As taxes are one of the largest expenses on both Adidas and Under Armour’s financials, it is important to identify the differences in both reporting and application of the deferred asset and liability that are created.
Income tax expense for Adidas and Under Armour were 353M Euro and 154M Dollars (34% and 40% of EBIT respectively). This large expense and its corresponding balance sheet complements have a major impact on key ratios.
One major difference is the classification of the Deferred Tax Asset and Liability. Under US GAAP, these are classed as either current or non-current while IFRS simply considers all Deferred Tax items as non-current. What this does is skew key ratios that rely solely on current asset totals as a factor in the …show more content…
The current and noncurrent effect key ratios that investors use, and to compare against IFRS companies, the removable of the line item is simple which cannot be said for the reverse (IFRS all non-current allocation to current/non-current).
Inventory Costing also have a strong impact on a company’s financial position as well as its operating income. Adidas costs its inventory under the weighted average method while Under Armour uses FIFO. Though both methods are allowed, behind the scenes information could be blurred when choosing one over the other.
It is important to note that IFRS and US GAAP allow FIFO and weighted average when costing inventory. However, GAAP additionally allows the LIFO method as an option. Though each company has its own reasoning for the method chosen, GAAP does allow more options.
Additionally, both frameworks use the lower of cost or market for a measure of carrying value, allowing a write-down if inventory becomes obsolete or devalued by other means. However, if value rises for any reason, GAAP disallows a “write-up” while IFRS allows the recognition of the regained
Income tax expense for Adidas and Under Armour were 353M Euro and 154M Dollars (34% and 40% of EBIT respectively). This large expense and its corresponding balance sheet complements have a major impact on key ratios.
One major difference is the classification of the Deferred Tax Asset and Liability. Under US GAAP, these are classed as either current or non-current while IFRS simply considers all Deferred Tax items as non-current. What this does is skew key ratios that rely solely on current asset totals as a factor in the …show more content…
The current and noncurrent effect key ratios that investors use, and to compare against IFRS companies, the removable of the line item is simple which cannot be said for the reverse (IFRS all non-current allocation to current/non-current).
Inventory Costing also have a strong impact on a company’s financial position as well as its operating income. Adidas costs its inventory under the weighted average method while Under Armour uses FIFO. Though both methods are allowed, behind the scenes information could be blurred when choosing one over the other.
It is important to note that IFRS and US GAAP allow FIFO and weighted average when costing inventory. However, GAAP additionally allows the LIFO method as an option. Though each company has its own reasoning for the method chosen, GAAP does allow more options.
Additionally, both frameworks use the lower of cost or market for a measure of carrying value, allowing a write-down if inventory becomes obsolete or devalued by other means. However, if value rises for any reason, GAAP disallows a “write-up” while IFRS allows the recognition of the regained