High Inflation and Financial Statements Why is it important that, in countries with high inflation, financial statements be adjusted for inflation?

What are the major differences in the calculation of income between the historical cost (HC) model and the general purchasing power (GPP) model of accounting?
Which balance sheet accounts give rise to purchasing power gains, and which accounts give rise to purchasing power losses?

High Inflation and Financial Statements and Income Calculation

What are the major differences in the calculation of income between the historical cost (HC) model and the current cost (CC) model of accounting?
Why is return on assets (net income/total assets) generally smaller under current cost accounting than under historical cost accounting?
In what ways do International Financial Reporting Standards (IFRS) address the issue of accounting for changing prices (inflation)?
What is a group? Compare and contrast the different concepts of a group.
To which specific type of business combination does the concept of a group relate?
Define control. When does control exist in accordance with IAS 27?
Explain why the legal concept of control may be appropriate in some countries, such as Japan.
1. Why might individual investors wish to include foreign companies in their investment portfolio?
2. Which companies might Ford Motor Company include in a benchmarking study of the automobile industry, and in which countries are those companies located?
3. What are potential problems in using commercial databases as the source of financial statement information for foreign companies?
4. How might an analyst obtain the most recent financial statements for a foreign company in which he or she is interested?
5. Why should the fact that a foreign company presents its financial statements in a foreign currency present no significant problems in analyzing those statements?
6. A foreign company prepares its financial statements in a foreign language and does not provide any convenience translations. How might this affect an analyst’s decision to invest in this company?
7. How can more disclosure in the notes to the financial statements facilitate the analysis of foreign financial statements?
8. In what ways does the timeliness of the publication of financial information differ across countries?
9. What are the advantages and disadvantages of using measures such as operating income before depreciation (OIBD) or earnings before interest, taxes, depreciation, and amortization (EBITDA) rather than net income in comparing profitability across foreign companies?
10. What are the different features of financial statements that a foreign company might “translate” in a convenience translation?
11. Why should analysts be careful in comparing financial ratios across companies in different countries?
12. How might differences in the extent to which countries apply the accounting concept of conservatism (some countries are more conservative than others) affect profit margins, debt-to-equity ratios, and returns on equity?
13. How might differences across countries in the extent to which debt versus equity is the major source of financing affect profit margins, debt-to-equity ratios, and return on equity?
14. A foreign company did not capitalize any interest in the current or past years, although such capitalization is required under U.S. GAAP. Why does an adjustment to reconcile this item to U.S. GAAP affect assets, expenses, and beginning retained earnings?