The purpose of this essay is to discuss the benefits of having international standards, reasons for national differences and difficulties in gaining agreement for standards. There are many benefits of having international standards. Firstly, this essay will only look at 4 benefits, which are comparability, credibility, principles and discipline. Secondly, this essay will state three national differences and evaluate their difficulties in gaining agreement. Finally a conclusion. Comparability is an accounting principle. The fundamental accounting reports need to be reliable; if they are not reliable it is not comparable. If the company cannot make a comparison then the accounts come impaired. For example, the Financial Accounting Standards Board requires that expenses associated to research and development (R&D) should be expensed when incurred, but some companies expensed R&D when gained. While some other companies deferred it to the balance sheet and expensed them at a later date. Furthermore, the accounts have to be reliable and standardised so the investment decision makers can make valid inter-company comparison. To make this comparison meaningful accounts are prepared with guidelines laid down by the Financial Reporting Standards. Credibility is linked with similar events, which produce similar results. If companies were doing a similar event in order to produce financial reports, which disclosed totally different results the company could lose their credibility, this is because companies can choose different accounting policies. It is important if financial statements disclose a true and fair view. Discipline helps the protection of investors this is linked in with the monitoring board. The mandatory standard... ... middle of paper ... ...ve different meanings for words. The tax system in France and Germany is different from the tax system in the UK and USA. In France and Germany their taxes are charged on the profit in the accounts, so the tax becomes accounting rules, whereas UK and USA tax rules and accounting rules are separate as this helps the user. For example, depreciation in France and Germany would be charged on the profit, this means whatever the tax rules say has to be shown in the accounts. A UK accountant will say that this does not show a true and fair view, even if it is legal to do so. However, depreciation in the UK will be charged separately from the profit. As depreciation can be deferred to the balance sheet and expensed at a later date. The tax system makes it difficult to obtain international agreement because there can be a misinterpretation of different tax rules used.
Financial records are very important aspects to any corporation and making sure the records are accurate is essential. Determining how a corporation is going to do is a guess but it is based on previous year's financial statements and that is a reason finical records are so important. Making a profit is a goal for any corporation.
The securities Act of 1933 has basic objectives, to require investors to receive financial and o...
In the world of international finance there are two major accounting systems; GAAP, which stands for Generally Accepted Accounting Principles, and IFRS, which stands for International Financial Reporting Standards. The United States prefers GAAP while the European market, as well as many other countries, prefers IFRS. By 2015 the Securities Exchange Commission is anticipating a total transfer to IFRS in the United States. Though the differences between GAAP and IFRS are few, they could affect accuracy of financial reporting throughout the world. It is important to understand the differences and similarities between both GAAP and IFRS if one is to globalize ones market (Logue).
The convergence project between the United States Generally Accepted Accounting Principles (U.S. GAAP) and International Financial Reporting Standards (IFRS)/International Accounting Standards (IAS) started in 2002. The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) met to discuss a joint commitment to develop a set of high quality standards that could be compatible internationally. The commitment was called the Norwalk agreement. The thinking behind the agreement is that it could improve international business relationships and allow financial statements to be compared across the world (IFRS, 2016).
According to the conceptual framework, the potential users of financial statements are investors, creditors, suppliers, employees, customers, governments and agencies, and the general public (Financial Accounting Standards Board, 2006). The primary users are investors, creditors, and those who advise them. It goes on to define the criteria that make up each potential user, as well as, the limitations of financial reporting. The FASB explicitly states that financial reporting is “but one source of information needed by those who make investment, credit, and similar resource allocation decisions. Users also need to consider pertinent information from other sources, and be aware of the characteristics and limitations of the information in them” (Financial Accounting Standards Board, 2006). With this in mind, it is still particularly difficult to determine whom the financials should be catered towards and what level of prudence is necessary for quality judgment.
Specifically, the presence of these connecting factors makes it difficult for any party or court to identify a single factor that determines the applicable law. Second, there is a question as to which law should determine, among other things, the interpretation, validity, and discharge of the contractual obligation. And third, due to the number of different types of contracts that exist, including contracts for the sale of goods, employment contracts, and insurance contracts, an issue arises as to whether different types of contracts should be governed by a uniform law or whether different laws should govern each particular type of contract. Both contracting parties and courts must consider these issues in creating, interpreting, and enforcing international
The globalization of business has resulted in the need for compatible accounting standards that can be used internationally for financial reporting. As a result, the International Financial Reporting Standards (IFRS) were developed by the International Accounting Standards Board (IASB) to unify the various financial reporting methods and create a single accounting standard which can be applied to any financial statement worldwide (Byatt). The global standardization of financial reporting will increase the readability and enhance comparability of globally traded companies’ financial statements, without the need of conversion or translation. There are a few main differences between the International Financial Reporting Standards (IFRS) and the U.S. Generally Accepted Accounting Principles (U.S GAAP). The increasing recognition and acceptance of the International Financial Reporting Standards by accounting professionals in the United States, will affect the way in which the U.S will record financial statements in the future.
In today’s day and age, there is a lot of news that is related to corporate accounting fraud as companies intentionally manipulate their financial statements to show a better picture of their financial health. The objective of financial reporting is to provide financial information about a company to its various stakeholders such as investors and creditors so that these stakeholders can make decisions accordingly. Companies can show a better image of their financial well being by providing misleading information. This can be done by omitting material information from the books or deceitful appropriation of assets such as inventory theft, payroll fraud, check forgery or embezzlement. Fraudulent financial reporting will have an effect on the
The International Accounting Standards Board, (IASB), began life as the International Accounting Standards Committee (IASC) in the 1973. The IASC was created in June 1973 as a result of an agreement by the accountancy bodies of Australia, Canada, France, Germany, Japan, Mexico, the Netherlands, the United Kingdom and Ireland and the United States. These countries constituted the Board of IASC at that time.
According to business, or any organization, Accounting plays a major role in developing and growth of the business. Financial standards of the organization expected as the complexities of business growth and expansion. Hence determining the implementation of the standards can vary according to the type of industry, business or organization.
standards, catch up with the trends and produce tax revenues. The importance of equity investors
(i) Judgement and materiality play a significant role in helping to ensure that the selection of accounting policies in presenting the financial statements for a true and fair picture of the company’s financials. This means that entities should provide the financial statements with comparability, consistency and clarity to users of these statements. Entities must follow accounting policies required by IFRS and AASB should be relevant to particular circumstance.
There has been a drive towards corporate governance which has been driven by a greater need for shareholder protection. If investors feel well cushioned then there is a higher chance that t...
GAAP is exceptionally useful because it attempts to regulate and normalize accounting definitions, assumptions, and methods. Because of generally accepted accounting principles one is able to presuppose that there is uniformity from year to year in the methods that are used to prepare a company's financial statements. And even though variations might exist, one can make realistically confident conclusions when comparing one company to another, or when comparing one company's financial statistics to the statistics for the industry as a whole. Over the years the generally accepted accounting principles have become more multifaceted because financial transactions have become more intricate (Accounting Principles, 2011).
Self-regulatory organizations because of their nature are more flexible to adapt to the changing requirements of the market. Self-regulation has proved to be effective because in a self-regulated organization, regulations are framed by market participants who have close knowledge of the market and know how to maximize regulatory benefit. The role and importance of self-regulation differs from country to country and from the state of development of the market. The basic principles of Self-regulation which were specified by the International Organization of Securities Commission in 2002 are as