Ford Motor Company: Accounting Case Study

Ford Motor Company is a Michigan-based American multinational automobile manufacturer with its headquarters in Dearborn – a creation of Henry Ford. Since incorporation, the company has been selling commercial and personal use automobiles since then. Although its headquarters are in America, Ford Motor has expanded and has several subsidiaries across various countries in the world. In light of this, various aspects in the operations of the firm, especially with reference to international aspects, promote critical examination and analysis. In this review, I intend to analyze Ford Motor Company with regards to the accounting standards the company applies – comparing the IFRS and the US GAAP. More so, I shall review material that refers to matters of internal control standards for the purpose of ascertaining Ford Motor Company’s control measures’ optimality. Additionally, I shall reflect tax issues referring especially to the calculation of taxable income as well as the income statement, accounting for reconciliation as well.


 Article 1

One publication that has addressed the IFRS and US GAAP issue is a report by the auditing firm PricewaterhouseCoopers (PWC, 2014, p. 5). The above is a significantly reliable source of insight especially because it has been prepared by and audit firm. It starts by stipulating the commonly known similarities, as well as the differences between the two accounting standards. I have used this publication, in this case, because the author addresses the importance of a company being financially bilingual.

A case of financial bilingualism, in this case, means a situation where a company uses both the IFRS as well as the US GAAP in the preparation of the financial records. In light of this, the author(s) highlights the fact that global adoption affects the business in the United States. It is important for the board of Ford Motor to understand the concept highlighted in this publication. Ford Motor is an international company. Instead of succumbing to the limitations of sticking to the US GAAP only, embracing financial bilingualism could provide a huge opportunity for the stakeholders of the company to increase their investments.

Article 2

Yet another publication prepared totally with an aim of highlighting the main differences, as well as the differences between the IFRS and the US GAAP. However, other than exploring on that matter only, it incorporates additional material suitable for American companies yearning to understand why IFRS are deemed important. The reason as to why I have used this literal publication is because the author(s) have clearly included relevant information about the evolution of the IFRS. Such information is important for a company like Ford Motor in the quest of having its stakeholders understand what brings about the importance IFRS, and the expected advantages of incorporating IFRS into its accounting processes.

According to this publication, the evolution of the IFRS started in 1973 with the formation of IASC, which was founded to formulate the International Accounting Standard, for use across the entire world. The provision established underwent revision in 1994, 1995, 1997, 1999, 2000, 2001 and 2002 (Earnest & Young, 2011, p. 49). From 2003 to date, phase 2 and 3 have taken place with recent improvements laying much emphasis on the collaboration between the IFRS with the US GAAP. In light of the above, the stakeholders in Ford Motor stand well advised upon the development of the IFRS and the importance of incorporating them into their accounting practices.

Article 3

I have chosen this article because of its depth in trying to show the differences and similarities between US GAAP and the IFRS. It is also stating how the effect is going to be on the US economy if they adopt the IFRS in one step, leaving their GAAP behind.

”US GAAP determines control by focusing on who control financial interests of the company by analyzing voting rights. Potential voting rights are excluded from the GAAP analysis but included in IFRS. IFRS lays emphasis on a company’s ability to govern the operating and financial policies. US GAAP focuses on the ability for a company to govern the financial and operating policies of an entity. The rationale behind this is to obtain all benefits. Meanwhile, IFRS analysis may factor in voting rights although it is not the exclusive factor” (Sedki, Smith, & Strickland, 2014).”

The above shows the difference between the US GAAP and the IFRS when consolidating financial statements. Apparently, all the subsidiaries under Ford, the parent, are going to be assessed as a whole, not each company alone. US GAAP looks only at voting rights while that is not the only factor in IFRS. The above is an illustration that shares without voting rights, under the US GAAP do not have control while, in IFRS, it is not an exclusive factor in defining control.

Article 4

The rationale behind using this publication by Earnest & Young is because it seeks to roll out the difference in the two accounting standards with specific emphasis on the automobile industry. One thing about the automobile industry is that most of the firms in this industry always find themselves pursuing international ventures since most of their expected market is not domestic. The above becomes a problem due to the developing complexity as far as compliance and agreement with a set of globally accepted accounting standards are concerned – with the IFRS receiving overall acceptability.

“For a couple of years, the United States FASB has campaigned for the concept of maintaining a single set of very high quality accounting standards. In so doing, it promotes the ease at which investors across the entire world understand. In the year 2005, the European Union made IFRS the mandatory accounting standard for all the companies listed in the EU. That concept gained a major boost across the globe. Over 100 countries adopted the use of IFRS or started using their local GAAPs based on the basic provisions of IFRS (Earnest & Young, 2008, p. 2).”

Stakeholders of Ford Motor need to understand that the US GAAP system has been of substance in the company’s organization culture so far. However, adopting the IFRS principle stands as the only reasonable way to follow as far as global investments that dictate the automobile industry stand.

Internal Control

Article 1

The initial point of consideration is the understanding of the internal control systems of the company; the only way to fully understand the compliance of a company’s internal control strategies is by comparison. The above surfaces as the rationale behind the application of this publication in this literature review. It stipulates some of the measures that Ford Motor has put in place for the purpose of ensuring the compliance with the international internal control systems requirements.

“An exhibit on this book shows that the management of the Ford Motor Company, including both the CFO and the CEO, are fully active in participating and supervising the internal control systems evaluation process. The exhibit also shows that the company’s internal control concerning all the financial reporting was up-to-date. The management report according to the exhibit provides a statement with a declaration of the management’s commitment to upholding the internal controls. It further defines the various internal controls, discusses their limitations, and identifies the criteria applied for their assessment (Johnstone, Gramling, & Rittenberg, 2015, p. 104). ”

In light of the above, it becomes clear that Ford Motor has set aside some worthwhile provisions for internal control. With such insight, it is now possible to compare its provisions with the international expectations in the pursuit of determining how well Ford Motor operates.

Article 2

Although the presence of internal control systems is good, it can only be applied to the best of its perfection just within the jurisdiction of any given company. As far as the consideration of various other bodies that are not members of the company are concerned, some of the control systems that are incorporated in an individual company man end up unappealing. In light of this, this publication features in the literature review as a result of the international guidelines it highlights. The above helps to ascertain the effectiveness of Ford Motor’s internal control measures.

“According to the International Standards of Supreme Audit Institutions, there are some key factors that should be applied by every company in the pursuit of promoting optimal internal control measures. The guidelines recommend for the inclusion of ethical values. They also advice towards the provision of more information relating to the general control principles, as well as the provision of material relating to information processing (INTOSAI General Secretariat, 2004, p. 1).”

From the above guideline, it is possible to consider the fact that Ford Motor has considerable relevance in its internal controls with respect to manner at which the management carries out its reports.

Article 3

With respect to the evidence of internal control measures carried out by Ford Motor, coupled with the expected international control standards formulation guidelines proposed by INTOSAI, the provisions of this article comes in handy. With the above knowledge, this article helps in providing the best recommendations with respect to the comparison of the measures taken by Ford Motor with the guidelines forwarded by INTOSAI.

“Designing effective internal control measures calls for the implementation of a number of strategies. The above can be achieved through the maintenance of reliable systems for the purpose of information accuracy.  Timely preparation of such reliable information is also a good recommendation. For the purpose of avoiding fraud and theft, it is necessary to include a process for safeguarding assets and conveyance of such information in the reports (International Federation of Accountants, 2012, p. 20).”

The internal control measures should help in increasing the efficiency in the provision of reasonable reports that assure all the stakeholders on matters relating to the well-being of the organization. In light of this, even with the current internal control measures applied by Ford Motor being good, taking more consideration by adding more features as stipulated by the international guidelines is important as well.

Calculating Taxable Income

Article 1

Taxable income is a major aspect to consider in the preparation of a firm’s financial records, that is, it is a key factor determining the extent of the firm’s actual disposable income. The choice of this article is promoted by the fact that it discusses the various ways upon which taxable income may be calculated. As discusses in a section above, there are various accounting standards available, upon which the calculation of taxable income may be based thus promoting the relevance of this literal publication.

“Under the provisions of the US GAAP, the tax basis is stipulated under the tax law. On the other hand, (using IFRS), it is determined with reference to the amount deductible for tax purposes. In addition, the US GAAP classifies the deferred tax liabilities and assets in relation to the classification of the liability or asset that led to the temporary difference. On the other hand, IFRS classifies all the deferred tax liabilities and assets as noncurrent without considering the liability or asset that led to the difference (McGladrey, 2012, p. 2).”

In light of the above, the Ford Motor Company should ensure that a consistency is maintained in the process of preparing financial records because using two standards would only result in incorrect records.

Article 2

With the consideration of taxable income, comes the aspect of the resulting income tax. Income tax features in the income statement that leads to the consideration of that financial record in this section. This publication best suits the reference in this case. The rationale is due to the fact that other than merely stating that the preparation of income statements varies with the accounting standards applied, it illustrates how the various similarities and variations occur.

“The treatment of income tax is similar to both the US GAAP and IFRS accounting provisions. A company using either US GAAP or the IFRS may present the components either as net of the related tax, or before the related tax effects – where an amount relating to the components are shown as the aggregate amount. However, there is a difference in terms of disclosure and presentation.  In IFRS, items of expense or income are not presented as extraordinary items. On the other hand, US GAAP allows for the separation of extraordinary items from any ordinary operations and showing them in the income statement individually (Grant Thorton LLP, 2013, p. 16).”

The above illustration also calls for the management of Ford Motor to ensure the right treatment of various entries in the income statement. This should be maintained whether they choose to remain with the US GAAP standards or after adopting the internationally accepted IFRS standards.

Article 3

This article best fits the use in this section because gives a detailed explanation as to why reconciliation of financial and cost account records are vital, especially in the current world. It is important for the management of Ford Motor to lay emphasis on the provisions of this article. The article provides a clear argument as to why stern measures with respect to the preparation of reconciliation accounts.

“With various Acts – for example, the Sarbanes-Oxley Act – coming into enactment, the internal control measures in most companies do not call for the presence of external auditors. Thus, the companies are obliged to report the errors found by the auditors either as material weaknesses or prove that their control measures would have determined the existence of the error. Preparation of balance sheet reconciliation accounts can accelerate the process and help the companies to identify and straighten the errors prior to filing their reports. In fact, companies should reconcile all their financial accounts. The reason is since each of the financial accounts prepared by the companies is subject to contain a significant amount of misstatements (Vorhies, 2006, p. N.p).”

Apparently, the practice of accounts reconciliation is overly important across all the industrial sectors. This means that the proper implementation of reconciliation for Ford Motor’s financial records stands to be the best means of maintaining efficient internal control remains relevant.


In as much as there are many different factors that result to the good performance and excellence of a company, there some that are really critical than others. In a multinational like Ford Motor, the proper maintenance of the right financial records is very vital to the success of the company. As highlighted by the review in various literal discussed above, the adoption of the best accounting standards works well in relation to the goals of the firm. Specifically, maintaining a consistent use of the chosen standards also helps in reflecting the truest and fairest value of the company to all its stakeholders. Additionally, the establishment and implementation of the right internal control measures is useful too. The case is the same with the treatment of important features such as income tax, especially in instances where the company keeps bilingual financial records.


Earnest & Young. (2008). Drive for the Global GAAP: An Automotive Industry Comparison of US GAAP and IFRS. Retrieved April 2, 2015, from$FILE/Industry_Automotive_Drive_for_the_Global_GAAP.pdf

Earnest & Young. (2011). US GAAP versus IFRS: The Basics. Retrieved April 2, 2015, from$FILE/US%20GAAP%20v%20IFRS%20Dec%202011.pdf

Grant Thorton LLP. (2013). Comparison between U.S. GAAP and International Financial Reporting Standards. Chicago: Grant Thorton LLP.

International Federation of Accountants. (2012). Evaluating and Improving Internal Control in Organizations. Retrieved April 2, 2015, from

INTOSAI General Secretariat. (2004). Guidelines for Internal Control Standards for the Public Sector. Retrieved April 2, 2015, from

Johnstone, K., Gramling, A., & Rittenberg, L. (2015). Auditing: A Risk Based-Approach to Conducting a Quality Audit (with ACL CD). Cengage Learning: Mason.

McGladrey. (2012). U.S. GAAP vs. IFRS: Income Taxes at a Glance. Retrieved April 2, 2015, from

PWC. (2014, October). IFRS and US GAAP: Similarities and Differences. Retrieved April 2 2015, 2015, from

Sedki, S. S., Smith, A., & Strickland, A. (2014). Differences and similarities between IFRS and GAAP on inventory, revenue recognition and consolidated financial statements. Journal of Accounting and Finance , 14 (2), 120-123.

Vorhies, J. B. (2006). Account Reconciliation: An Underappreciated Control. Retrieved April 2, 2015, from Jornal of Accountancy:


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