Accounting Reporting Criteria

Accounting Reporting Criteria

When financial mishaps such as the Tyco and Enron scandals came to light; it was evident that the Government needed to step in to ensure that corporations were reporting their finances accurately and honestly. For this reason Congress passed the Sarbanes Oxley Act (SOx) in 2002. The Act details the requirements for financial reporting for public corporations and is overseen by the Securities and Exchange Commission. The Sarbanes Oxley Act requires all publically traded corporations to follow strict requirements for financial accounting and reporting. Boeing and Airbus are the two leading rival builders of aircraft, and they do not follow the same regulations for internal controls. One of the reasons for these differences is due to the fact that Boeing in a domestic corporation and Airbus is an international corporation. For the purpose of this paper, Team A will compare and contrast the regulatory environments of the two corporations.

The Boeing Company takes its regulatory governance very seriously and the company has worked very hard to meet the challenge of SOx compliance. In order to ensure the company is SOx compliant, Boeing has employed significant resources. One of these resources is the Corporate Audit organization. Corporate Audit is responsible for reviewing the internal control system to assure that all organizations are achieving the regulatory objectives and that the system is functioning as intended. These reviews are important so that the company can fix any discrepancies in order to pass external audits.

Most of the organizations within Boeing have Regulatory Governance groups that employ subject matter experts (SME’s). Some of these SME’s are Boeing employees and some are contract employees from PricewaterhouseCoopers, Jefferson Wells, and other companies. Their role is to help the control performers understand the controls, the audit process, and the requirements for SOx. Often these subject matter experts conduct workshops and training as well and working towards institutionalizing SOx compliance into the Boeing culture.

Deloitte & Touche is the external auditor that reviews and audits Boeings compliance to its internal controls. If the auditors find any deficiencies during an audit, a corrective action plan is developed and implemented.

Both Boeing and Airbus have adopted a new aircraft to follow regulatory environments. Taking a clean-sheet design for airlines’ operational needs of tomorrow, Airbus developed the A380 as the most spacious and efficient airliner ever conceived (Airbus, 2008). The aircraft holds 525 seats and delivers an unmatched level of comfort while still providing all the benefits of Airbus’ other fly-by-wire aircraft families. Airbus is the first jetliner manufacturer to be certified to international environmental standards ISO 14001, for full lifecycle coverage, including all products and manufacturing plants (Airbus, 2008). The Airbus' A380 is based on a ground-breaking Environment Management System, used to plot, evaluate, follow and lessen an aircraft's environmental shock throughout its life. This will optimizes environmental performance at any point of the product life phase. The A380 has been a channel for inventive new technologies. Airbus negotiates environmental requirements in contractual agreements with suppliers and actively spreads environmental best practices within the supply chain (Airbus, 2008).

The Generally Accepted Accounting Principles are significantly different between countries. Boeing follows the United States’ processes and procedures of GAAP which include following the financial reporting standards and are overseen by the Financial Accounting Standards Board (FASB, 2008). For example, on Boeing’s website there is a link labeled “Investor Relations.” Under this link there is the option to view Annual Reports, Earnings Releases, Archived Reports and SEC filings, and the option to request financial reports. Additionally, there is a link titled “Accounting Considerations” where information is available to better understand where the information from their financial statements came from. Airbus on the other had does not make their finance information as readily available to the consumer market. Currently in the UK, companies are phasing out GAAP in favor of International Financial Reporting Standards (IFRS). The standards being set forth by IFRS include but are not limited to; “recognize all assets and liabilities whose recognition is required by IFRS, and not recognize items as assets and liabilities if IFRS does not permit such recognition” (IASB, 2008).

In review of Airbus’ website, there were minimal details regarding their financial status;