Case 3-5 International versus U.S. Standards

Under U.S. GAAP, property, plant, and equipment are reported at historical cost

net of accumulated depreciation. These assets are written down to fair value when

it is determined that they have been impaired.

A number of other countries, including Australia, Brazil, England, Mexico, and

Singapore, permit the revaluation of property, plant, and equipment to their current

cost as of the balance sheet date. The primary argument favoring revaluation is that

the historical cost of assets purchased ten, twenty, or more years ago is not meaningful.

A primary argument against revaluation is the lack of objectivity in arriving at current

cost estimates, particularly for old assets that either will or cannot be replaced with

similar assets or for which no comparable or similar assets are currently available for

purchase.

a. Discuss the qualitative concept of comparability. In your opinion, would the

fi nancial statements of companies operating in one of the foreign countries

listed above be comparable to a U.S. company