Ford Motor Company is the second-largest automobile company in the world. Ford’s main focus is automobiles; however, they also operate in Ford Credit and Hertz Corporation. Ford also has controlling interest in Mazda Motor Corporation. Ford was established June, 1903; in an old wagon factory in Detroit Michigan. In 1903, Ford began production on a two-cylinder, 8 horsepower called the Model A. They produced a total of 1,708 of these cars in their first year of operation. Toyota Motor Corporation was Japan’s largest car company.
Toyota ranked the world’s third largest by the year 2000. The company could produce near five million car units annually in the 1990s and controlled approximately 10 percent of the global market. Toyota was founded by a man named Kiichiro Toyoda in 1933. He did not produce his first car until 1935. By this time General Motors and Ford were already operating in Japan. Both companies are manufactures of cars which are sold in the United States. One is made in Japan and the other in the United States. They are both a financially well because of the popularity of their cars.
The accounting criteria’s that they both face are different because of the foreign rules and regulations. Both companies are faced with their own set of rules that have to be followed, but Toyota is faced with more issues since they sell their cars in the United States How does a U.S. company differ from a foreign company? What reporting regulations are different or the same? Team C decided to compare Ford Motor with Toyota Motor Company. In following pages similarities and differences within the two companies are compared. The Japanese management accounting system has much to do with its success over recent years.
There have been several reported differences between the Japanese and U.S. in the accounting departments. The success of Japanese manufacturing such as Toyota over the past ten years has more than stimulated the interest of others in that success. Firms in both the U.S and in Japan tend to use similar practices, the Japanese firms tend to use a measure of direct labor content which is more or less hours or cost form. This form tends to be used more in the Japanese forms than in U.S. The fact is that there are many differences between U.S, and Japanese accounting practices as well as the management accounting practices.
Management accounting accounts for only one component of a company’s total management system and the role of that system cannot be completely understood without considering the organizational context and the goals that are to be achieved. United States companies such as Ford Motor Company tend to put more emphasis on manufacturing costs after the fact. The Japanese tend to stress the proactive use of managerial accounting to promote the success and innovation of the products that are introduced.
The accounting system used by the two is similar in some ways and differ in many others. The key area where they tend to come together is the bottom line which is where the final numbers are clear. Some feel as though to further shed light on how U.S. and Japanese companies differ, they must consider the goal, context and the process of the accounting practices. When visiting Toyota’s website, the same flashy graphics are displayed as their American competitor’s website, Ford. Looking deeper for differences in generally accepted accounting principles (GAAP) between Toyota and Ford, the financial results for both companies can be viewed online.
The Ford Motor Company’s annual report and financial statements are presented according to U.S. GAAP, which has been cited by many experts as one of the highest standards of accounting practices in the world. In the past, countries like Japan have held their companies accountable to local GAAP, but since the late 1990’s have been requiring some companies, like Toyota, to more internationally accepted standards based on European and U.S. GAAP (Business Accounting, 2006). Although Toyota’s format may be different from that of Ford, the top of Toyota’s financials read, “All financial information has been prepared in accordance with accounting principles generally accepted in the United States of America” (Toyota, 2007).
Toyota may use internal accounting methods that vary from U.S. GAAP, but reports for the public are displayed in the U.S. GAAP. An international company, like Ford or Toyota, is sensible to use a transparent and comparable set of GAAP, like those set by the FASB in the United States. Format and currency may vary in the companies’ financial records, but computations and definitions are common to both sets of documents, making the reports more usable for investors.
Both companies with strong accountability, Ford and Toyota, have been or are automotive powerhouses in regards to their accounting standards. Having to stand up to accounting standards set by individual countries, the FASB, and the IASB, both companies have to be thorough and accurate in order to provide the best information for users of their financial information. Internationally renowned automotive companies must hold fast to only the most significant generally acceptable accounting principles in the world.
ReferencesBusiness Accounting Council on Planning and Coordination Committee. (2006, July 31).Towards the International Convergence of Accounting Standards. Retrieved February 14, 2008, from http://www.fsa.go.jp/en/news/2006/20060731.pdf Toyota. (2008). For Investors. Retrieved February 14, 2008, from http:// www.