Companies in each country have to adapt and regulate their financial statements to certain requirements. They base and format their accounting standards on their national General Accepted Accounting Principles (GAAP) set by security regulators. However, in this modern globalized era, owing to too many financial differences between nations, it is increasingly difficult for entities to compare their financial records and identify trends in their financial position and performance with their competitors. As an answer to such financial chaos, harmonisation consists of formulating one universal GAAP; accountants worldwide would subsequently be able to use one single standardized practice, which would, according to Weber (1992), improve financial market information, government accountability, facilitate international transactions and minimise exchange costs. However, harmonising standards remains a disputable answer in accounting. This paper will attempt to shed some light on the current debate about the pros and cons of adopting a universal set of accounting standards. International accounting standards are discussed, set and published by the International Accounting Standards Board (IASB) which was formed in 2001. The International Accounting Standards Committee (IASC) was the predecessor of the IASB; its Foundation is to harmonise all worldwide GAAPs into one single set of accounting standards. According to Mogul (2003), harmonisation is defined as the constant process of ensuring that the GAAP of each country are formulated, aligned and updated to international best practices (GAAPs in other countries) with suitable modifications and fine tuning, considering each domestic condition. Harmonisation is thus wished by any financ... ... middle of paper ... ... issue 7, pp. 975-992 ScienceDirect [Online]. Available at: http://www.sciencedirect.com/science (Accessed: 03 November 2010) Mogul, S. (2003) Harmonization of Accounting Standards. Available at: http://www.icai.org/resource_file/11430p681-684.pdf (Accessed: 3 November 2010) Blake, J. and Hossain, M. (1996) Readings in International Accounting. London: Routledge. Weber, C.M. (1992) ‘Harmonization of international accounting standards’, The National Public Accountant [Online]. Available at: http://www.allbusiness.com/accounting/methods-standards/339832-1.html (Accessed: 3 November 2010) Wittington, G. (2008) ‘Harmonisation or discord? The critical role of the IASB conceptual framework review’, Journal of Accounting and Public Policy, vol. 27, issue 6, pp. 495-502 ScienceDirect [Online]. Available at: http://www.sciencedirect.com/science (Accessed: 03 November 2010)
According to the FASB Accounting Standards Codification, goodwill is “An asset representing the future economic benefits arising from other assets acquired in a business combination or an acquisition by a not for profit entity...” (glossary). Goodwill is measured by the premium price we pay for a company; we calculate premium price by subtracting the amount we paid by the estimated price (Fair value) of the company and if we paid more goodwill is created. Goodwill is an intangible asset so it has an indefinite life because it cannot lose value over a specific amount of time. We test for impairment to find out if goodwill has kept its value or if it has declined and we test for impairment on an annual basis. However, goodwill in FASB Accounting Standards
Include as discussion of the topic, subtopics, sections and subsections in your answer. The new Codification does not change GAAP, but all existing ...
Ruth Dianne Hines, born 1951 is an Australian Accounting academic based in the School of Economic and financial studies at Macquarie University from 1978-1994. The Conceptual Frameworks are ‘a strategic maneuver for providing legitimacy to standard-setting boards during periods of competition or threatened government intervention,’ Hines raised this argument in her 1989 journal ‘Financial Accounting Knowledge, Conceptual Framework Project and the Social Construction of the Accounting Profession’. In order to identify the basis of Hines’ argument, one must first take a look at what the Conceptual Framework (CF) is, as well as its purpose. Throughout this discussion, I will be examining – the need for a CF, the benefits and how it provides a legitimacy to the accounting profession. I will also be exploring both the local and international history of the CF projects that were undertaken, why they were undertaken and if these purposes relate to Hine’s argument.
This meant that communication amongst those drafting the standards and those affected by the standards could easily exchange information (Devonport & van Zijl, 2010). Devonport & van Zijl (2010) outlined some advantages of having sector neutral accounting standards including, a strong accounting connection between the public and private sectors and the transition between the two sectors would be easier for professional accountants.
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).
Olusegun Wallace, R. 1996. The Development of Accounting Research in the UK. In: Cooke, T. and Nobes, C. eds. 1997. The Development of Accounting in an International Context. London: Routledge, pp. 218-254.
The need for expansion in global business is a necessity for big companies, and many Canadian companies are expanding their operation into overseas markets. This is a new challenge to the performance of high quality auditing, because new transaction will be made in these markets which are not necessarily follow Canadian GAAP standards for purpose of reporting. The auditors must ensure they understand business standards and regulatory that is applicable to entities that now form a part of consolidated financial statement. The auditors need to understand business structures which exist in foreign countries.
In conclusion, appropriate principles could lead to clearer interaction and more comparable financial reporting standards without the need of the current rules. The NZ Framework has provided parts of clear and appropriate underlying principles to lead the application of NZ GAAP and other financial reporting standards. However the standards setting movement from ‘rule-driven’ approach to ‘principle-based’ approach is still half-way in New Zealand. How could principles be sufficiently clearly portrayed and put into practice require the profession to think and support. Just as Tweedie (2007, p.7) states, a principle based system will only work if preparers, auditors, users and regulators wish to make it work.
GAAP reporting standards (AICPA, n.d.). A private business owner can utilize the concise and familiar accounting principles and accrual income tax or cash basis method of financial reporting to assess the company’s performance and provide relatable decision-making information to stakeholders (AICPA, n.d.). Moreover, it is a cost-effective measure for business owners that do not have to comply with U.S. GAAP base financial statements. In addition, CPAs can provide value pricing by preparing meaningful and concise reporting to internal and external parties. However, a business owner should carefully consider and examine the available options before deciding on an appropriate reporting framework. In order to provide the best short-term and long-term solution, it is imperative to consider a company’s business structure and future
Hoggett, J., Edwards, L., Medlin, J. (2008). Accounting, 6th Edition. John Wiley & Sons Australia Limited.
Schofield (2014) researches the difference between public and private company financial reporting. For instance, a private company has fewer consumers reviewing their financial statements, whereas public companies could have multiple consumers reviewing financial statements. In addition, private companies typically have less specialized accounting personnel, whereas public companies will have several. Lastly, Schofield (2014), reviewed the number of amendments proposed and finalized to help benefit private companies financial reporting.
One of the most debatable topics in the accounting industry today is the extent in which we should make the financial statements understandable to the general population. The FASB currently gears its reporting standards toward...
The main objective of the IASC was the development of International Accounting Standards, in an effort to reduce the differences in accounting practices across countries. Harmonization is the name given to the process of reducing differences in financial reporting practices and increasing comparability of financial statements in various countries. As such the intent of the IASC was to create a set of accounting rules that would be relevant and consistent to all countries ...
The Financial Accounting Standards Boards (FASB) defined conceptual framework as a consistent of underlying concepts and the ideas that describe the nature and general purpose of financial reporting which may lead to consistent standard in accounting (Deegan 2010). The role of the conceptual framework is to ensure that financial statements in accounting are free from bias and to provide useful information that is useful for user’s decision making. The standard-setting board also formulated a range of perceptions and theories related to accounting to trigger the objectives of financial reporting. The standard-setting board keeps issuing the conceptual framework over time to ensure that the conceptual framework’s objectives are improving to provide useful financial information. The innovative work on conceptual framework was embraced in the United States by the FASB in the early 1970s. The FASB accomplished disappointment in attempting to generate a standard that at the outset might not appear to present, especially testing theoretical issues. Regardless, while attempting to achieve concession on Statement of Financial Accounting Standard, tending to the theoretical issues produced critical matter for the board members. In this manner, throughout the outset the FASB understood the requirement for an obvious conceptual framework. Based on Hines’s argument, the conceptual framework is mean to provide the ability to increase self-regulate of a profession in order to neutralizing government interference from arising. Whether this argument has been accepted or not will be discussed in more detail with supported evidence to clarify the main point about Hines’s argument. Further details about this argument will discuss below.
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).