Principles of Accounting

A Comparison between the GAAP practiced by Microsoft and by Softtek

There are noted differences between the US Generally Accepted Accounting Principles (GAAP ) which Microsoft adheres to and the standards issued by the Mexican Institute of Public Accountants which Softtek , in turn , applies in its accounting books and the preparation of its financial statements

Next to the balance sheet and income statement , Mexican rules require a statement of changes in financial position as the third financial statement to regularly prepare whereas in USA , the statement of cash flows is what comes

as the third financial statement (GAAP 2000

Consistent with US GAAP , Microsoft values its assets (inventories or fixed assets ) at either the replacement cost or the original cost whichever is lower . In contrast , Mexican companies including Softtek follow either the general price level method or that method combined with the current cost method for restatement for inflation , and if the current cost method is followed , the results of holding non-monetary assets (difference between indexed cost and current cost ) is recorded in equity (GAAP 2000

Furthermore , the restatement of the financial statements for inflation to factor in its effects on the figures therein is a mandatory practice in Mexico this does not apply to USA . Thus , it is readily seen that Mexican accounting rules takes very seriously the impact of inflation on the financial condition of Mexican companies . In contrast USA companies do not seem to need the same rule . Perhaps it is because inflation in USA does not represent any abrupt or unexpected fluctuation , as inflation in Mexico does (GAAP 2000 Reference

Arthur Andersen , BDO , Deloitte Touche Tohmatsu , Ernst Young International , Grant Thornton , KPMG , Pricewaterhouse Coopers (December 2000 . GAAP 2000 : A Survey of National Accounting Rules in 53 Countries ( HYPERLINK "http /www .iasplus .com /resource /gaap2000 .pdf http /www .iasplus .com /resource /gaap2000 .pdf Principles of Accounting PAGE \ MERGEFORMAT 2...