Research Topics: Vodafone Marketing Strategy

A Case Study on Vodafone

COMPLIANCE, PROFIT-SEEKING BEHAVIOR AND USER NEEDS: THE THREE CRITERIA OF ADAPTING A NEW ACCOUNTING POLICY Introduction             As the global economy matures, there is a need to globalized and integrate accounting polices for efficient and effective cross-border trading.  However, it is still questionable that companies apply internationally-accepted principles due to profit-seeking stance.  More so, the emphasis given to situate FS structure to a wide-range of users may be undermined.  But it is assumed that when international standards are used, the usefulness of FS on general users is assured.  This paper discusses the ability of Financial Statements (FS) to reflect corporate performance and position that can be useful to a wide-range of users.  The ultimate question is that “What will be the core objective of the reporting entity?” The IAS Framework IAS 1 accounts compliance of an entity in presenting, structuring and satisfying disclosure requirements for general purpose FS (IAS Plus 2006).  Its purpose is to provide users a decision-making platform and covers guidelines in completing balance sheet, income statement, statement in changes in equity, cash flow statement, and if necessary, notes to FS.  It is suggested that fair presentation is achieved when an entity follows the provisions of International Financial Reporting Standards (IFRS) in which IAS 1 aids in reminding entities to be explicit and make no reservation on reporting (IAS Plus 2006).  On the other hand, IAS 8 largely set out disclosure requirements and possible adjustments in related FS due to changes in accounting policies which give rise to change in accounting estimates and emergence of errors (IAS Plus 2006).  Its purpose is to inform and protect users against the risks of misleading forecasts about the past, present and future financial performance of an entity due to the changes in accounting policies.  To achieve this end, the provision lays two priorities for the reporting entity to use Standards and Interpretations as references for accounting framework prior to last resort of managerial judgment or recent pronouncements from standard-setting bodies (IAS Plus 2006).          Vodafone: Analysis of Compliance             According to IAS 1, disclosure of entity’s judgments and own policy in FS as well as non-compliance of IFRS should be justified according to its nature, reasons and impact (IAS Plus 2006).  The company reflects compliance in the portion pertaining to risk factors, trends and outlook primarily due to the shift to IFRS from UK and US GAAP.  For example, there is a risk in broader and global scope of IFRS governing body as it may significantly affect business performance and operations unlike the narrower view of national and regional policies (p. 43).  It also forecasted future growth and performance of the company under new accounting framework as far as 2007.  It closed the section by stating some cautions regarding the forward-looking statements as well as admitting non-GAAP information (pp. 46-47).  This is beneficial data for non-speculative and wealth-conscious investors as they tend to have a more long-term relationship with the company than speculators/ players in the stock market.                        Vodafone used IFRS in its consolidated FS for the year ended 31 March 2005 although the European Parliament already required companies for its usage since 2002 (Vodafone 2006 p. 25).  Due to this lagged, the firm is liable for retrospective application (IAS Plus 2006) which it is complied by showing comparative amounts and substantial explanation of the former (US GAAP) and new framework used in estimation (IFRS) (pp. 26-28).  Stating that the shift resulted to major effect in future performance and activities of the company (p. 25), the report presented restatements (note 40) and reconciliations (note 38) which sufficiently follows necessary disclosures required in policy change.  As the firm also uses UK GAAP apart from its US operations, (note 40) not only shows restatements of UK GAAP to IFRS but also revised the account format and labeling (e.g. turnover to revenues).  The latter move in a coinciding compliance with IAS 1 because UK GAAP that allows “exceptional non-operating items” in the P/L account is classified (e.g. non-operating income and expense, investment income, etc.) when converted in IFRS format (p. 128).                                      The company is operating and reporting in a global scale that it uses at least two accounting policies (e.g. UK and US GAAP).  However, by shifting to IFRS, the burden of adjusting to dissimilar reporting regulations is minimized by using a generally-accepted accounting standard.  Shareholders and potential investors are the groups that primarily benefited from these methodologies reflected in FS report of the entity.  The company warned them initially about the risks associated with policy shift and elaborated them with restatements.  As an illustration, (note 40) ended a loss for year ended 31 March 2005 using UK GAAP £ (7.5B) but IFRS bottom-line showed a profit £6.4B primarily due to measurement and recognition differences.  In addition, the bottom-line format of IFRS explicitly admits that the “profit for the financial year is attributable to equity shareholders” which provide a partial marketing clause to invest in the company unlike the implicit UK GAAP format of “loss for financial year” (Note: This may be more welcomed by the company because noone would like to gain a net loss).                         The presentation of UK GAAP and IFRS reconciliation is also done following IAS 8 guidelines for errors (IAS Plus 2006).  Since the company adapted IFRS only in 31 March 2005, it is obliged by the provision to restate the opening balances for 2004 and 2005 (p. 126) because they are part of the retrospective scope.  In this regard, shareholders and potential investors will not be anxious that past FS inconsistencies might affect the application of IFRS in the current FS report for 2006.  This will solidify the FS going public scrutiny in terms of credibility and efficiency in reporting.              Perhaps, the most frequent result of managerial judgment, accounting estimates require elaborated presentations especially when accounting policies which serve as conceptual frameworks for managerial decision-making are on a change.  This endeavor will benefit creditors as well as suppliers in determining the accurate size of assets of the company for credit rating and customer contract purposes.  In addition, Vodafone belongs to telecommunications industry which is a high-tech sector.  Assets and new developments/ inventions are necessary to remain competitive.  With the depth and dominance of Vodafone in the global arena, buying rights and patents including licensing is a common strategy.  In effect, even the government hosts to the technology of Vodafone can determine the applicable licenses or taxes that can be shouldered by the latter.  Without disclosing changes in accounting estimates, creditors, suppliers (e.g. technology) and host government will not fully understand the costing of the company which can lead to lost opportunity on both sides (refer to RIM vs NTP on patent infringement cited in CNET News 2003).              The preceding admonition is illustrated in shifting US GAAP to IFRS format and its impact on critical accounting estimates which in turn serve as the basis for completing the consolidated FS.  The two policies is largely separated by impairment methodologies with tax, estimation of asset’s useful life and determination for allowance on bad debts are pegged in managerial judgment (pp. 26-28).  As IFRS requires annual test of impairment, the company resulted impairment looses of several million pounds contrary to the US GAAP comparison of carrying value to undiscounted future cash flows.  This can affect valuation from possible licensees that seek to acquire or share the assets of Vodafone.  In the contrary, the company did not elected to apply IFRS on business combinations because of the difficulty of applying the requirements to the large number of business combinations it undertook (p. 27).  Such is evidence that the FS of the firm continued to benefit from the leniency of “impracticable clause” of IAS 8 which in accordance to global operations and size of the firm.  Company employees and resources are saved from this simplicity.                                               As IAS 1 applies to all FS that complies with IFRS, Vodafone incorporated basic guidelines.  There are far more notes than FS per se (e.g. from pp. 75-139 against pp. 72-74 respectively) and they are cross-referenced to the account concerned.  In addition, the format of notes mimic the policy of IAS 1 like prioritizing basis of preparation and accounting policies being used. “Net” is excluded in identifying the bottom-line account or the Profit/ Loss for the financial year.  The minimum requirement for specific accounts to be reflected in the Income Statement is also accounted for (e.g. there is revenue, finance costs, share of associate’s undertakings, tax expense).  The balance sheet is also unflawed with regards to IFRS conformity.  Accounts are categorized as current and non-current and minimum items required at the face of the balance sheet (e.g. intangible assets, inventories, etc.) (IAS Plus 2006).  However, there are many “other accounts” especially on non-current assets and current liabilities.  Statement on Changes in Equity is also followed with regards to IAS 1.  This positively impacts the comparability of the company’s FS with other companies especially within the same industry.  This will aid investors in allocating their capital on a homogenous decision platform. France Telecom: Analysis of Compliance             The situation of France Telecom (FT) with regards to its adaption of IFRS is congruent to Vodafone.  Perhaps this can be associated as the two are major players in the regional and global telecommunications industry.  FT also applied IFRS during its 2005 operations and used 2004 as comparative figure.  Initially, the firm presented how it transformed historical data to comparable data particularly financial results for 2004 (FT 2005 p. 11).  This is in accordance to IAS 8 but the manner it was elaborated is more extensive than Vodafone.  Perhaps, the bigger font size of the web document of FT FS report plays significant role.  As a thoroughly explained situation can provide users substantial facts about the accounting policy shift, there is also the risk of de-motivating them to read the document due also to the substantial effort needed.             But when observed closely, Vodafone has also the tendency to elaborate extensively the cause to historical figure of policy shift but FT is more detailed from one account to the other.  This can be primarily affected by the ongoing critical project of the company called “Ambition FT 2005” which started in 2002 (p. 15).  As a result, many accounts attributable to the project are adjusted to IFRS in reference to retrospection and its practicability because the project is attended so closely that it became part of the company’s major endeavors.  In effect, it is indeed practical to be retrospective and thorough explanation of comparative figures is inevitable.             The company is implicit that there are risks associated with the accounting policy shift.  This is evidenced by merely pinpointing “outlook” immediately after the changes in historic accounts (particularly 2004) are identified.  It informed the users about its customer-oriented plans like the 2006-2008 NEXT program which aims to introduce innovations, unify customer serve and adaptation of simplified brand architecture (p. 22).  Unlike the more aggressive cautions of Vodafone, FS is more customer-oriented which implicates that customers using the products and services of FS will greatly benefit in the FS report apart from potential and current investors who have financial stake on the firm.  The future trends of FT like the “development of new DSL, use of Live Box” are an obvious opposite of “impact of new competitors, downward pressure on termination rates from regulatory action”.  In effect, IAS 8 is undermined because the company fails to account the primary users of FS which are the shareholders and investors.             The customer-oriented balance sheet of FT can positively or negatively impact shareholders.  Positive as the report embodies a strategy on how to maintain and increase market share while there is adverse effect on shareholder impression on financial stability and consistency.  However, similarities are eminent.  The opening balance sheet of FT under French GAAP is compared with IFRS version.  Adjustments such as net value of properties for IFRS figures reduced the value of assets of French GAAP-quoted accounts (p. 215).  There are notes to serve as reference for adjustments not only on computations but accounts names.  For example, deferred income taxes is changed to deferred tax assets as well as “other” accounts are specified which is a compliance with IAS 1 and 8.  In addition, most of the notes pertain to implications to FS of IFRS adaption which complied with disclosures in accounting policy changes like the cause of change, amount of adjustment and retrospective applications (IAS Plus 2006).              The company applied the carrying amounts of the IFRS that affects most of its accounts especially the properties which resulted to reduction in impairment (p. 221) looses unlike Vodafone who increased impairment losses after adapting IFRS.  This shows that there are winners and gainers within the telecommunications industry in the effort to integrate operations to the needs of a globalized economy.  In turn, this indicated that Vodafone gripped in prioritizing standards, interpretations and recent pronouncements from regulatory bodies (IAS Plus 2006) before implementing managerial judgment.  This is because the company can use the managerial leniency in making flexible arrangements in accounting policy reconciliation but seemingly opted not to do so.             Parallel with Vodafone, FT stated specific provisions not in IFRS policy but is suitable to managerial decision making.  As observed, this is in compliance with IAS 8 particularly with regards to stating the reasons of adapting a different accounting policy (IAS Plus 2006).  With this, investors will not be discouraged and distrust the credibility if the company’s FS due to their “additions” in the on-going IFRS policies.  They are justified and the governing-bodies allowed justification as a part of managerial judgment.  For example, provision for pension plans and similar benefits is not a universal method to motivate employees and as such excluded in explicit IFRS policy.  In the contrary, the company had justified its use and compatibility with its current strategy including its significant effects when not accounted for.                   Lastly, it can be proved that FT diligently follows IFRS even with a more customer focus as its report accounted for expenses incurred during stock option grants which in French GAAP are not allowed to be compensated.  However, this are not cash transactions but only “entry” transactions.  This is in accordance to disclosure regarding capital transaction with owners and reconciliation of share capital account (IAS Plus 2006).  To investors and also internal employees, this can be an eye-opener that not all IFRS adjustments to country-based GAAP lead to increase in cash and in turn their gains and incomes.  There are some transactions that cannot increase the bottom-line that closer look to the effects of IFRS shift should be taken into account.             Conclusion             It is earlier noted that when an FS is presented using the framework of IFRS, financial performance and position of an entity is assured to obtain fair representation.  An FS is useful to specific users if it embodies their concerns such as earnings per share to shareholders, cash flows for suppliers, research and development feats for customers, provision for environmental liabilities for environmentalist, tax profit/ loss for the government and provision for pension benefits for employees and retirees.  More generally, FS should be useful and understandable to a broad-range of users because IFRS is biased on general purpose financial statements.  Vodafone and FT are both compliant with IAS provisions which are a segment of IFRS and show that it can obtain general benefits to users (e.g. clearness, simplicity, thoroughness).  However, they seemingly concentrated to one primary beneficiary of FS report and two to five secondary beneficiaries.  Environmental impacts of their operations are excluded to the loss of environmentalists and other authorities.  Then, the question in the introduction is finally answered… it depends on managerial judgment, perhaps, accounting knowledge and experience.              Credit:ivythesis.typepad.com

A Case Study on Vodafone

COMPLIANCE, PROFIT-SEEKING BEHAVIOR AND USER NEEDS: THE THREE CRITERIA OF ADAPTING A NEW ACCOUNTING POLICY Introduction As th...

Strategic Analysis and Choice of Orange Mobile Company

Introduction             The mobile Industry has been evolving now and then, from the “brick-size” phone to the size of a credit card, what comes next? In the advent of high-end technology, mobile phones become a necessity at the same time a leisure gadget that most teenagers enjoy. What has these phones got into? Well, they not only serve as communication purposes but it has become an icon, a fashion statement due to its complicated high-end features yet the simplicity of its function captures the heart of its consumers. In the words of Robin Richmond (n.d.), “the mobile phone industry is certain to continue evolving, with some research suggesting that one day phones will take the place of credit cards and the remote control.” We are given the capacity to personalize our mobile phones in every aspect or features. Much more, with the growing innovation of mobile phones it has likely influenced the desires of every consumer; good news for mobile industries that they would be able to advance to next level. The current fads that the consumer has well appreciated are unlimited video clips, video phone calling, camera, photo message, downloadable ring tones, wallpapers and screen saver and most of all, the mp3 player, if this is now? What comes next? That is what we call the never-ending strategy.                       An example of a mobile industry is the Orange Mobile Company. It was launched last April 1994, Orange was the fourth entrant into an already crowded UK mobile phone market, with an ambitious aim: to become the mobile provider of choice by making communications an intuitive and easily accessible part of daily life. Orange enlisted the influential brand consultancy Wolff Olins for help in producing a brand identity, name and visual style that would create high awareness … and attract customers. The products and services they offer are: mobile phones where in they work closely with major manufacturers such as Motorola, Nokia and Samsung; the internet where one can go livebox and livemusic. Colour was used simply and confidently, complemented by simple language, short sentences and an easy to read typeface. Words spelt out the customer benefit rather than the technical specification of a product. By the time Orange was sold to Mannesmann AG in 1999 Orange had launched in Switzerland and Belgium and had licensed its brand to companies in Hong Kong, Australia, Israel and India (www.orange.com).   In particular, this paper will be concentrating on Orange Mobile Company; one of the leading mobile industries in UK, with regards to its strategic marketing analysis. This paper will be discussing the importance of understanding competitors and how this understanding may facilitate successful planning of marketing activities and analyze these activities to conceptualize a profitable plan. The purpose of this paper is to give the researcher wide knowledge over strategic analysis and apply this knowledge in assessing the strategic analysis of Orange Mobile Company in particular context with its strategic business units , (France Telecom rebranded Wanadoo, and Equant ) and in the maintenance of the brand value in competition with other mobile industries (Cellnet and Vodafone). An in-depth analysis of product portfolio strategy with the use of its method, the Boston Consulting Group Box (BCG Box) is required as to facilitate the researcher in its aims for the paper.   Strategy             Strategy as defined by Johnson and Scholes (Exploring Corporate Strategy) as the direction and scope of an organization over the long-term; which achieves advantage for the organization through of configuration of resources within a challenging environment to meet the needs of the market and fulfill the needs of stakeholder expectations. Strategies exist in any areas of an organization from a group of businesses to the individuals working with it. The different levels of a business where in strategy became one of their cornerstones. We have the corporate strategy, business unit strategy and operational strategy. Corporate strategy is concerned with the overall purpose and scope of the business to meet stakeholder’s expectation. When we say, market scope it classifies as to which market a business should compete in and what kind of activities to be involved in the business incorporating the values and expectations of those who have power in and around the business. This level often stated their strategic decision-making through their mission statement. The said mission statement would guide them as to what they should do for the betterment of the business for the years to come. Business unit strategy is concerned on how the business competes successfully in the market. This refers as to what products that shall meet the demands of the customers, necessary skills that are required in gaining advantage over the competitors to further exploit and/or create opportunities. The firm’s operational strategy concerns mainly of the assets, finances, technical competence and the people. Job performance is influenced by the employee’s knowledge, attitude and skills in handling their day-to-day activities and issues. This is by upholding work ethics within the organization and during business affairs.   Strategic Management             Strategic Management is showing strategic timing in selling a stock. The diagram shown below clearly pinpoints the corporate, business unit and the operational strategies in the simplified five tasks.   In order for the said tasks to be realized there must be a thorough coordination with other departments so that strategic decisions answer the mission statement of the organization. It is an on-going process that challenges the organization to convert their mission statement into organizational objectives that pushes the firm to be inventive intentional and focused. In this way they could keep track of the company’s performance thus, error would be prevented and they would be able to dispose parts of their business that cannot generate adequate returns or that does not generate with their business strategy.   Strategic Analysis In thorough strategic management process, it has three main components shown in the figure below:   Strategic analysis by the term itself means it is by using strategic tools in order to methodically assess and analyze the firm’s strength in order to propel company’s ambition to its zenith considering their position or their standing in the competitive market and the influencing environment that might alter or improve their status. The strategic choice would involve the stakeholder’s expectation as their basis in making strategic choices and these choices are screened very well in order to implement these options. Strategic implementation is the crucial and most difficult of the three since; it has to be implemented into an action, and that the organization would act as a whole.   Business Portfolio             The Business Portfolio is the collection of business and products that make up the company. The best business portfolio is one that fits the company’s strengths and helps exploit the most attractive opportunities. The company must (1) analyze its current business portfolio and decide which business should receive more or less investment, and (2) develop growth strategies for adding new products and businesses to the portfolio, whilst at the same time deciding when products and businesses should no longer be retained.   Methods of Portfolio Planning             The two best-known portfolio planning methods are from the Boston Consulting Group and by General Electricity/Shell. In each method, the first method is to identify various Strategic Business Units (“SBU’s”) in a company portfolio. An SBU is a unit of the company that has a separate mission and objectives and objectives and that can be planned independently from the other businesses. An SBU can be a company division, a product line or individual brands – it all depends on how the company is organized.   The Boston Consulting Group Box (“BCG Box”)             It is a means of analysing and categorizing the performance of business units in large diversified firms by reference to market share and growth rates. Four main categories are displayed in a two-dimensional matrix, which seeks to identify those business units that generate cash and those that use it, and then to relate the position of the business units to the formulation of an overall business strategy (A Dictionary of Business; 2002). Resources are allocated to business units according to where they are situated on the grid as follows:   Using the BCG Box, a company classifies all its SBU’s according to two dimensions: on the horizontal axis: relative market share – this serves as a measure of SBU in the strength market; on the vertical axis: market growth share rate – this provides a measure of market attractiveness.   By dividing the matrix into four areas, four types of SBU can be distinguished:   · Stars – a business unit that has a large market share in a fast growing industry. Stars may generate cash, but because the market is growing rapidly they require investment to maintain their lead. If successful, they become cash cows (www.quickmba.com).               In relation, Orange mobile company has made strategic partnerships and alliances with some of the world’s leading suppliers and operators. They established the FreeMove alliance in 2003.  In 2006 they were joined by leading Nordic operator, Telia Sonera. This alliance ensures that customers have access to the same familiar services, like voicemail or customer service, abroad as well as at home. You can now even see who is calling when you roam on member networks. The services they offered are classifies into two: business and individual services. In the business sector – roaming services for international businesses, each with a consistent call rate for calls made and received when users are roaming abroad, and for international calls made from their home countries; also offered, data services including both GPRS and BlackBerry™. In this sector, they have an International customer service with International Business Care group, a multi-lingual team dedicated to providing great service to multi-national organizations. In the individual sector, they have the FreeMove answer, wherein they just have to dial their usual short codes to access voicemail and see whose calling; there is no need to re-programme the saved numbers for them to work internationally (www.freemovealliance.com). Aside from it, they join with Cingular Wireless combining okay strengths of coverage, network performance and business support services. These functionalities are the STARS of the Orange mobile company; the joint services offered will attract future customers as well as prospect businesses who would like to venture business with them. Thus, an increase demand of services also increases their sales.   · Cash Cow – a business unit that has a large market share in a mature, slow growing industry. Cash cows require little investment and generate cash that can be used to invest in other business units (www.quickmba.com).   France telecom acquired the Orange brand last August 2000 in effort to acquire the power of the Orange brand. Most of France Telecom’s mobile businesses were rebranded to Orange. France Telecom’s ambition is to be the first integrated telecoms operator in Europe and leader for convergence, delivering a ‘New Experience of Telecoms’ for its customers. This includes the rebranding of Equant and Wanadoo on 1 June 2006 – forming part of an international strategy to use the Orange brand commercially for mobile, fixed-line, broadband, multi-play and business offerings. This means a simple, single-company experience for customers as well as an exciting new generation of enhanced communications and converged services. The rebranding of the said business added brand value to the Orange brand. Knowing this, those individuals who use the previous brand now use the power name of Orange. This is an example of Cash cow since, the Equant and Wanadoo are already legitimate brands that are already recognized by the mobile market. The effect of rebranding escalated the number of prospect customers thus, Orange Company can generate fund from this to support other businesses that is still fresh in the competitive mobile market or other projects that has promoted the brand value of Orange. For an instance, the collaboration of Orange with PalmSource in the Palm Powered Mobile World Program, the joint forces of the two will bring a cutting – edge Palm Powered smartphones to the market.   ·                    Question Marks (or Problem Children) are businesses or products with low market share but which operate in higher growth market share at the expense of more powerful competitors. Management have to think about “question marks” – which one should they invest in? Which ones should they allow to fail or shrink?   In this category, these are the probable business units that might not continue to share in the market that will lead to product failure due to poor promotion and advertisement and the price is just costly that people wouldn’t spend a cent; or it might become the Stars and in the long run the Cash cows. The business units I’m referring are of those newly integrated services and products since; it is new there will always be questions that will arise and strategic planning must continue on and on in order, to finalize what particular procedure should be implemented. In addition, it is necessary that management of the marketing function be built upon purposively defined and analytically based marketing strategies. The strategic marketing planning, according to Allen (2006), involves basically three stages: (1) segmenting the market; (2) profiling the market segments; and (3) developing the market segment marketing strategy. Pease refer to Figure 4 for the outline. Considering that globally, it is a competitive market, it is a must that strategic planning must be done before making unnecessary unfit choices. After such strategic choices, strategic analysis is done to further enhance the chance of making it big.    In strategic analysis, the company must also learn to comprehend the competitors of a business in a given industry and developing methods as to distinguish it from them is a very relevant and critical aspect which influences the development of the competitive strategy of the firm. In addition, it is also an important aspect of the strategic planning process as it (1) facilitates the management to understand their competitive advantage or disadvantages associated to their competitors; (2) creates understanding of the competitors past, present, and future strategies; (3) offer an informed basis to develop strategies to gain and maintain competitive advantage in the future; and (4) to facilitate the firm in forecasting the returns that may be made from future investments (Tutor2u Limited 2005).               Proctor (2000) notes that understanding competitors is the core to making marketing plans and strategy. A firm has to compare its products, prices, channels of distribution and promotional methods with those of its competitors on a regular basis to make sure that it is not at a disadvantage. The process of the competitor analysis basically constitutes three steps. The first step is to identify the firm’s competitors. As for Orange Mobile Company, it has several competitors such as Vodafone and Cellnet.   The second step of the competitor analysis is the assessment of its competitors. This may be done through benchmarking as the firms will first have to determine the objectives of its competitors as well as their objectives, then later on assessing the strengths and weaknesses of its competitors. Lloyd, Elmuti and Kathawala (1997) notes that benchmarking sustains organizational growth as well as facilitates world-class competitive status.               Finally, the third step in the competitor analysis is the selection of competitors to avoid or to attack. After the assessment of the firm’s competitors, the firm will have to formulate the specific strategies that will give them the competitive advantage against its competitors.               It must be noted that during the process of competitor analysis and the implementations of its strategies, the firm will have to assess which of the competitors’ strategies that they will have to follow or not. The second stage which allows the company to compare their operations with others will necessitate some degree of change within the organization. Thus it should be very well noted that the company only as to follow the strategies that will apply to their business as every business is unique in their own nature. These strategies will have to be in lined with the company’s philosophies as well.   ·                    Dogs are the combination of low growth rate and market share is typical of these businesses and products, which operate in mature markets. Firms frequently face strategic decision regarding whether to continue to support dogs or to implement a divestment strategy. Barriers to exit (factors that make it difficult for a company to leave a make a market that is no longer profitable or that has ceased to provide an acceptable return on capital) would also need to be considered (A Dictionary of Business, 2002).   Using the BCG Box to determine the strategy is a way of maximizing the long-run interests of every group. Another is that by balancing properly the interests of major stakeholders, the long-range interests of all will be maximized. However, conventional strategic thinking suggests there are four possible strategies for each SBU: (1) build share: here the company can invest to increase market share like turning the Question mark into a Star (2) hold: the company invest just enough to keep the SBU in its present position (3) harvest: the company reduces the amount of investment in order to maximize the short term cash flows and profits from the SBU. This could be shown by turning the Stars into Cash cows (4) divest: the company can divest the SBU by phasing it out or selling it – on order to use resources elsewhere by investing into more promising Question marks.   Conclusion: The mobile industry has already extended throughout the world. Firms that operate within the mobile industry are categorized as a market structure that is highly competitive. Orange Mobile Company and its strategic marketing planning has been the focus of this research is that the Orange mobile Company as a market leader in the mobile industry.   The Strategic Management is the process of specifying an organization’s objectives, developing policies and plans to achieve these objectives, and allocating resources so as to implement the plans. There is a need to have a strategy that is concerned with the most important decisions made in an enterprise. The central thrust of these decisions is the future of the organization. In here, strategic planning must be done to “create” more desirable future results by (a) influencing the outside world or (b) adapting current programs and actions so as to have more favorable outcomes in the external environment.   This paper has strongly recognized the importance of understanding competitors in strategic marketing planning for the benefits that it gives to the successful planning of marketing activities. These benefits and advantages include the following. First, understanding competitors will facilitate the firm’s management to understand their competitive advantage and disadvantages in relation to their competitors. Second, understanding competitors will also generate understanding of the past, present and future strategies of the firm. Third, it offers the firm an informed basis to develop strategies in order to gain or maintain competitive advantage against their competitors in the future. Lastly, understanding competitors will also facilitate the firm in forecasting or predicting the financial returns that they made from future investments.   To further influence the strategic analysis of the Orange mobile Company, we use the BCG – share matrix. The experience curve represents a volume-cost relationship. It is argued that, as the cumulative historical volume of output increases, unit costs will fall at a geometric rate. This relationship is said to result from specialization, standardization, learning, and scale effects. The firm with the largest cumulative output will have lower costs, suggesting a strategy of early and price policies to develop volume. Credit:ivythesis.typepad.com

Strategic Analysis and Choice of Orange Mobile Company

Introduction The mobile Industry has been evolving now and then, from the “brick-size” phone to the size of a credit card...

COMPLIANCE, PROFIT-SEEKING BEHAVIOR AND USER NEEDS

Introduction             As the global economy matures, there is a need to globalize and integrate accounting polices for efficient and effective cross-border trading.  However, it is still questionable that companies apply internationally-accepted principles due to profit-seeking stance.  More so, the emphasis given to situate FS structure to a wide-range of users may be undermined.  But it is assumed that when international standards are used, the usefulness of FS on general users is assured.  This paper discusses the ability of Financial Statements (FS) to reflect corporate performance and position that can be useful to a wide-range of users.  The ultimate question is that “What will be the core objective of the reporting entity?”   The IAS Framework IAS 1 accounts compliance of an entity in presenting, structuring and satisfying disclosure requirements for general purpose FS (IAS Plus 2006).  Its purpose is to provide users a decision-making platform and covers guidelines in completing balance sheet, income statement, statement in changes in equity, cash flow statement, and if necessary, notes to FS.  It is suggested that fair presentation is achieved when an entity follows the provisions of International Financial Reporting Standards (IFRS) in which IAS 1 aids in reminding entities to be explicit and make no reservation on reporting (IAS Plus 2006).  On the other hand, IAS 8 largely set out disclosure requirements and possible adjustments in related FS due to changes in accounting policies which give rise to change in accounting estimates and emergence of errors (IAS Plus 2006).  Its purpose is to inform and protect users against the risks of misleading forecasts about the past, present and future financial performance of an entity due to the changes in accounting policies.  To achieve this end, the provision lays two priorities for the reporting entity to use Standards and Interpretations as references for accounting framework prior to last resort of managerial judgment or recent pronouncements from standard-setting bodies (IAS Plus 2006).           Vodafone: Analysis of Compliance             According to IAS 1, disclosure of entity’s judgments and own policy in FS as well as non-compliance of IFRS should be justified according to its nature, reasons and impact (IAS Plus 2006).  The company reflects compliance in the portion pertaining to risk factors, trends and outlook primarily due to the shift to IFRS from UK and US GAAP.  For example, there is a risk in broader and global scope of IFRS governing body as it may significantly affect business performance and operations unlike the narrower view of national and regional policies (p. 43).  It also forecasted future growth and performance of the company under new accounting framework as far as 2007.  It closed the section by stating some cautions regarding the forward-looking statements as well as admitting non-GAAP information (pp. 46-47).  This is beneficial data for non-speculative and wealth-conscious investors as they tend to have a more long-term relationship with the company than speculators/ players in the stock market.                        Vodafone used IFRS in its consolidated FS for the year ended 31 March 2005 although the European Parliament already required companies for its usage since 2002 (Vodafone 2006 p. 25).  Due to this lagged, the firm is liable for retrospective application (IAS Plus 2006) which it complied by showing comparative amounts and substantial explanation of the former (US GAAP) and new framework used in estimation (IFRS) (pp. 26-28).  Stating that the shift resulted to major effect in future performance and activities of the company (p. 25), the report presented restatements (note 40) and reconciliations (note 38) which sufficiently follows necessary disclosures required in policy change.  As the firm also uses UK GAAP apart from its US operations, note 40 not only shows restatements of UK GAAP to IFRS but also revised the account format and labeling (e.g. turnover to revenues).  The latter move is a coinciding compliance with IAS 1 because UK GAAP that allows “exceptional non-operating items” in the P/L account is classified (e.g. non-operating income and expense, investment income, etc.) when converted in IFRS format (p. 128).                                        The company is operating and reporting in a global scale that it uses at least two accounting policies (e.g. UK and US GAAP).  However, by shifting to IFRS, the burden of adjusting to dissimilar reporting regulations is minimized by using a generally-accepted accounting standard.  Shareholders and potential investors are the groups that primarily benefited these methodologies reflected in FS report of the entity.  The company warned them initially about the risks associated with policy shift and elaborated them with restatements.  As an illustration, note 40 ended a loss for year ended 31 March 2005 using UK GAAP £(7.5B) but IFRS bottom-line showed a profit £6.4B primarily due to measurement and recognition differences.  In addition, the bottom-line format of IFRS explicitly admits that the “profit for the financial year is attributable to equity shareholders” which provide a partial marketing clause to invest in the company unlike the implicit UK GAAP format of “loss for financial year” (Note: This may be more welcomed by the company because no one would like to gain a net loss).                           The presentation of UK GAAP and IFRS reconciliation is also done following IAS 8 guidelines for errors (IAS Plus 2006).  Since the company adopted IFRS only in 31 March 2005, it is obliged by the provision to restate the opening balances for 2004 and 2005 (p. 126) because they are part of the retrospective scope.  In this regard, shareholders and potential investors will not be anxious that past FS inconsistencies might affect the application of IFRS in the current FS report for 2006.  This will solidify the FS going public scrutiny in terms of credibility and efficiency in reporting.                Perhaps the most frequent result of managerial judgment, accounting estimates require elaborated presentations especially when accounting policies which serve as conceptual frameworks for managerial decision-making are on a change.  This endeavor will benefit creditors as well as suppliers in determining the accurate size of assets of the company for credit rating and customer contract purposes.  In addition, Vodafone belongs to telecommunications industry which is a high-tech sector.  Assets and new developments/ inventions are necessary to remain competitive.  With the depth and dominance of Vodafone in the global arena, buying rights and patents including licensing is a common strategy.  In effect, even the government hosts to the technology of Vodafone can determine the applicable licenses or taxes that can be shouldered by the latter.  Without disclosing changes in accounting estimates, creditors, suppliers (e.g. technology) and host government will not fully understand the costing of the company which can lead to lost opportunity on both sides (refer to RIM vs NTP on patent infringement cited in CNET News 2003).                The preceding admonition is illustrated in shifting US GAAP to IFRS format and its impact on critical accounting estimates which in turn serve as the basis for completing the consolidated FS.  The two policies is largely separated by impairment methodologies with tax, estimation of asset’s useful life and determination for allowance on bad debts are pegged in managerial judgment (pp. 26-28).  As IFRS requires annual test of impairment, the company resulted impairment looses of several million pounds contrary to the US GAAP comparison of carrying value to undiscounted future cash flows.  This can affect valuation from possible licensees that seek to acquire or share the assets of Vodafone.  In the contrary, the company did not elected to apply IFRS on business combinations because of the difficulty of applying the requirements to the large number of business combinations it undertook (p. 27).  Such is evidence that the FS of the firm continued to benefit from the leniency of “impracticable clause” of IAS 8 which in accordance to global operations and size of the firm.  Company employees and resources are saved from this simplicity.                                              As IAS 1 applies to all FS that complies with IFRS, Vodafone incorporated basic guidelines.  There are far more notes than FS per se (e.g. from pp. 75-139 against pp. 72-74 respectively) and they are cross-referenced to the account concerned.  In addition, the format of notes mimics the policy of IAS 1 like prioritizing basis of preparation and accounting policies being used. “Net” is excluded in identifying the bottom-line account or the Profit/ Loss for the financial year.  The minimum requirement for specific accounts to be reflected in the Income Statement is also accounted for (e.g. there is revenue, finance costs, share of associate’s undertakings, tax expense).  The balance sheet is also unflawed with regards to IFRS conformity.  Accounts are categorized as current and non-current and minimum items required at the face of the balance sheet (e.g. intangible assets, inventories, etc.) (IAS Plus 2006).  However, there are many “other accounts” especially on non-current assets and current liabilities.  Statement on Changes in Equity is also followed with regards to IAS 1.  This positively impacts the comparability of the company’s FS with other companies especially within the same industry.  This will aid investors in allocating their capital on a homogenous decision platform. Credit:ivythesis.typepad.com

COMPLIANCE, PROFIT-SEEKING BEHAVIOR AND USER NEEDS

Introduction As the global economy matures, there is a need to globalize and integrate accounting polices for efficient an...

Mobile Broadband has a great impact on the growth of e-business

WIRELESS/MOBILE BROADBAND NETWORK             by             (Student #) (Name)             (Organization)                 February 2, 2009                             Executive Summary               Mobile broadband has a great impact on the growth of e-business, because it will help to add number of online users and buyers, and it was made possible due to application of 3G. In addition, compare with other connectivity broadband such as Wi-Fi and satellite access systems, mobile broadband or 3G will be cheaper and widely accessible. Furthermore, the said technology is offering future enhancement such as application of WiMAX for cheaper connection and the improving industry of mobile broadband. However, mobile broadband can cause problems regarding its cost, due to the pricing strategies of manufacturers of the devices.                                 What is Mobile Broadband?               Mobile broadband is a sophisticated new technology which allows it users to access the Internet using laptop, mobile phones or the related gadgets, anywhere, it is a broadband connectivity that is available on the go ( 2008; Top 10 Broadband 2009). Above all, mobile Internet is defined as architecture where in a user can have access to the global Internet network and it is usual services regardless of the current point of attachment to the network ( 2003).   How the Technology Works?               The wireless mobile Internet has been made possible by third generation or (3G) (2004). It allows a mobile phone system to transfer data, e-mail, and watch streaming video over a mobile phone connection. 3G technologies allows for a long-range Internet connection which covers 10 km or more and allows the user to be on the go such as walking, while riding on the train or bus               Due to new upgrade, the said system is also being applied to provide personal computers with a high-speed Internet connection. Thus, the vendors are almost mobile phone telecommunications such as Telstra and Vodafone which focuses on the different devices such as notebook, computers or USB modems which allows connecting to the said service (  2007). Context               It is important to consider that e-business technologies are sensitive to the network externality characteristics, thus the success of any e-business systems is dependent on the number of the citizens as well as organizations who consume the said products ( 2008). As a result, if the number of online consumer of one e-business is low, the said technology will be useless. In connection, the industry of mobile broadband is showing a great growth. According to the Market Intelligence Center or MIC, in 2008, there are more than 800 wireless mobile broadband providers which covered more than 200 countries ( 2008). This can also be attributed to the changing lifestyle of people; where in people don’t have much time to check their mails and other important data using the traditional way.               The said event can be accounted to the growing popularity of small and handy mobile devices, and it is supported by the growing sales of mobile devices in the world ( 2008). As a result, mobile commerce has been hyped as the next big wave in terms of e-business because of the big push of wireless application protocol or WAP-based hand phones to the market ( 2000).   Brand/Options               Aside from 3G mobile broadband, there are other options that can be applied in order to improve e-business connectivity such as satellite access systems that can work in more places on Earth, however, the said option is extremely expensive to operate, and it is not suitable when the user is in transit. Another is the technology of Wi-Fi, as of now there is a growing number of Wi-Fi hotspots in the world, therefore the user can exert effort to scan for Wi-Fi hotspot wherever they go. However, it will not be applicable if the user needed it for a time that is critical for business activity ( 2008). Therefore, mobile broadband shows the greater advantage.   Future               The OVUM Strategy Analytics and Ericson forecasted that the mobile wireless broadband users are growing much faster than the fixed or landline broadband users, or by 2012, there will be over 1.8 billion broadband Internet users in the world, and more people will be using the mobile than the landline broadband (2008). Thus, the mobile broadband is expected to become the dominant broadband platform in the world, in this coming 2011 ( 2007).               Aside from that, there are also incoming standards that will compete with 3G. WiMAX is an emerging standard for long-range data transmission that is main goal or vision is to provide cheap mobile broadband service with the convenience of Wi-Fi (2008).   Generation/Cost Saving Potential               Handset vendors have always been the beneficiaries of the drive of the operators to increase the number of subscriber. Operators are practicing the device subsidy. As a result, the price of the device will be around 0 above, and the average bill of materials for a handset to support mobile Internet will be about 0 to 5. Due to the said reason, operators will be having difficulty in subsidizing the service, the will deter the users from upgrading their existing device to a new mobile broadband devices (2006). As a result, it can affect the decision of the users or consumers to jump to the bandwagon of mobile Internet, thus it can affect the impact of e-business.   Recommendation               There is no doubt that mobile broadband created different changes, not only on the individual lives of people around the world, but also changes the entire environment of e-business. The said aspect is considered as one of the key developments or innovations in the field of e-business that can help to boost the number of online citizens who will avail products and services online.             That’s why it will be important for many businesses to focus on changing and adding some features in their official website that will be capable in the WAP or mobile Internet. By doing that, their customer will be able to connect with anywhere and anytime.                   Credit:ivythesis.typepad.com

Mobile Broadband has a great impact on the growth of e-business

WIRELESS/MOBILE BROADBAND NETWORK by (Student #) (Name) ...

A Paper on MANAGERIAL ACCOUNTING of VODAFONE MOBILE AND ORANGE MOBILE

COMPLIANCE, PROFIT-SEEKING BEHAVIOR AND USER NEEDS: THE THREE CRITERIA OF ADOPTING A NEW ACCOUNTING POLICY   Introduction             As the global economy matures, there is a need to globalized and integrate accounting polices for efficient and effective cross-border trading.  However, it is still questionable that companies apply internationally-accepted principles due to profit-seeking stance.  More so, the emphasis given to situate FS structure to a wide-range of users may be undermined.  But it is assumed that when international standards are used, the usefulness of FS on general users is assured.  This paper discusses the ability of Financial Statements (FS) to reflect corporate performance and position that can be useful to a wide-range of users.  The ultimate question is that “What will be the core objective of the reporting entity?”   The IAS Framework IAS 1 accounts compliance of an entity in presenting, structuring and satisfying disclosure requirements for general purpose FS (IAS Plus 2006).  Its purpose is to provide users a decision-making platform and covers guidelines in completing balance sheet, income statement, statement in changes in equity, cash flow statement, and if necessary, notes to FS.  It is suggested that fair presentation is achieved when an entity follows the provisions of International Financial Reporting Standards (IFRS) in which IAS 1 aids in reminding entities to be explicit and make no reservation on reporting (IAS Plus 2006).   On the other hand, IAS 8 largely set out disclosure requirements and possible adjustments in related FS due to changes in accounting policies which give rise to change in accounting estimates and emergence of errors (IAS Plus 2006).  Its purpose is to inform and protect users against the risks of misleading forecasts about the past, present and future financial performance of an entity due to the changes in accounting policies.  To achieve this end, the provision lays two priorities for the reporting entity to use Standards and Interpretations as references for accounting framework prior to last resort of managerial judgment or recent pronouncements from standard-setting bodies (IAS Plus 2006).            Vodafone: Analysis of Compliance             According to IAS 1, disclosure of entity’s judgments and own policy in FS as well as non-compliance of IFRS should be justified according to its nature, reasons and impact (IAS Plus 2006).  The company reflects compliance in the portion pertaining to risk factors, trends and outlook primarily due to the shift to IFRS from UK and US GAAP.  For example, there is a risk in broader and global scope of IFRS governing body as it may significantly affect business performance and operations unlike the narrower view of national and regional policies    It also forecasted future growth and performance of the company under new accounting framework as far as 2007.  It closed the section by stating some cautions regarding the forward-looking statements as well as admitting non-GAAP information .  This is beneficial data for non-speculative and wealth-conscious investors as they tend to have a more long-term relationship with the company than speculators/ players in the stock market.                         Vodafone used IFRS in its consolidated FS for the year ended 31 March 2005 although the European Parliament already required companies for its usage since 2002 (Vodafone 2006 ).  Due to this lagged, the firm is liable for retrospective application (IAS Plus 2006) which it complied by showing comparative amounts and substantial explanation of the former (US GAAP) and new framework used in estimation (IFRS)   Stating that the shift resulted to major effect in future performance and activities of the company  the report presented restatements (note 40) and reconciliations (note 38) which sufficiently follows necessary disclosures required in policy change.  As the firm also uses UK GAAP apart from its US operations, note 40 not only shows restatements of UK GAAP to IFRS but also revised the account format and labeling (e.g. turnover to revenues).  The latter move is a coinciding compliance with IAS 1 because UK GAAP that allows “exceptional non-operating items” in the P/L account is classified (e.g. non-operating income and expense, investment income, etc.) when converted in IFRS format                                      The company is operating and reporting in a global scale that it uses at least two accounting policies (e.g. UK and US GAAP).  However, by shifting to IFRS, the burden of adjusting to dissimilar reporting regulations is minimized by using a generally-accepted accounting standard.  Shareholders and potential investors are the groups that primarily benefited these methodologies reflected in FS report of the entity.  The company warned them initially about the risks associated with policy shift and elaborated them with restatements.  As an illustration, note 40 ended a loss for year ended 31 March 2005 using UK GAAP £(7.5B) but IFRS bottom-line showed a profit £6.4B primarily due to measurement and recognition differences.  In addition, the bottom-line format of IFRS explicitly admits that the “profit for the financial year is attributable to equity shareholders” which provide a partial marketing clause to invest in the company unlike the implicit UK GAAP format of “loss for financial year” (Note: This may be more welcomed by the company because noone would like to gain a net loss).                            The presentation of UK GAAP and IFRS reconciliation is also done following IAS 8 guidelines for errors (IAS Plus 2006).  Since the company adopted IFRS only in 31 March 2005, it is obliged by the provision to restate the opening balances for 2004 and 2005  because they are part of the retrospective scope.  In this regard, shareholders and potential investors will not be anxious that past FS inconsistencies might affect the application of IFRS in the current FS report for 2006.  This will solidify the FS going public scrutiny in terms of credibility and efficiency in reporting.                Perhaps the most frequent result of managerial judgment, accounting estimates require elaborated presentations especially when accounting policies which serve as conceptual frameworks for managerial decision-making are on a change.  This endeavor will benefit creditors as well as suppliers in determining the accurate size of assets of the company for credit rating and customer contract purposes.  In addition, Vodafone belongs to telecommunications industry which is a high-tech sector.  Assets and new developments/ inventions are necessary to remain competitive.  With the depth and dominance of Vodafone in the global arena, buying rights and patents including licensing is a common strategy.  In effect, even the government hosts to the technology of Vodafone can determine the applicable licenses or taxes that can be shouldered by the latter.  Without disclosing changes in accounting estimates, creditors, suppliers (e.g. technology) and host government will not fully understand the costing of the company which can lead to lost opportunity on both sides (refer to RIM vs NTP on patent infringement  2003).                The preceding admonition is illustrated in shifting US GAAP to IFRS format and its impact on critical accounting estimates which in turn serve as the basis for completing the consolidated FS.  The two policies is largely separated by impairment methodologies with tax, estimation of asset’s useful life and determination for allowance on bad debts are pegged in managerial judgment .  As IFRS requires annual test of impairment, the company resulted impairment looses of several million pounds contrary to the US GAAP comparison of carrying value to undiscounted future cash flows.  This can affect valuation from possible licensees that seek to acquire or share the assets of Vodafone.  In the contrary, the company did not elected to apply IFRS on business combinations because of the difficulty of applying the requirements to the large number of business combinations it undertook   Such is evidence that the FS of the firm continued to benefit from the leniency of “impracticable clause” of IAS 8 which in accordance to global operations and size of the firm.  Company employees and resources are saved from this simplicity.                                               As IAS 1 applies to all FS that complies with IFRS, Vodafone incorporated basic guidelines.  There are far more notes than FS per se (e.g. from  against  respectively) and they are cross-referenced to the account concerned.  In addition, the format of notes mimics the policy of IAS 1 like prioritizing basis of preparation and accounting policies being used. “Net” is excluded in identifying the bottom-line account or the Profit/ Loss for the financial year.  The minimum requirement for specific accounts to be reflected in the Income Statement is also accounted for (e.g. there is revenue, finance costs, share of associate’s undertakings, tax expense).  The balance sheet is also unflawed with regards to IFRS conformity.  Accounts are categorized as current and non-current and minimum items required at the face of the balance sheet (e.g. intangible assets, inventories, etc.) (IAS Plus 2006).  However, there are many “other accounts” especially on non-current assets and current liabilities.  Statement on Changes in Equity is also followed with regards to IAS 1.  This positively impacts the comparability of the company’s FS with other companies especially within the same industry.  This will aid investors in allocating their capital on a homogenous decision platform. France Telecom: Analysis of Compliance             The situation of France Telecom (FT) with regards to adoption of IFRS is congruent to Vodafone.  Perhaps this can be associated as the two are major players in the regional and global telecommunications industry.  FT also applied IFRS during its 2005 operations and used 2004 as comparative figure.  Initially, the firm presented how it transformed historical data to comparable data particularly financial results for 2004 (FT 2005 p. 11).  This is in accordance to IAS 8 but the manner it was elaborated is more extensive than Vodafone.  Perhaps, the bigger font size of the web document of FT FS report plays significant role.  As a thoroughly explained situation can provide users substantial facts about the accounting policy shift, there is also the risk of de-motivating them to read the document due to the also substantial effort needed.               But when observed closely, Vodafone has also the tendency to elaborate extensively the cause to historical figure of policy shift but FT is more detailed from one account to the other.  This can be primarily affected by the ongoing critical project of the company called “Ambition FT 2005)” which started in 2002  As a result, many accounts attributable to the project are adjusted to IFRS in reference to retrospection and its practicability because the project is attended so closely that it became part of the company’s major endeavors.  In effect, it is indeed practical to be retrospective and thorough explanation of comparative figures in inevitable.               The company is implicit that there are risks associated with the accounting policy shift.  This is evidenced by merely pinpointing “outlook” immediately after the changes in historic accounts (particularly 2004) are identified.  It informed the users about its customer-oriented plans like the 2006-2008 NEXT program which aims to introduce innovations, unify customer serve and adaptation of simplified brand architecture   Unlike the more aggressive cautions of Vodafone, FS is more customer-oriented which implicates that customers using the products and services of FS will greatly benefit in the FS report apart from potential and current investors who have financial stake on the firm.  The future trends of FT like the “development of new DSL, use of Live Box” are an obvious opposite of “impact of new competitors, downward pressure on termination rates from regulatory action”.  In effect, IAS 8 is undermined because the company fails to account the primary users of FS which are the shareholders and investors.               The customer-oriented balance sheet of FT can positively or negatively impact shareholders.  Positive as the report embodies a strategy on how to maintain and increase market share while there is adverse effect on shareholder impression on financial stability and consistency.  However, similarities are eminent.  The opening balance sheet of FT under French GAAP is compared with IFRS version.  Adjustments such as net value of properties for IFRS figures reduced the value of assets of French GAAP-quoted accounts .  There are notes to serve as reference for adjustments not only on computations but accounts names.  For example, deferred income taxes is changed to deferred tax assets as well as “other” accounts are specified which is a compliance with IAS 1 and 8.  In addition, most of the notes pertain to implications to FS of IFRS adoption which complied with disclosures in accounting policy changes like the cause of change, amount of adjustment and retrospective applications (IAS Plus 2006).                The company applied the carrying amounts of the IFRS that affects most of its accounts especially the properties which resulted to reduction in impairment (p. 221) looses unlike Vodafone who increased impairment losses after adopting IFRS.  This shows that there are winners and gainers within the telecommunications industry in the effort to integrate operations to the needs of a globalized economy.  In turn, this indicated that Vodafone gripped in prioritizing standards, interpretations and recent pronouncements from regulatory bodies (IAS Plus 2006) before implementing managerial judgment.  This is because the company can use the managerial leniency in making flexible arrangements in accounting policy reconciliation but seemingly opted not to do so.               Parallel with Vodafone, FT stated specific provisions not in IFRS policy but is suitable to managerial decision making.  As observed, this is in compliance with IAS 8 particularly with regards to stating the reasons of adopting a different accounting policy (IAS Plus 2006).  With this, investors will not be discouraged and distrust the credibility if the company’s FS due to their “additions” in the on-going IFRS policies.  They are justified and the governing-bodies allowed justification as a part of managerial judgment.  For example, provision for pension plans and similar benefits is not a universal method to motivate employees and as such excluded in explicit IFRS policy.  In the contrary, the company had justified its use and compatibility with its current strategy including its significant effects when not accounted for.                    Lastly, it can be proved that FT diligently follows IFRS even with a more customer focus as its report accounted for expenses incurred during stock option grants which in French GAAP are not allowed to be compensated.  However, this are not cash transactions but only “entry” transactions.  This is in accordance to disclosure regarding capital transaction with owners and reconciliation of share capital account (IAS Plus 2006).  To investors and also internal employees, this can be an eye-opener that not all IFRS adjustments to country-based GAAP lead to increase in cash and in turn their gains and incomes.  There are some transactions that cannot increase the bottom-line that closer look to the effects of IFRS shift should be taken into account.               Conclusion             It is earlier noted that when an FS is presented using the framework of IFRS, financial performance and position of an entity is assured to obtain fair representation.  An FS is useful to specific users if it embodies their concerns such as earnings per share to shareholders, cash flows for suppliers, research and development feats for customers, provision for environmental liabilities for environmentalist, tax profit/ loss for the government and provision for pension benefits for employees and retirees.  More generally, FS should be useful and understandable to a broad-range of users because IFRS is biased on general purpose financial statements.  Vodafone and FT are both compliant with IAS provisions which are a segment of IFRS and show that it can obtain general benefits to users (e.g. clearness, simplicity, thoroughness).  However, they seemingly concentrated to one primary beneficiary of FS reports and two to five secondary beneficiaries.  Environmental impacts of their operations are excluded to the loss of environmentalists and other authorities.  Then, the question in the introduction is finally answered… it depends on managerial judgment, perhaps, accounting knowledge and experience.                     Credit:ivythesis.typepad.com

A Paper on MANAGERIAL ACCOUNTING of VODAFONE MOBILE AND ORANGE MOBILE

COMPLIANCE, PROFIT-SEEKING BEHAVIOR AND USER NEEDS: THE THREE CRITERIA OF ADOPTING A NEW ACCOUNTING POLICY Introduction ...