Apple Inc.'s compliance with IFRS reporting requirements and standards

To:
From:
Date:
RE:
Dear Sir/Madam,
The main objective of this memo is to provide a comprehensive explanation into IFRS reporting requirements and Industry-Specific reporting requirements, with a specific emphasis on Apple Inc. and the industry in which it conducts its business operations.
Part A: IFRS Reporting Requirements
1. A brief description of IFRS, its objective, and the general difference between IFRS and U.S. GAAP
Accounting is based on International Financial Reporting Standards (IFRS) which are based on principles and the Generally Accepted Accounting Principles (GAAP) which are largely based on rules. International Financial Reporting Standards (IFRS) encompass a group of international accounting standards, which delineate the manner in which certain kinds of transactions and events ought to be reported in financial statements. The fundamental objective of IFRS is to stipulate precisely how accountants ought to maintain as well as report their accounts and therefore the standards create a mutual accounting language in order for accounts and businesses to be comprehended from one corporation to another and from one nation to another (Robinson et al., 2015). In contrast, the generally accepted accounting principles (GAAP) are financial reporting practices established by the Financial Accounting Standards Board (FASB). In particular, GAAP encompasses a mutual group of acknowledged accounting principles, standards, and measures that firms and their accountants ought to adhere to when they assemble their financial statements.
The general dissimilarity between IFRS and U.S. GAAP is that the latter is based on rules whereas the former is based on principles. This divide reveals itself in precise details and interpretations. In simple, IFRS guidelines provide considerably less general details as compared to GAAP. As a result, the theoretical frameworks together with the principles leave additional room for interpretation and might usually necessitate prolonged disclosures on financial statements (Robinson et al., 2015).
2. A general description of concerns or arising issues with the conversion (that is, a rule-based system versus a principle-based system)
One of the fundamental differences between IFRS and GAAP is centered on the conceptual technique of these two accounting methods. To begin with, IFRS is principle based while on the other hand, GAAP is rule based. The inherent characteristic of a principles-based framework encompasses the prospective of different interpretations for similar financial and accounting transactions. This situation encompasses second-guessing and as a result creates wide-ranging disclosures in the financial statements. In general, in the case of a principle-based system of accounting, the areas of discussion or interpretation can be simplified and explained by the standards-setting board, and offer lesser exceptions in comparison to a rules-based system. Nonetheless, IFRS can consist of positions and guiding principles that can be simply and easily be deemed as sets of rules rather than sets of principles. In the course of the adoption of IFRS, it was perceived that international standards were significantly rule-based in comparison to GAAP that were more principle-based. In addition, there is difference with respect to the methodology employed on examining accounting treatment. With regard to the GAAP, the research lays more emphasis on the literature while on the other hand with regard to IFRS, the examination of the facts is more comprehensive (Ernst and Young, 2015).
3. A section in which you compare and contrast three areas of financial statements that would be impacted by the application of IFRS on the individual account balance and the reflection of these changes on the balance sheet or income statement.
One of the areas of financial statements that would be impacted by the application of IFRS on the individual account balance is the inventory item. Under the U.S GAAP format, the First In- First Out, Last In –First Out, and weighted-average methods are all acceptable. In contrast, in the case of IFRS accounting method, the LIFO method is not acceptable. The inference of this is that if a company makes use of the LIFO method for inventory valuation, then the convergence with the IFRS implies that the inventory valuation has to be carried out using the FIFO method that is used. With respect to the FIFO approach, it is the first batch of inventory that is retailed first. In contrast, with respect to the LIFO approach, it is the final batch of inventory that is retailed first. One of the fundamental variances is that under the FIFO method, the yields will be substantially greater (IAS, 2017). Leases are also dissimilar. Unlike the U.S GAAP, the IFRS 16 makes use of a single lease accounting model that ignores the necessity for a classification test. In line with ASC 842, the leases for low-value assets are not exempted. In contrast, IFRS 16 allows the exemption for leases of low-value assets, which are $5,000 or lower when new (PWC, 2017).
A second item that is impacted is in the income statement and is the earning per share. It is imperative to note that under the IFRS approach, then the computation of the earning per share fails to average the individual interim period computations. On the other hand, with regard to the GAAP approach, the calculation averages the individual interim period incremental shares. The third item that is taken into consideration is the development costs. It is imperative to note that under the IFRS, these development costs can be capitalized in the event that certain criteria are met. However, under the GAAP, these development costs are deemed to be expenses (Lin et al., 2019).

Part B: Industry-Specific Reporting Requirements
1. Identify Apple Inc. specific reporting requirements, including the history and objective of these requirements.
The specific reporting requirements for Apple Inc. are reporting the financial statements of the company in pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934. This is an obligation of the company to file reports with the Sec periodically. The history of this requirement is lined to SEC Act of 1934, which also indicated that an organization becomes subject to these reporting requirements, if it has registered a class of securities with the SEC, if its total assets are more than $10 million and also of the class of securities is held by 200 persons or more and held of record by over 300 shareholders that reside in the United States (Thompson Reuters, 2019). The preparation of Apple Inc.’s consolidated financial statements and complementary summaries in conformism with U.S. generally accepted accounting principle, necessitates the organization’s management to make approximations and suppositions that impact the amounts reported.
2. Describe the organization responsible for establishing and regulating the reporting requirements of Apple, Inc.
The organization that is culpable for the establishment and regulation of the reporting requirements of Apple, Inc. is the Securities Exchange Commission (SEC). Financial Accounting Standards Board (FASB), is a private and non-profit organization that responsible for setting standards and whose fundamental aim takes into account the establishment and improvement of the of the GAAP within America. However, the organization that takes up the role of ensuring that these standards are adhered to and that the organizations report their financial statements in the right manner is the SEC. The SEC holds principal accountability for imposing the federal securities regulations, propositioning securities guidelines, and regulating the securities industry, the state's stock and options exchanges, together with other activities and organizations, as well as the electronic securities markets in America. To attain its obligation, the SEC implements the statutory prerequisite that public companies and other regulated corporations provide quarterly and annual reports, in addition to other periodic reports (Bragg, 2015).
3. Describe the regulatory, ethical, and legal consequences of noncompliance with reporting requirements
There are regulatory, ethical, and legal consequences of noncompliance with reporting requirements. Financial reporting frauds are a severe threat for the confidence of investors in the financial information. The major consequences of the financial frauds are impacting the integrity, quality and confidence in the organization’s published financial reporting. Lawbreakers, who partake in the carrying out of such fraud, ranging from management to employees, have to comprehend that the interference of records is a wrongdoing that will be judged. One of the major consequences is criminal charges. It is important to note that criminal charges are a conceivable consequence for failure of being in compliance with regulations. Failure of complying with regulations could result in jail time. An ethical consequence is the adverse impact on the reputation of the firm. The public image of an organization is pivotal to its success and achievement. When an organization comes into the public light and attention for the failure of being in compliance with regulations, there are reputational consequences, which at the end of the day give rise to distrust. Subsequent to this, loyal customers might opt to leave, new customers may be negatively impacted and possibly beneficial partnerships might never come to fruition. The regulatory consequences take into account not only fines but also being banned from operations. Failure of being in compliance with all regulations can give rise to severe consequences for an organization. Together with changing the organization’s legal status, which might leave the entity susceptible to lawsuits, government agencies may opt to carry out audits, enforce fines or even dissolve the organization entirely (Lexis Nexis, 2017).
4. Identify emerging industry trends that will have an effect on the required reporting.
There are emerging trends within the industry that Apple Inc. operates, which will have an impact on the required reporting. The internet as well as cloud technology continue to substantially cause disruption in the technological industry, encompassing accounting. Largely, gone are the days when the financial accountants and the department as a whole spend several hours inputting data that is eventually put into standardized accounting and financial accounting and also several amounts of paper in reporting and generating weekly, monthly as well as yearly reports. Secondly, the advancement of technology within the industry is expected to substantially impact the financial and accounting reporting. For instance, in the contemporary, there is the use of XBRL and iXBRL, which implies that the companies are making use of taxonomies to report data. XBRL is intended for financial reporting and facilitates accounting figures for a company to be tagged within the format employed for XBRL, by means of utilizing predetermined explanations. This homogenous and incessant tagging augments the analysis and examination of financial information and brings about superior comparable and reliable information. This is expected to enable the companies within the industry in regard to the filing their financial annual reports in a format that is progressively more well-thought-out and organized, which is unlike the conventional PDF format. All things considered, this reduces the hindrance of generating numerous different financial reports. What is more, XBRL augments the level of trustworthiness and transparency as well as lessening the administrative expenditures of financial reporting (Hall, 2015).

References Bragg, S. M. (2005). The Ultimate Accountants' Reference Including GAAP, IRS & SEC Regulations, Leases, and More. John Wiley & Sons. Ernst and Young. (2015). US GAAP versus IFRS: The basics. Retrieved from: ifrsbasics_bb3119_22december2015.pdf Hall, J. A. (2015). Accounting information systems. New York: Cengage Learning. IAS. (2017). Inventories: Key differences between U.S. GAAP and IFRSs. Retrieved from: https://www.iasplus.com/en-us/standards/ifrs-usgaap/inventories Lexis Nexis. (2017). Are the consequences of non-compliance worth the risk? Retrieved from: https://www.polity.org.za/article/are-the-consequences-of-non-compliance-worth-the-risk-2017-06-12 Lin, S., Riccardi, W. N., Wang, C., Hopkins, P. E., & Kabureck, G. (2019). Relative effects of IFRS adoption and IFRS convergence on financial statement comparability. Contemporary Accounting Research, 36(2), 588-628. PWC. (2017). The leasing standard – A comprehensive look at the new model and its impact. Retrieved from: http://www.pwc.com/us/en/cfodirect/publications/in-depth/fasb-lease-accounting-model-asc-842.html Robinson, T. R., Henry, E., Pirie, W. L., & Broihahn, M. A. (2015). International financial statement analysis. Hoboken: John Wiley & Sons. Thompson Reuters. (2019). US reporting issuer. Retrieved from: https://uk.practicallaw.thomsonreuters.com/4-107-7464?transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1