Accounting

The consolidated financial statements of Hitachi Limited have been prepared in accordance with US GAAP due to the fact that it has an ADR listing on the NYSE and hence this may point to a listing requirement that results be presented in an understandable and recognized manner, that is, in accordance with US GAAP (Annual Report, 2009). Additionally, borrowings have also been done abroad in foreign currencies. Lastly, while the companys principal office is located in Japan, the company has an international exposure with a number of subsidiaries, associates, joint ventures and variable interest entities the world (Annual Report, 2009).
These three facts point to an international capital base, together with an international base for employees, customers, suppliers and other stakeholders. In this regard, it makes sense to prepare the consolidated financial statements in accordance with a widely recognized and understood accounting framework, rather than the more localized Japanese alternative. It is also possible that Japanese law allows such deviation on the basis of finding more international relevance for reported results of Japanese multinational corporations.
Task Two
Depreciation is in essence accounting for the usage of fixed assets over time and the fall in value that occurs with them. In essence it is a fund setting aside strategy for future asset replacement and for revealing the true income generating capacity of the assets on the balance sheet. With regard to depreciation of property, plant and equipment, the US GAAP and IFRS have certain similarities and differences. Both set of standards call for
Property, Plant  Equipment to be depreciated in a systematic way over their useful lives.
No Specific method is required under either set of standards.
The Depreciation charge is to be deducted from profit and loss under both set of standards.
Changes in useful life, residual value, depreciation method and any other asset specific changes to be accounted for prospectively as changes in estimates under both IFRS and US GAAP. However, greater disclosure requirements exist in US GAAP for changes in depreciation method when compared with those under IFRS.
Subsequent expenditure on any asset is capitalized if it can be ascertained whether future benefits will flow to the entity.
Any routine service charge expensed.
On to the differences, and we see that
whereas IFRS calls for reviewing all estimates and method used on the each reporting date, the US GAAP requires a review of all estimates and method used whenever events or changes in circumstances indicate current estimates may not be appropriate.
Whereas component depreciation is required in IFRS, US GAAP does not require it but allows its usage.
Inventory includes a companys stock of goods for use in the manufacturing process or for resale.  A variety of inventory costing methodologies are  permitted under US GAAP including LIFO, FIFO andor weighted average cost. US Income tax rules require that companies that use LIFO for tax purposes also use it for book accounting  reporting purposes. On the other hand, IFRS permits the use of a number of costing methodologies although LIFO is explicitly prohibited. Conversely, IFRS allows reversal of inventory write downs to the original amount of the write down itself as the same are required for subsequent recoveries. The US GAAP explicitly prohibits any such reversals (PWC, 2009).
Task Three
Note 13 of the note to the financial statements of the company state that the  Japanese company law provides that earnings in an amount equal to 10 percent of appropriations of retained earnings to be paid as dividends should be appropriated as a capital surplus or legal reserve until the total of capital surplus and legal reserves equals 25 percent of the stated common stock. In addition to transfer from capital surplus to stated common stock, either capital surplus or legal reserve may be available for dividends by resolution of the shareholders meeting  (Annual Report P. 70, 2009).
This basically implies that by law, Japanese companies are required to build up equity reserves and not keep distributing profits as dividends as this acts as a buffer in case of the company going into financial trouble. A good equity base, which is increased over time, is a risk mitigating factor and points to a sustained effort at a long life of Japanese corporations. Under this arrangement, 10 of the dividend payment should be retained as a legal reserve until and unless these legal reserves reach a level of 25 of the common equity of the company.
Do note that the local company laws supersede US GAAP and IFRS across the globe and while this practice is a legal requirement and is not covered by either set of accounting standards, the practice is not in contravention of them.
Task Four
 The public company accounting oversight board is a private sector, non profit corporation, created by the Sarbanes-Oxley Act of 2002, to oversee the auditors of public companies in order to protect the interests of investors and further the public interest in the preparation of informative, fair and independent audit reports  (PCAOB website, 2009). More specifically, following the collapse of Enron and WorldCom and the negligence exhibited by auditors in both these cases, not to mention the malpractices employed by Arthur Anderson in the case of Enrons audit over the course of several years, a dire need was felt in academic, professional and government circles for more investor protection. The Sarbanes-Oxley act is in essence a fall out of this investor shock witnessed by financial markets in the United States which called for a new corporate governance framework, making financial reporting more revealing and also supervising auditors of public companies so that the loop holes that led to billions of dollars in investor losses and the confidence fall out that occurred does not happen again and investors are provided with enough reliable tools to measure the performance of their agent, that is management and auditors.

Task Five
Ernst  Young ShinNihon LLC, members of Ernst  Young Global, are auditors of the company. Reference is made to the Public Company Accounting Oversight Board by the auditors due to the fact that these consolidated financial statements will be made available to the US investors by virtue of the companys ADR listing on the NYSE and hence the auditors are liable under the Sarbanes Oxley Act 2002 to have their work and their effectiveness at doing their work overseen and scrutinized by the  Public Company Accounting Oversight Board.
Task Six
The auditors of the company have qualified their opinion on the consolidated financial statements of the company for the year ended 31 March 2009 citing the lack of segment reporting as a reason. Bear in mind that Hitachi operates through a number of geographic and product segments. The drive towards more revealing and informative financial statements entails that where available and applicable, all information should be provided to readers of financial statements to help them make informed investment decisions.
Task Seven
The commercialization of Japan has historically happened under the leadership of European colonial powers before World War II and then the United States of America following the defeat of Japan at the hands of the Allied powers and occupation by Allied Forces until a vibrant democratic system was established together with proper capital market system and standards for conduct of public companies including company and business law. From a historical perspective, hence, Japanese corporations are heavily influenced by Western elements esp that of the United States for their intellectual input in Japans post war transformation into an economic power (Watson, 1974).
Additionally, from an environmental perspective, the use of US GAAP is an influence by Hitachi due to their reliance on capital markets in the United States ever since 1945. Do note that following the end of the second world war, Japan and America became major trading partners as Japan came to become the largest exporting nation after Germany esp in electronics and cars (the Unites States on the other hand became a heavy importer of cars and electronics due to higher affluence). Hence, the intellectual connection between the two countries deepened leading to higher reliance on US funding and hence reference to the Public Company Accounting Oversight Board (Watson, 1974).
Lastly, from a cultural perspective, Japanese are conservative people and although they appreciate the drive for more informative and revealing financial statements, segmental reporting does seem to be too much of an extra step for them at the moment, that is, they do not accept change so easily and fast (Watson, 1974).