Dole and Nestle Generally Accepted Accounting Principles

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.

International Financial Reporting Standards (IFRS)

In basic terms, this is a framework of procedures, standards or rules of accounting accepted worldwide. These rules detail the procedures that should be followed in reporting a wide range of transactions in an entity's financial statements. Most of the IFRS are inspired by the older framework of standards i.e. The International Accounting Standards (IAS). Comparability remains one of the main benefits of adopting International Financial Reporting standards. With companies from across the world preparing their financial reports based on an agreed upon set of rules, it becomes easier for investors to compare the financial statements especially when it comes to making cross-border investments. Hence International Financial Reporting Standards can be said to be a timely step towards global accounting standards synchronization.

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.