1. Document the effects of the GAAP differences in the 20F by doing the following:

a. For the current year, calculate the percentage change for net income and for total shareholders’ equity indicated by the reconciliation and using the non-U.S. GAAP (i.e., IFRS) numbers as a base.

b. Repeat the same calculations for the preceding year. Are the percentage changes approximately the same? What is significant about your findings?

c. For the current year, identify the two income statement items and the two balance sheet items that exhibit the relatively largest differences. Would you expect other French multinational companies to be subject to similar item-by-item differences?

2. Should a U.S. reader of non-U.S. financial statements find this SEC-mandated reconciliation useful?

3. Based on your analysis of the sanof-aventis 2006 limited restatement, do you support the SEC’s decision to exempt companies using IFRS from the reconciliation requirement? Why or why not?

MINI CASE 

As an analyst for a securities firm, you are aware that accounting practices differ around the world. Yet you wonder whether these differences really have any material effect on companies’ financial statements. You also know that the SEC in the United States requires non-U.S. registrants to reconcile key financial data from the GAAP used in their financial statements to U.S. GAAP. However, companies using IFRS were exempt from this reconciliation requirement starting in 2007.