U05a2 Company Analysis Daisy Rivera Capella University- MBA6152 Professor Wendy Achilles McDonald’s has a long standing history of business, and has built a loyal customers base with the company’s continued dedication to customer service. The food service industry is one of high competition; however, McDonald’s has been able to obtain the position as the leader in market capitalization with a market capital of $39. 37B. As I analyze McDonlad’s Corporation’s reporting requirements it is imparative that the new standards are going to be a small challenge for McDonlad’s Corporation.
In their annual report they state that the new standards will not affect them in the sense of doing business internationally. For our accounting analysis we found the key accounting policies and related them to our identified key success factors. McDonald’s most important factors include consolidation, financial statement estimates, revenue recognition, advertising costs, compensation from stocks, property and equipment, goodwill, long-lived assets, franchise revenues, and employee benefit plans. We determined that McDonald’s has a large amount of flexibility in its accounting methods.
Their depreciation methods and goodwill impairment practices are very important in their financial statements because the numbers are so substantial. As the largest company in the restaurant and food services industry, McDonald’s Corporation has chosen to find its primary competitive advantage in the marketing and operational areas. As McDonald’s continues to grow and improve as a company, it is committed to its key success factors of cost efficiency, product development, marketing, and promotions. By focusing on these factors McDonald’s has derived its key accounting policies.
Due to McDonald’s unique business strategy, certain accounting policies are more important than others. Its policies regarding goodwill are very important because goodwill is one of McDonald’s largest assets. McDonald’s also spends a great deal of resources on advertising and marketing itself. The consolidated financial statements are inclusive of the company and subsidiaries, where the equity method is used to account for investments of 50% or less. McDonald’s is fairly conservative in making their accounting policies.
Estimations of the financial statement are in compliance with GAAP and realistic of the companies standing. McDonald’s revenue recognition is a combination of cash basis of company operated restaurants, as well as franchises fees and royalties complying with the matching principle of recording when earned in that current period. All foreign currency is translated to the U. S. dollar except for the countries who currently use the dollar, in order to ensure that dollar amounts are all on the same monetary scale.