Financial statement analysis and accounting standards for Dole and Nestle

Dole and Nestle

Generally Accepted Accounting Principles (U.S. GAAP)

When it comes to the preparation as well as presentation of financial statements in the United States, there are a number of accounting procedures and rules used by entities in an attempt to enhance a certain level of consistency. These rules and procedures are referred to as U.S. GAAP. Essentially, U.S. GAAP contributes towards the enhancement of the legitimacy and truthfulness of an entity's financial statements. For instance, under the framework, some practices like the creation of "hidden reserves" are prohibited. This effectively goes a long way to ensure that an entity's financial reports are a true reflection of its economic performance.

Liquidity

Liquidity can be broadly defined as a measure of how quickly a given asset can be converted to cash. In this sense, liquidity can essentially be taken to denote the marketability of a certain asset. When it comes to the computation of liquidity, ratios referred to as liquidity ratios are used. It can also be noted that in another sense, liquidity can be taken to denote the ability of an asset to be bought or sold with a minimal effect on its price. Hence in this sense, liquid assets are those items which can either be sold or bought with relative ease.

Liquidity is an important consideration for an investor seeking to invest in a given company. Essentially, the lifeblood of on entity is cash. If a firm cannot collect cash earned from the sale of goods and services on a timely basis, it may encounter some difficulties when it comes to the payment of its own obligations.

Part 2: Financial Statement Analysis: Dole and Nestle

One of the main differences between Nestle's and Dole's financial statements is the currency used in the projections. While Nestle's projections are in Swiss Francs, those of Dole are in U.S. dollars. The actual presentation of the financial statements also differs. Unlike Dole's income statement, the consolidated income statement of Nestle has additional columns to accommodate continuing and discontinued operations figures.

In regard to the accounting conventions followed by the two companies, it can be noted that Nestle uses the historical cost as well as accrual basis in the preparation of its financial statements. When it comes to Dole, the asset and liability method is used to account for taxes (income). Further, discounted cash flows are used at Dole in the determination of goodwill fair value. Both companies use the full disclosure convention in that any information of a financial nature that could influence the decisions of stakeholders is fully disclosed. The consistency convention is yet another guideline the two companies use in the preparation of their financial statements.

In my opinion, Cash from Operating