Inclass Project

1
In-class Project

• Why does McDonalds use constant currency
  comparisons when reporting its financial results?
• McDonalds knows that the foreign exchange value
  of each currency can change daily. By showing all
  currency figures using the foreign exchange rate
  applied to the previous year's financial
  statements, the company helps investors and
  analysts compare year-to-year results on the same
  basis. Otherwise, investors and analysts would
  have to adjust the current year's figures in
  order to make a fair and accurate comparison of
  sales and profit trends.

2
In-class Project

• What type of assets might McDonalds list for
  depreciation in its financial statements?
• Restaurant buildings, kitchen equipment, and
  delivery trucks are three types of tangible,
  long-term assets McDonald's would depreciate.
  Students may name additional assets, as well.

3
In-class Project

• What effect do the corporate income tax rates in
  countries where McDonalds
• operates have on the income statements
  prepared in local offices?
• The corporate income tax rates, along with
  expenses, are deducted from sales revenues to
  calculate net income in each country

4
In-class Project

• What problems might arise if individual
  McDonalds restaurants were required to enter
  sales data directly on the companys centralized
  accounting website, instead of following the
  current procedure of sending it through country
  and regional channels?
• Having individual restaurants send sales data
  directly to headquarters would probably create
  confusion and additional problems, in part
  because of the high number of restaurants
  reporting (more than 27,000) and because of the
  need to convert raw sales data using a multitude
  of foreign exchange rates. The current system,
  which allows local, country, and regional
  controllers to collect and review restaurant
  sales, make any necessary adjustments and
  conversions, and then send it to the next level
  for consolidation, might be further automated to
  speed up the process.

5
In-class Project

• To help investors and analysts better assess the
  companys worldwide financial health, should
  McDonalds be required to disclose financial
  results for every country and region? Support
  your chosen position.
• Two arguments for disclosing detailed financial
  results for each country and region (1)
  investors and analysts would be better able to
  evaluate the company's performance within the
  context of each areas environment and economic
  climate (2) investors and analysts would be able
  to contrast company results from country to
  country over time and during one particular
  period. Arguments against (1) investors and
  analysts could have difficulty making sense of
  country-by-country results because of unique laws
  and regulations governing the accounting and
  reporting for operations in each nation or area
  (2) emphasizing country-by-country results could
  distort the true overall picture of McDonalds
  performance. Students may suggest other arguments
  for and against, as well.