North Face Case



North Face

Case Analysis

North Face due to economic problems had to start some back door activities, as it opened new avenues of running the business. It actually wanted to hide these backdoor activities from other stakeholders, so it may not have to face the embarracing situation in case things go wrong. Security and Exchange Commision has developed very strong regulations to cope with issues a company could face. These regulations were also developed to protect investors from potential misrepresentation. When SEC tighten the regulationon North Face to document all its activities and improve the transparency of company activities. Since, the company did not follow SEC regulations, they had to face sanctions from the regulator and it was justified as such an act could have affected shareholders of the company significantly.

Economic Slowdown and mortgage crisis has created serious concerns for not only investors, but all the stakeholders including policy makers, government officials and financial institutions etc. The only way out for economies is to improve the transparency and accuracy of financial information. It will help rebuild investor's confidence and would make things easier for policy makers, and different economies as many countries were affected by the financial, and mortgage crisis.

The crisis and panic is into such an extent that even doubts have been raised on different accounting policies and their implications. There have been a lot of discussions in the recent past about changing accounting rules and regulations. The biggest factor behind such criticism is the fact that companies do not reveal complete and accurate information about their operations and worth, which creates enormous problems. The actual picture is quite different from what the financial statements of the company reveals. For the purpose, analyst says that fair-value accounting method must be abandoned, and transparency of the company's financial statement must be improved. In this paper, we will discuss the four major issues faced by the financial sector, which must be resolved in order to get things on the right track.

Objective of IASB (International Accounting Standard Board) is to work out an international system of measures that will be accepted all the countries of the world. It is important that all Stock Exchanges of the world should accept the new measures otherwise there is no use in working out the new system. In the USA the SEC (Security and Exchange Commission) won't accept IFRS as the official accounting standards, but IFRS will be an alternative way to use in the USA as well. This can be a beginning of the integration process.

For the present USA think their system is better than IFRS, and if the world needs the huge capital market of the USA, they have to accept US GAAP as well. This is partly understandable if you have a look at the capitalisation of NYSE (New York Stock Exchange) that is $15,000 billion. The two biggest European Stock Exchanges (FTSE and DAX) don't even reach the half of the capitalization of NYSE (Muglia, & Tierney, ...