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International Accounting

International Accounting. Diversity in Financial Accounting Practices. Pre 1929 US: Superficial state laws with weak Accounting & Reporting requirements Code Law Countries: corporate laws with weak Accounting & Reporting requirements Post 1930

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International Accounting

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  1. International Accounting

  2. Diversity in Financial Accounting Practices • Pre 1929 • US: Superficial state laws with weak Accounting & Reporting requirements • Code Law Countries: corporate laws with weak Accounting & Reporting requirements • Post 1930 • Fair presentation/full disclosure countries created committees of professionals • CPAs & CAs recommended GAAP • SEC enforces in US; courts in UK • Corporate laws became prescriptive in Code Law countries

  3. Diverse Accounting & Reporting Procedures/Rules • Standard Setting • Private sector: users and preparers • Public sector: government agencies • Environmental variables • Use of a particular financial accounting model • Process of setting national GAAP • Conservatism

  4. Differences in Measurement & Disclosure • Account values • Cash & cash equivalents • Currency translation • Other • Inventories • Depreciable assets • R&D • Deferred taxes • Income/Loss measurement • Gains & losses direct to B/S • Secret & legal reserves

  5. Specific Examples • Goodwill • Capitalize • W/O amortization • W/ amortization: to income or to equity • Write off to equity • Income smoothing: predominant in code law countries • Provisions?? • Reserves?? • Asset valuation • Historical cost • General purchasing power • Current cost accounting

  6. Consequences of Diversity • Corporate Management • Domestic corporations • MNCs • Investors & Creditors • Stock Market regulators • Investor protection • Market quality (fair & efficient trading) • Accounting Professional & Standard Setters

  7. Accounting Harmonization • International Accounting Standards Committee • International Federation of Accountants • European Union • Securities & Exchange Commission • Financial Accounting Standards Board

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