Kế toán, kiểm toán - Chapter eleven: Worldwide accounting diversity and international accounting standards

Chapter ElevenWorldwide Accounting Diversity and International Accounting StandardsMcGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.Reasons for Accounting DiversityLegal SystemTax RegimesInflationCultureFinancial ProvidersPolitical andEconomicTiesAll these interact!!!LO 111-*Gray’s Framework for the Development of Accounting Systems InternationallyCultural DimensionsIndividualismUncertainty AvoidancePower DistanceMasculinityInstitutional Conseq.Legal systemCorporate OwnershipCapital MarketsProfessional AssociationsEducation & ReligionAccounting ValuesProfessionalismUniformityConservatismSecrecyAccounting SystemsAuthorityEnforcementMeasurementDisclosure11-*Nobes’ Model of the Reasons for International Accounting DiversityNobes’ simplified model has two explanatory factors: (1) national culture, including institutional structures, (2) the nature of a country’s financing system divided into two classes.Class A (Strong equity-outsider financing system)Less conservativeGreater disclosureFinancial and tax accounting separateClass B (Weak equity-outsider financing system)More conservativeLess extensive disclosureFinancial reporting follows tax rules11-*Problems Caused By Diverse Accounting StandardsProblemsSubs use local standards for financial statements. The parent must adjust the subs’ statements to GAAP. Statements must be re-stated in common standards.To access foreign capital markets, costly measures must be taken to prepare financial statements that comply with local standards.Financial statements from different countries are simply not comparable. Accounting rules differ from country to country.LO 211-*International Accounting Standards Board (IASB)International Accounting Standards committee (IASC) established in 1973.IASB superseded IASC in April 2001. 14-member board (12 full-time, 2 part-time)The IASB has sole responsibility for establishing IFRSs (“IASB GAAP”)IASB has no enforcement authority!!LO 311-*International Financial Reporting Standards (IFRSs)Countries can elect to use IFRS by:(1) adopting IFRS as its national GAAP(2) requiring domestic listed companies to use IFRS in preparing their consolidated financial statements(3) allowing domestic listed companies to use IFRS(4) requiring or allow foreign companies listed on a domestic stock exchange to use IFRS. LO 411-*Norwalk Agreement: FASB-IASB ConvergenceIn Norwalk, Connecticut, FASB and IASB held a joint meeting in September 2002.The “Norwalk Agreement” states that the two bodies will “use their best efforts” to:1. Make existing financial reporting standards compatible “as soon as is practicable” and2. Coordinate efforts to “ensure that once achieved, compatibility is maintained”LO 511-*FASB-IASB ConvergenceFASB initiatives include:Short-term convergence projectJoint projectsConvergence research projectLiaison IASB member at FASB officesMonitoring of IASB projectsExplicit consideration of convergence potential in FASB agenda decisions11-*SEC Acceptance Of IFRSIFRS Roadmap:In November 2008, SEC issued a proposed rule that set milestones toward the use of IFRS by U.S. public companies by 2014.In February 2010, SEC pushed that date back to “approximately 2015 or 2016.”Large companies with market capitalization greater than $700 million (so-called large accelerated filers) would be the first required to use IFRS.11-*SEC Acceptance Of IFRSIFRS Roadmap Milestones:Improvements in IFRSAccountability and funding for the IASBImprovement in the ability to use interactive data for IFRS reportingEducation and trainingHowever, in May 2011, the SEC published a suggested framework for an “endorsement process” incorporating IFRS into U.S. GAAP.11-*Steps To prepare opening IFRS balance sheet:Determine the applicable IFRS.Recognize assets and liabilities not recognized under GAAP and derecognize those not allowed under IFRS.Measure the balance sheet accounts under IFRS at the balance sheet date.Reclassify certain assets and liabilities in accordance with IFRS.Comply with disclosure and presentation requirements. First-time Adoption of IFRS11-*IFRS Accounting Policy Hierarchy IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, establishes the hierarchy that firms must follow when dealing with an accounting issue:1. Apply specifically relevant standards (IASs, IFRSs, or Interpretations).2. Refer to other IASB standards. 3. Refer to the IASB Framework for guidance.4. Consider the most recent pronouncements of other standard-setting bodies11-*Current Differences Between IFRSs and US GAAPMeasurement: How is cost determined?Disclosure:If allowed, How?InventoryFixed AssetsExtraordinary ItemsRecognition: If recognized, how? When?Discontinued OperationsPresentation:Principles? Financial Statement Components?LO 611-*Significant Differences Between IFRSs and US GAAPU.S. GAAP Reconciliations:Interest CapitalizationBusiness CombinationsPurchase vs. Pooling MethodsGoodwillAmortization vs. ImpairmentLeases Revaluation of Fixed AssetsFixed Asset Impairment LossesLO 711-*