In its 2014 annual report, Honda Motor Company states that its manufacturing operations are principally conducted in
In its 2014 annual report, Honda Motor Company states that its manufacturing operations are principally conducted in 22 separate factories, including 3 in Japan; the Japanese factories maintain their books of account in conformity with financial accounting standards in Japan, while the subsidiaries in foreign countries generally maintain their books of account in conformity with accounting standards in the countries of their domicile; and the consolidated financial statements have been prepared in conformity with the accounting principals generally accepted in the U.S. Honda's policy of using U.S. GAAP to prepare its consolidated financial statements extended back to at least 1977, when Honda first listed its American depositary receipts (ADRs) on the New York Stock Exchange.
a. Discuss the possible reasons for Honda to prepare its consolidated financial statements in conformity with U.S. GAAP.
b. In 2015, Honda switched from using U.S. GAAP to using IFRS. The accounting policy note in the 2015 annual report also eliminated references to the foreign subsidiaries maintaining their books in conformity with local accounting principles. Discuss possible reasons for Honda's migration to IFRS in 2015.
Step by Step Answer: