Transcript Chapter 3
Chapter 3
Comparative International
Financial Accounting I
Founding Members of the
IASC and IASB
Exhibit 3.1 Economic Data for Developed Countries
GDP PPP
(in billions)
GDP Per
Capita
Populatio
n (in
millions)
Unemplo
yment
Inflation
Area per sq
km
(in
thousands)
Imports
(in
billions)
Exports
(in
billions)
U.S
$10,990.0
$37,800
293.0
6.0%
2.3%
9,631.4
$,1260.0
$714.5
U.K.
$1,666.0
$27,700
60.3
5.0%
1.4%
244.8
$363.6
$304.5
Australia
$571.4
$29,000
19.9
6.0%
2.8%
7,686.9
$82.9
$68.7
Netherlands
$461.4
$28,600
16.3
5.3%
2.1%
41.5
$217.7
$253.2
Sweden
$238.3
$26,800
9.0
4.9%
1.9%
450.0
$83.3
$102.8
Germany
$2,271.0
$27,600
82.4
10.5%
1.1%
357.0
$585.0
$696.9
$239.3
$32,700
7.4
3.7%
0.6%
41.3
$102.2
$110.0
France
$1,661.0
$27,600
60.4
9.7%
2.1%
547.0
$339.9
$346.5
Italy
$1,550.0
$26,700
58.1
8.6%
2.7%
301.2
$271.1
$278.1
Spain
$885.5
$22,000
40.3
11.3%
3.0%
504.8
$197.1
$159.4
Japan
$3,582.0
$28,200
127.3
5.3%
-0.3%
337.8
$346.6
$447.1
Switzerland
International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black
Anglo-American Accounting
Less conservative and more transparent
Pre-Sarbanes Oxley – what about post?
United States
Focused on large corporations and interests of investors
Securities markets are the dominant influence on
accounting regulation
SEC has authority to formulate and enforce accounting
standards
Delegated to the FASB
Only listed corporations are required by law to comply with
GAAP
Very public standards-setting process – solicit input before
rules go into place – Example, SFAS 96 v. 109.
International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black
Anglo-American Accounting
United Kingdom
Focus on information needs of investors
Securities markets dominate the process of acctg.
Regulation.
Commercial/Company law has a much wider remit
Accounting requirements are for all LLCs and corporations
Why LLCs too?
Accounts present a “true and fair view” of company results
Accounting Standards Board (ASB) recently incorporated
International Financial Reporting Standards (IFRS)
International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black
Anglo-American Accounting
Australia
English influence
Focus on investors rather than tax needs
Australian Securities & Investments Commission
Regulate and enforce company law
Australian Accounting Standards Board – creates
standards
Urgent Issues Group (UIG)
Financial Reporting Council oversees AASB
Provides guidance for public and private sector
International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black
The Netherlands
Though Nordic, more similar in approach to U.S. and U.K.
Business economics approach to accounting – focus on investors and
other uses access and disclosure - voluntarily
Tradition of
Public ownership of shares
International business outlook
“Generally Acceptable Accounting Principles” – mandating true and fair
concept in financial reporting.
Provided by Council for Annual Reporting
Members from the accounting profession (NIVRA) and others
Not mandated by law, but followed by most companies
Influence of Commercial law supplemented by case law is increasingly
present in setting accounting standards.
IFRS required for listed companies in 2005
International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black
Nordic Accounting
Nordic Countries: Denmark, Finland, Iceland, Norway, and
Sweden
Sweden
Focus on creditors, government, and tax authorities
Also heavily involves accounting profession in standard setting.
Capital Markets important to accounting and disclosure req’ts
Two-tier approach
The law provides a framework rather than detailed requirements
Individual accounts – traditional basis
Consolidated accounts of major groups – international capital
market needs
Accounting Standards Board and Accounting Council provide
guidance in the context of company law
IFRS required for listed companies in 2005
International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black
Germanic Accounting
Germany / Austria
Focus on needs of creditors and tax authorities
MNEs are becoming more investor-oriented
Commercial law is predominant influence
Accounting rules amend the Commercial Code
Annual accounts are the basis for tax accounts
Tax rules dominate legal accounting issues
Limited impact of accounting profession
German Accounting Standards Board
Fair and true standard = transparent and reliable for in
German viewpoint.
IFRS required for listed companies in 2005
International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black
Germanic Accounting
Switzerland Favors needs of creditors and authorities
More companies are making further voluntary disclosures – as
Swiss Securities Markets grow./ Swiss companies face
competition
Very secretive and conservative system
Dominated by commercial law and tax regulations
New law – 1992
Improved disclosure and protection for investors
Secret reserves are still allowed
Accounting profession consists of – still relatively small
Foundation for Accounting and Reporting Recommendations –
supervises the Accounting Standards Board
Recommendations elaborate and supplement company law
International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black
Latin Accounting
France
Focus on needs of creditors and tax authorities
Consolidated groups can report in U.S. GAAP or IAS
Commercial law/tax law are the predominant influences
Small accounting profession established by law
OECCA and CNCC for public accounting and auditing
Small stock market
Focus on national economic planning
Tax laws tend to override accounting rules
Most capital contributed by banks, government, or family
French equivalent of the SEC – Commission des Opérations de
Bourse (COB)
IFRS required for listed companies in 2005
International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black
Latin Accounting
Italy
Focus on interests of government and tax authorities
Focus is shifting because of globalization
Accounts are used as the basis for taxation
Tradition of conservatism to minimize taxes
Italian equivalent of the SEC – CONSOB
Slow to adopt EU directives because
External investor interests are seen as less important than
family and state interests
Tendency to protect the right of companies to keep
business secrets
Professional accounting bodies are advisory
IFRS required for listed companies in 2005
International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black
Asian Accounting
Many countries have a colonial accounting history or
foreign influence
Japan
Focus on needs of creditors and tax authorities
Commercial Code (similar to Germany)
Corporate tax law is very influential
Leads to conservative accounting
Government institutions are directly involved in standardsetting
Ministry of Finance – responsible for securities and
exchange law
Ministry of Justice – responsible for application of
Commercial Code
International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black
Asian Accounting
Japan continued
Accounting for business combinations is a source of
concern
Keiretsu – system of interlocking directorates of related
businesses formed to work together
Small accounting profession
Makes recommendations on the practical application of
legal accounting rules
Tendency for secrecy and a lack of disclosure
Increased international focus
ASBJ in Japan is similar to the FASB in the U.S.
Approximately 30 Japanese companies listed in the U.S.
prepare financial statements in accordance with U.S.
GAAP.
International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black