management’s Discussion and Analysis of Financial Conditions and Results of Operations in the 10-K, what foreign currency exchange risk factors does McDonald’s have and what are they doing to manage this risk? Provide page number references. You will need to provide at least 2 page references from item 1A and from Item 7.
- Find the audited annual financial statement that has a total line for Foreign currency translation adjustments-net of tax. Please provide the name of the statement, the page number, and the amount for the current year? What makes up this foreign currency translation adjustment? In the notes to the financial statements identify what generally is the functional currency of operations outside of the US? What page did you find this note on?
- Is McDonald’s Consolidated Statement of Cash flows operating section prepared in the direct or indirect method? Explain why you know McDonald’s is using the direct or indirect method. Identify the amount and label included on this statement that reflects the impact to cash or cash equivalents from exchange rates. Provide page number reference(s).
- Were there any hedges referred to in relationship to foreign operations/transactions in the notes to the financial statement? Explain what these hedges are and how they are being accounted for by McDonalds. Provide page number reference(s).
- What company is the auditor for McDonald’s? Specifically identify if McDonald’s used US GAAP or IFRS by providing the name of the auditor’s report and page number that identifies which one they were using? Copy the line from the auditor’s report that states what GAAP is being used by this company in the auditor’s report. Provide page number reference(s).
Part 2: Nokia
- What foreign exchange risk factors does Nokia have based on the discussion on risk factors on foreign exchange risk? You can find information about these factors in the Risk Factors section of the report that starts on page 60 and you need to provide information from the notes to the financial statements on risk management as it relates to foreign currency risk. Identify what type of risk that Nokia categorizes the foreign exchange risk as in the report. Provide page number references for both risk factors section and the note to the financial statement.
- What was the net change from translation differences on the consolidated Statement of Comprehensive Income? In the notes to the financial statement what is the currency used to provide consolidated financial statements by the parent. Also, in the notes, what is contained in comprehensive income related to transactions in foreign currencies.
- Is Nokia’s Statement of Cash flows operating section prepared in the direct or indirect method? Explain why you know it is the direct or indirect method. Identify the amount and label included on this statement of cash flows that reflects an impact to cash or cash equivalents from translation. Provide page number reference(s).
- Using the notes to the financial statements discuss any hedges referred to in relationship to foreign operations/transactions in the notes to the financial statement? Explain what these hedges are and how they are being accounted for by Nokia. Also, identify the two financial statements that show hedges as a line item of the statements. Provide page number reference(s).
- What company is the auditor for Nokia? Specifically identify if Nokia used US GAAP or IFRS by providing the name of the auditor’s report and page number that identifies which one they were using? Provide page number reference(s).
Part 3: Comparison of the 2 companies’ financial statements with supporting documentation
- Determine whether McDonald’s and Nokia provide a set of financial statements that includes like kind financial statements (e.g. consolidated balance sheet, consolidated income statement, cash flows statement). Explain your answer.
- List 2 format or terminology differences in each of the companies’ income statements.
- List 2 format or terminology differences in each of the companies’ balance sheet.
- Assess whether the content of the information provided in the notes to the financial statements is similar between the two companies. Specifically give examples of 2 similarities and 2 differences.
- In your opinion, which presentation did you feel was more useful and why? Did you feel that the 2 different approaches were very different? Why or Why not? Your response to this question should be at least 250 words.