Comparative Study in Regard to IFRS and GAAP Between

Walmart, Tesco and Woolworths

ACCT 4314: International Accounting

Section# 201

Student's names & ID number:

Najla Almarri 201200242

Aram Alshebel 201500063

Marwah Alosail 201400586

Instructor: Dr. Mohammad Talha

Date: Sunday, December 2nd 2018
Table of Contents
EXECUTIVE SUMMARY ....................................................................................................... 3
INTRODUCTION: .................................................................................................................... 4
Background of the Three Companies .................................................................................... 4
Walmart.............................................................................................................................. 4
Tesco .................................................................................................................................. 5
Woolworths ........................................................................................................................ 6
LITERATURE REVIEW .......................................................................................................... 6
Introduction ............................................................................................................................ 6
Hypothetical Literature Review ............................................................................................. 7
Experimental Literature Review ............................................................................................ 8
ANALYSIS& DISCUSSION .................................................................................................... 9
Introduction ............................................................................................................................ 9
Compare and Contrast Between IFRS and US GAAP .......................................................... 9
Inventory ............................................................................................................................ 9
Fair value ......................................................................................................................... 11
Intangible assets ............................................................................................................... 11
Leases ............................................................................................................................... 12
Revenue recognition ........................................................................................................ 12
Statement of financial position ........................................................................................ 13
Compare and Analysis the 4 Years Company Performance .................................................... 13
Walmart................................................................................................................................ 13
Income statement ............................................................................................................. 13
Balance sheet ................................................................................................................... 14
Cash flow statement ......................................................................................................... 14
Tesco .................................................................................................................................... 15
Income statement ............................................................................................................. 15
Balance sheet ................................................................................................................... 15
Cash flow statement ......................................................................................................... 15
Woolworths .......................................................................................................................... 16
Income statement ............................................................................................................. 16
Balance sheet ................................................................................................................... 16
Cash flow statement ......................................................................................................... 16
Compare Tesco vs. Woolworths .......................................................................................... 17
Income statement ............................................................................................................. 17
Balance sheet ................................................................................................................... 17
Cash flow statement ......................................................................................................... 17

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CONCLUSION ........................................................................................................................ 18
REFERENCE ........................................................................................................................... 19

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EXECUTIVE SUMMARY
Every company has its own history and difficulties at their beginnings, no company started
strong they should face problems to be stronger and learn how to deal with difficulties, that
applies for both strong and weak companies. This project will cover three famous companies
that are related mainly to selling cheap goods compared to other brands in the market, and
will discuss about them and give information about them; those companies are Walmart,
Tesco, and Woolworths. The project is mainly comparing between the three companies that is
why it will give brief information about the two companies. The first one Walmart is in the
United States, the second one Tesco is in the United Kingdom, and the last one Woolworths
is in Australia.

The main purpose is to discuss about the systems of the three companies, two of them are
using IFRS system and one is using GAAP, the project must give information regarding the
history of the companies and when did they start in order to understand them, then it must
give deep information regarding why we choose those companies.

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INTRODUCTION:
The accounting standards differ from one country to another, the purpose of these
standards is to secure the confidence of the company’s public reporting of the financial
reports. Managers and investors will be able to examine the health of their own organizations
based on these standards which will guide them to making better judgment. This paper will
examine the difference in accounting standards between three companies, which are
Walmart, Tesco, and Woolworth.

Background of the Three Companies

Walmart

Walmart is a known company located in the United States; it has hypermarkets,

discount store, and groceries. The main headquarter of the company is in Arkansas in
America and the founder of the company was Sam Walton it started operating in 1962.
Walmart first of all started in the United States with few stores around the country but by this
year it has many different stores around the world with different name, like in Japan it has
Seiyu Group, and the UK is called Asda. Nowadays the company own more than 11,000
stores around the world. “Each week, nearly 265 million customers and members visit our
more than 11,200 stores under 55 banners in 27 countries and E-Commerce websites in 10
countries” (Walmart), in this year the revenues of Walmart exceeds $500 billion from all the
stores around the world. “Walmart continues to be a leader in sustainability, corporate
philanthropy and employment opportunity. It’s all part of our unwavering commitment to
creating opportunities and bringing value to customers and communities around the world.”
(Walmart)

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Tesco

Tesco Company was founded in Europe in UK specifically in London in the 1920s,

which makes it older than Walmart, this company was founded by a guy called Jack Cohen
he started as small retail in London then later in the 1930s he started to buy lands to expand
his retails. “Jack Cohen bought a plot of land at Angel Road, Edmonton, north London to
build a new headquarters and warehouse. It was the first modern food warehouse in the
country and introduced new ideas for stock control.” (Tesco) He continued to develop his
retail until he opened officially his first super market in the 1950s. Nowadays Tesco has
expanded across Europe and it established online store to buy things online.

The purpose and values that Tesco follows are the following (Tesco):

Understand customers

Be first to meet their needs

Act responsibly for our communities

Work as a team

Trust and respect each other

Listen, support and say thank you

Share knowledge and experience

Helping to reduce food waste globally and ensuring surplus food goes to those in need

Making it easier to live more healthily

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Sourcing great quality, affordable and sustainable products

Making a positive contribution to the communities where we operate.

Woolworths

Woolworths beginning was between 1924 and 1925 in a basement in Sydney,

Australia. The founder of Woolworths is Percy Christmas he thought that everybody in
Sydney needs a handy shop that sells cheap handy things, Percy started to think of how to
expand his business from being in a basement to then reaching other cities. Little by little
Percy started to buy shops or small room in different cities in Asutralia until now they made
it and reached New Zealand and Malaysia and still people of Woolworths are planning to
expand their business to reach different parts of the world like Walmart. (Woolworths)

LITERATURE REVIEW
Aram Alshebel 201500063
Introduction

This segment is envisioned to deliver an extended literature review in full depth,

explaining and summarizing information from each resources under investigating the topic of
Comparative Study in Regard to IFRS between Walmart X TSCO X Woolworths. This section,
specifically reviews hypothetical and experimental; websites, articles and journals that evolves
around to topic of the contrast of both resemblances and differences between IFRS and US
GAAP Reporting Standards. The purpose of this review is to assist the researcher to gain more
knowledge, information and understanding about the topic.

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Hypothetical Literature Review

The research peruses to compare and contrast between the reporting standards of
Walmart, TESCO and Woolworths in depth to detect both the resemblances and differences
between US GAAP and IFRS. To do so, the researcher will first understand how both of these
companies are effected by the; environment and atmosphere that is surrounding them, and what
will happen when something changes, and how will they operate differently. These might
contribute to understanding more of the IFRS and US GAAP reporting standards.

To fully understand and compare the researcher will be using the Legitimacy Theory;
It highlights the extent to which corporate social and environmental disclosures are influenced
by the boundaries established by the society in order to be appreciated and avoid being
penalized by the community in which both companies operates (Yurtoğlu, N. 2006).

The Legitimacy Theory hypothesizes that organizations continually seek to ensure that
they operate within the bounds and norms of their respective societies (Yurtoğlu, N. 2006).
These companies are designed and shaped by the people who work in them and help the growth
of the company, to work in similar standards and rules (Guthrie& Parker, 1989). The
Legitimacy theory states that the companies and the organizations are powerfully induced from
any external factors that will arise from environmental pressures and specifically external
pressures like; accountant, finance, culture, taxation, rules, regulations and legal systems.

When an environment categorized as legitimism, it forces their companies to produce

similarities, each organization will try to show unique characteristics to increase their worth,
by creating the companies own unique systems and approaches at the start of the company’s
organizational lifecycle. As a start external factor cannot effect and it will become better
established and be pushed towards success, as the growth of the company increases with having
franchises across the country, the management loses its individuality by adopting and
implementing comparable rules (Yurtoğlu, N. 2006). In The dynamics of organizational
identity, Hatch and Schultz (2012) they distributed the environment in which companies and
organizations operates into three divisions; social, culture and legal responsibilities. Social
responsibilities was initiated to help the employees understand the forces that effect the
organization, it is accompanying with the influences of future expectations, history and
traditions, and acceptances of rules and regulations of humanity. Cultural responsibility was
introduced to respects of their cultures (Diversity) and the companies home culture to respect
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and obey by it. Legal responsibilities commenced to obey the country’s and the accounting
standard’s rules and regulations. The culture impact in a country is the nation’s accounting
standard proposed from the government, therefore Gray (1988) portrays the dissimilarities
between all accounting systems used in various countries, Gray acknowledged four values that
are used in between accounting standards; Conservatism, Consistency, Professionalism and
Privacy, when comparing these four values it is expected to find differences between IFRS and
US GAAP accounting standards in Walmart, TESCO and Woolsworth.

Experimental Literature Review

Atu (2014) examined the differences between United Kingdom and United State of
America’s accounted standards, or in other words the difference between IFRS and US GAAP.
The research used related materials, and reviewed past documents of financial statements as
well as how they are made in both United Kingdom and United State of America, the
examination found that United Kingdom and United State of America preparation of financial
statement differs thus their accounting standards differs as well, when comparing they contrast
with items such as; Inventory, Fair Values, Intangible Assets, Leases, Revenue Recognition
and Disclosing of depreciable asset for the United Kingdom and as for the United States of
America they did not require disclosing depreciable asset individually, in IFRS FIFO method
is used in measuring inventory cost, while the US GAAP they use LIFO method in measuring
the value of inventory for tax purposes, they are similar in measuring the value of stock which
is the lower cost of net realizable value (Atu, 2014).

The requirements of consolidating financial statement between both accounting

standards are remarkably different; as for US GAAP to consolidate a financial statement has
to be with ownership of greater than 50%, while in the IFRS the company has to obtain the
majority of the board of directors (Van der Meulen, Gaeremynck & Willekens. 2007). The
difference in accounting standards can effect on the accuracy of predictions, and can confuse
the international investors whom are on the look out to invest or franchise internationally,
therefore they cannot compare because of there is inconsistency in different accounting
standards (Barth, Landsman, Lang & Williams. 2012).

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ANALYSIS& DISCUSSION

Introduction

In order to be successful in the US capital markets, it is necessary to be financially

bilingual, and that involves speaking both US GAAP and IFRS. The convergence of the US
GAAP and IFRS has been an issue of great concern for years. However, there is a report of
security and exchange commission backing aware from the adoption of IFRS because of
differences between the two sets of standards as being the reason for the shift from the adoption.
An example of the differences in the reporting of cash flows. IFRS and GAAP tend to provide
guidance that is similar but may differ significantly on detailed requirements and
implementation. Because of globalization, it led to the introduction of IFRS, which aimed at
making financial statements and reports by companies comparable and understandable across
various boundaries. However, the US has not fully moved to the new accounting standards,
and it is still using the old GAAP. GAAP is based on standard accounting practices that are
informed by certain standards, rules, and conventions that should be observed by accountants.
However, many international businesses have opted out of the GAAP because it tends to
operate on a cash aspect rather than on an accrual basis that is commonly used by major global
firms. With the example of Walmart, Tesco, and Woolworths this section will compare and
contrast between IFRS and US GAAP accounting standards.

Compare and Contrast Between IFRS and US GAAP

Inventory

Walmart is a retail store that is located in the United States and they are using Generally
Accepted Accounting Principle (US GAAP) as a reporting system (Walmart 2017).Tesco is
located in the United Kingdom and the company is using International Financial Reporting
Standards (IFRS) as a reporting system (Tesco PLC,2018). Moreover, Woolworths is located
in Australia and the company was using Generally Accepted Accounting Practice (UK GAAP)
then transition to IFRS in 2006 (Woolworths, 2015).

Inventory is the process of recording the asset of the business. There are many ways
to record the assets of the business such as first in, first out (FIFO), last in, first out (LIFO)
and weighted average method (Najjar, 2018). When the first in, first out method used in a
company the bookkeeper suppose that the items produce first will be used or sold first which

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means what stay in the stock is the last produce which means the newest ones (Najjar, 2018).
This method is good because it helps companies to sell the oldest items first and don’t have to
be concern about expiration dates (Najjar, 2018).When the last in, first out (LIFO) method
used in a company the bookkeeper suppose that the items produce last will be used or sold
first which means what stay in the stock are the first produced which means the oldest ones
(Najjar, 2018). When a company uses the weighted average method they will determine
average costs to each piece of their inventory when it is sold during the year (Doupnik &
Hector, 2014).

The Financial Accounting Standards Board created the GAAP in which there is a
criterion followed in recording inventory (Prangnell et al. 2006). According to FASB,
companies should use the lower of cost or the net realizable value when reporting unless they
are using the last in last out method. GAAP expect that inventory is written down be
expensed in the same period (Prangnell et al. 2006) (Doupnik & Hector, 2014). The US
GAAP acceptable the FIFO and weighted average cost method but LIFO is not acceptable.
According to IFRS, regarding the cost formulas, IAS2 does not provide more options as the
US GAAP It is expected that the way of measuring inventory is through the weighted average
and the first in first out (FIFO) method (Doupnik & Hector, 2014). Also, the inventory write-
downs to reach net realization value should be expensed in the period that it is incurred and it
can be reversed (Doupnik & Hector, 2014).

There is a difference in how Walmart, Tesco, and Woolworths report inventory.

Walmart values the inventories at the lower of the cost or market as it is determined primarily
by retail inventory method of accounting and uses the LIFO method for all of its Walmart US
segment’s inventories (Walmart, 2018). However, Walmart international segment is using the
FIFO method when reporting inventory that is because LIFO is not allowed by IFRS. Using
LIFO means that Walmart has to lower the reported amount of inventory on hand but will
have a small taxable income. Tesco reports inventory using the lower cost and the net
realizable value using the weighted average cost method to value inventories (Tesco PLC,
2018). Woolworths values the inventories at the lower of cost or net realizable. The cost can
be determined using a weighted average cost method. When reporting inventories using
different methods, it results in different amounts being reported (Willekens et al. 2007). As a
result of the differences, Tesco and Woolworths using the IFRS will have a greater reported
amount of inventory under the weighted average method. That leads to a higher taxable

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income as compared to using the LIFO method. When Walmart uses the LIFO method in
accounting and tax, it will lead to a low taxable income, and a low reported net income in the
company which will provide the company with more tax advantages, but it may affect the
investors in decision making since the lower net income is reported in the financial
statements (Najjar, 2018).

Fair value

Fair value is the price that will be received to sell an asset or paid to transfer the liability
in an orderly transaction between the market participants at the measurement date. Under
GAAP, some assets are eligible for fair value accounting, but not under IFRS and vice versa
(Prangnell et al. 2006). IFRS and GAAP have some similarities and differences in fair value.
Both GAAP and IFRS can use the fair value measurement standards and disclosures that can
be required or allowed by other standers (KPMG, 2017). However, the scope exemptions vary
in IFRS and GAAP that is because IFRS uses different underlying Codification topics and
subtopics which can interact with the fair value measurement and the Codification topics
(KPMG, 2017). Also, Both GAAP and IFRS measurement of the fair value of the non-financial
asset examines the market participants’ ability to produce economic profits that can be done by
make the most of the assets by selling it to others at a higher price (KPMG, 2017). Moreover,
In GAAP a possible expedient that permits entities to measure the value of a certain investment
at net asset value. However, In IFRS, they don't have that (KPMG, 2017).

Under IFRS, Tesco and Woolworths can consider valuing property, plant, and
equipment using either revaluation or cost model (Tesco PLC,2018). When using the
revaluation model, the whole class of property, plant, & equipment is revalued at fair value
regularly. The revaluation increases are normally credited to equity, and the revaluation losses
tend to be charged first against any revaluation surplus in the equity related to a specific asset
and any excess charged to the income. The property, plant, & equipment at Tesco are recorded
at the carried cost minus the accumulated depreciation (Tesco PLC,2018). However, at
Walmart, The property, plant, & equipment are recorded at cost (Walmart 2017).

Intangible assets

An intangible asset is an asset that has no physical substance and it is very difficult to
evaluate (KPMG, 2017).The intangible assets like advertising costs and research and
development. Under IFRS accounting does shine as a principle based method. It will consider

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taking into account if the asset will have a future economic benefit as a way of estimating the
value (Willekens et al. 2007). The intangible assets measured under GAAP are recognized at
the fair value (KPMG, 2017).GAAP is considered to be rule-based, and as IFRS is viewed as
principle-based which makes the expressing and obtaining the economics of a transaction
way better than GAAP (Doupnik & Hector, 2014). The process of research and development
(R&D) applying IFRS and GAAP obtained in a business combination is valued under
particular guidance but the guidance varies in IFRS and GAAP (Doupnik & Hector, 2014).
Moreover, In IFRS, the advertising and promotion expenditure is expensed as it incurred.
Whereas in GAAP it can be delayed until the advertisement is presented (KPMG, 2017).
Furthermore, the goodwill in IFRS and GAAP is recognized when the firm combines its
business then it is determined at residual (KPMG, 2017).

Leases

When it comes to the aspect of Leasing, At Tesco and Woolworths, the IFRS does
classify leasing into two categories which are the finance lease and the operating lease
(Willekens et al. 2007). There are several situations that can lead to leases to be a finance lease.
If the lease has a bargain purchase choice, if it can transfer ownership to the lessee at the end
of lease term, if the leases of an asset are specialized in natural and the lease term is a major
part of the economic life of a leased asset, then it is considered as a finance lease (Doupnik &
Hector, 2014). Another rule for finance lease is all further costs if the lease is canceled is born
by the lessee, and the lessee can renew the lease at the rent that is lower than the market rent
(Prangnell et al. 2006).In the aspect of the finance lease, the asset is going to depreciate over
the time of the lease and unless there is a certainty that an asset changes hands to the lessee
after the lease term (Doupnik & Hector, 2014). In the case that the asset will change hands, the
depreciation is measured for the life of the asset (Doupnik & Hector, 2014). On the other hand,
the GAAP such as in Walmart, will capitalize leases if any one of the 4 criteria is faced
(Doupnik & Hector, 2014) (Walmart 2017).These criteria are very similar to IFRS but with
specific details such as the major part of a lease should be 75% and the substantially should be
90% (Doupnik & Hector, 2014) (Walmart 2017).

Revenue recognition

The recent implementation of a standard of revenue recognition will converge the

GAAP and IFRS; thus, eliminating differences occurring on the financial statement per the
different types of reporting (CFA Institute, 2017). The new GAAP standard does realize

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performance obligation in the records and contracts the revenue as each performance
obligation is being met. In the case of Walmart, it tends to disclose its revenues for each of its
line of business and Tesco does use the old standard of revenue recognition under IFRS, but
it will soon implement the new standard. Under the US GAAP, the revenue is normally
recognized when a customer fee or the consideration is fixed and determined to set a
threshold for recognition of revenue (CFA Institute, 2017). However, the IFRS requirement
tends to be less conservative and does not need consideration to be fixed and determinable
before the recognition of revenue (KPMG, 2017).

Statement of financial position

The classified statement of financial position in IFRS is divided between current and
non-current assets and liabilities (KPMG, 2017). Based on the order of liquidity or how cash
can be turned into cash easily will be the unclassified statement of financial position. However,
GAAP does not have rules to present a classified Statement of financial position (KPMG,
2017). Also, there is no constraint for unclassified Statement of financial condition (KPMG,
2017). Additionally, Using IFRS there is a specific list of items that should be displayed in the
statement of financial statement with no format. However, GAAP has a specific minimum list
item and prescribe using SEC regulations (KPMG, 2017).

After we compare between GAAP and IFRS we find that IFRS has more high-quality
financial report that because it can show represents economics of a transaction better than
GAAP. Also, IFRS can help to bring more international investors. IFRS can be applied in any
country. In addition, IFRS can help accountant to work in any country since they use the same
accounting practices. Also, it provide more flexibility. The reporting system at Tesco and
Woolworths is better than Walmart. That is because using IFRS allow the companies to record
their losses which help them to provide financing with greater transparency.

Compare and Analysis the 4 Years Company Performance

Walmart

Income statement

The income statement is a significant statement that because it can represent the
company performance during a specific period. The net income of the company is unstable
which is concerning, it was increasing from 2014 to 2015 which is good because it means
that the company is making a profit (Walmart, 2015) (Walmart ,2017).Then it negatively

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decreased from 2016 to 2017 and that is not good. The total revenue is almost constant that
means there are no big changes. The total revenue from 2014 to 2015 is increasing, then it
decreased in 2016 and increases in 2017 which is good because it shows that the company is
improving their revenue (Walmart 2015) (Walmart 2017).Also, the operating expenses are
decreasing from 2014 to 2015 which very good because it shows that the company is trying
to lower their cost of production. However, it’s increased from 2016 to 2017 and that can be
good and bad. It conceder good if the increase was due to efficiency and productivity. It is
conceder bad because it’s better to have lower expenses and to lower the risk (Walmart 2015)
(Walmart 2017).

Balance sheet

The Balance sheet is a significant statement that is because it can to show the health of
the company to investors. The total assets decline from 2014 to 2015 then rise in 2016 and
decline in 2017, this is not good. The total liability rises from 2014 to 2016 then decline in
2017 which is good because with less debt less risk (Walmart 2015) (Walmart 2017).The total
equity rise from 2014 to 2015 then decrease from 2016 to 2017 which is not good. However,
when we compare between the total assets and total liabilities we can see that the total assets
in 2017 are higher than the total liabilities which is very good because it shows that the
company can cover all their debts. Moreover, when we compare the total liabilities and total
shareholders’ equity. We can see that the total liabilities are higher than the total shareholders’
equity which is not good because it shows that the company is using debt to fund the company
and that has a higher risk (Walmart 2015) (Walmart 2017).

Cash flow statement

The cash flow is a very significant statement because it shows the money that gets in
and out of the business. The inflow from the operating activities is increasing from 2014 to
2017 which is very good because it shows that the company is making money their production
activities. The outflow of the investing activities is increasing from 2014 to 2017 and that due
to the payment of property and equipment. (Walmart 2015) (Walmart 2017).This is not
necessarily a bad thing that because the company is investing their money in the company. The
outflow of the financing activities is increasing from 2014 to 2017 due to the payment for
dividends and purchasing stocks. This is good for shareholders. (Walmart 2015) (Walmart
2017).

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Tesco

Income statement

The revenue decrease from 2014 to 2016 then increase in 2017 which is good because
it shows that the company has the ability to grow. The cost of sales increases from 2014 to
2015 then decrease from 2015 to 2016 and then increases in 2017. (Tesco PLC,2015), (Tesco
PLC,2017). This can be good and bad, good because the change was reasonable and bad
because it’s better to have a lower cost of production to generate more profit. The gross profit
is decreasing from 2014 to 2015 then increasing from 2016 to 2017 this is a good indicator that
shows the company profit after deducting the cost (Tesco PLC,2015), (Tesco PLC,2017).The
operating profit is increasing from 2014 to 2017 which is good because it shows that the
company is making a gain (Tesco PLC,2015), (Tesco PLC,2017).

Balance sheet

The non-current assets are decreasing from 2014 to 2017 which is not a good indicator
that is because it shows that the company has own less property. The current assets are
increasing from 2014 to 2017 which is a good indicator because it shows that the company has
more cash flow. The non-current and current liabilities is increasing from 2014 to 2017 which
is not a good indicator that is because it shows that the company has more debt and that is
riskier. The total shareholders’ equity is unstable, it is decreasing from 2014 to 2015 then
increasing in 2016 decreasing in 2017 which is not a good indicator (Tesco PLC,2015), (Tesco
PLC,2017). However, when we compare between the total assets and total liabilities we can
see that the total assets in 2017 are higher than the total liabilities which is very good because
it shows that the company can cover all their debts. Furthermore, when we compare the total
liabilities and total shareholders’ equity. We can see that the total liabilities are higher than the
total shareholders’ equity which is not good because it shows that the company is using debt
to fund the company (Tesco PLC,2015), (Tesco PLC,2017).

Cash flow statement

The inflow from the operating activities is decreasing from 2014 to 2015 then
increasing from 2016 to 2017 and that is good. The outflow of the investing activities is
decreasing from 2014 to 2017 which is good and bad at the same time that is because of it
better for the company to invest their money in the business (Tesco PLC,2015), (Tesco

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PLC,2017). Also, the company generated profit in 2017 from the investing activities. The
outflow of the financing activities is increasing from 2014 to 2017. That is due to the repayment
of borrowing. This is good because the company tries to pay their debts (Tesco PLC,2015),
(Tesco PLC,2017).

Woolworths

Income statement

The revenue increase from 2014 to 2015 then decrease from 2016 to 2017 which is not
good. The cost of sales was very high in 2014 to 2015 then decrease from 2016 to 2016 which
is good because it shows that the company tries to reduces the cost of production (Woolworths,
2015) (Woolworths, 2017). The gross profit increases from 2014 to 2015 then decrease from
2016 which is not good because it shows that the company is not making a high profit after
subtracting the cost of production. Also, the profit is following the trend of the cost of sales, it
increasing from 2014 to 2015 then decreasing from 2016 to 2017 (Woolworths, 2015)
(Woolworths, 2017).

Balance sheet

The current assets and the non- current assets are increasing from 2014 to 2015 then
decreasing from 2016 to 2017 which is not a good indicates. The total liabilities are decreasing
from 2014 to 2017 which is good. The total equity is increasing from 2014 to 2015 then
decreasing from 2016 to 2017 which is not good (Woolworths, 2015) (Woolworths, 2017).
However, when we compare between the total assets and total liabilities we can see that the
total assets in 2017 are higher than the total liabilities which is very good because it shows that
the company can pay all their obligations. Additionally, when we compare the total liabilities
and total shareholders’ equity. We can see that the total liabilities are higher than the total
shareholders’ equity which is not good because it shows that the company is using debt to fund
the company (Woolworths, 2015) (Woolworths, 2017).

Cash flow statement

The inflow from the operating activities is increasing from 2014 to 2015 then
decreasing from 2016 to 2017 which is not good (Woolworths, 2015) (Woolworths, 2017).The
outflow of the investing activities is decreasing from 2014 to 2017 which is good and bad. The

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outflow of the financing activities is unstable it is decreasing then increasing from 2014 to 2017
which it can be good and bad. It is increasing in 2017 due to the payment of the borrowings
which is good (Woolworths, 2015) (Woolworths, 2017).

Compare Tesco vs. Woolworths

Comparing the performance of Tesco and Woolworths since both are using the same
reporting system which is IFRS. We will compare only the trend of the preforming in which
company is doing better and have an increase that because every company is reporting in
different currency. Tesco is reporting using pounds. Woolworths are using Australian dollars.

Income statement

The revenue was better in Tesco that because it was increasing in 2017 whereas the
revenue was decreasing in 2017 at Woolworths. The cost of sales is better at Woolworths
because it was going lower. (Woolworths, 2015) (Woolworths, 2017).The gross profit is better
at Woolworths and that due to the lower cost of production. The profit in both Tesco and
Woolworths was increasing which is good. (Tesco PLC, 2015), (Tesco PLC,2017).

Balance sheet

In both companies, the total assets were decreasing in 2017, which was not a good
indicator. The total liabilities were better in Woolworths that because the total liabilities were
decreasing in 2017 (Woolworths, 2015) (Woolworths, 2017). Also, the total equity was higher
at Woolworths which is very good. Both companies are using debt to finance its activities
which conceder risky.

Cash flow statement

The inflow from the operating activities is better at Woolworths that because of it
higher. The outflow of the investing activities was higher at Woolworths which mean it’s better
at Tesco because they have cash inflow from the investing activities in 2017 (Woolworths,
2015) (Woolworths, 2017). The outflow of the financing activities is increasing at
Woolworths and Tesco which can be good and bad at same time. (Tesco PLC,2015), (Tesco
PLC,2017).

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 Marwah Alosail 201400586

After, we compare between the two companies. We find that Woolworths has a better
outstanding in the financial statement which are income statement, balance sheet and cash flow.

CONCLUSION

In conclusion, IFRS is the International Financial Reporting Standards which help to

understand statements and reports worldwide. However, GAAP is the Generally Accepted
Accounting Principle which is an old system. GAAP and IFRS have many differences and
similarities. In this report, we discussed the differences and similarities at the inventory, fair
value, intangible assets, leases and statement of financial position. Also, GAAP can vary
significantly than IFRS on some detailed vice versa. We use three companies to show the
difference between GAAP and IFRS. Walmart is using GAAP, Tesco and Woolworths are
using IFRS. For example, in inventory Walmart is using FIFO method to record the inventory,
Tesco and Woolworths are using weighted average cost method to record the inventory.
Moreover, we analysis four years performance for each company. When we compare between
Tesco and Woolworths we find that Woolworths has a better outstanding.

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