Hanson and icinbsp in may 1991 hanson the united kingdoms

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Hanson and ICI  In May 1991, Hanson, the United Kingdom's most notoriously acquisitive corporation, purchased a 2.8 percent stake in ICI, the United Kingdom's largest manufacturer and the world's fourth-largest chemical corporation. Amid speculation about the possibility of a takeover bid, the comparative performance of the two companies was a significant issue because of the claims of the respective management concerning their relative efficiency and success. From an accounting perspective, it is possible to assess performance in terms of both U.S. and U.K. GAAP because Hanson and ICI are listed in the United States and are required by the SEC, under Form 20-F, to provide reconciliation data.

The comparative data below show net income and shareholders' equity data for the period 1998-2002 in accordance with both U.K. and U.S. GAAP, together with the data for long-term debt. Questions 1. Calculate the "conservatism" index and returns on equity for Hanson and ICI for the period 1998-2002 under both U.K. and U.S. GAAP. 2. Does it appear that U.S. GAAP is more or less conservative than U.K. GAAP? What could be the main reasons for this? 3. To what extent do the results affect your assessments of comparative corporate performance? 4. Calculate the debt-equity ratio for both corporations under both U.K. and U.S. GAAPs. 5. To what extent are the results likely to affect your assessment of the comparative riskiness of investing in Hanson and ICI?

Reference no: EM13573130

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