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Chapter 3

Chapter 3. Comparative International Financial Accounting I Dosen Pengampu : Dra. Siti Nurlaela, SE,Msi.,Ak. CA. Strategic Decision Point. IASB was created to increase comparability How will differing cultures interpret standards? Will standards be applied consistently?

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Chapter 3

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  1. Chapter 3 Comparative International Financial Accounting I Dosen Pengampu : Dra. Siti Nurlaela, SE,Msi.,Ak. CA

  2. Strategic Decision Point • IASB was created to increase comparability • How will differing cultures interpret standards? • Will standards be applied consistently? • What can the IASB do to mitigate this issue? International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black

  3. Founding Members of the IASC and IASB Exhibit 3.1 Economic Data for Developed Countries International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black

  4. Anglo-American Accounting • Less conservative and more transparent • 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 International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black

  5. Anglo-American Accounting • United Kingdom • Focus on investors • Company law has a much wider remit • Accounting requirements are for all LLCs and corporations • Accounts present a “true and fair view” of company results • Accounting Standards Board (ASB) will incorporate International Financial Reporting Standards (IFRS) by 2005 International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black

  6. 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

  7. The Netherlands • Business economics approach to accounting • Tradition of • Public ownership of shares • International business outlook • “Generally Acceptable Accounting Principles” • Provided by Council for Annual Reporting • Members from the accounting profession (NIVRA) and others • Not mandated by law, but followed by most companies • Company law is supplemented by case law • IFRS required for listed companies in 2005 International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black

  8. Nordic Accounting • Nordic Countries: Denmark, Finland, Iceland, Norway, and Sweden • Sweden • Focus on creditors, government, and tax authorities • Two-tier approach • Individual accounts – traditional basis • Consolidated accounts of major groups – international capital market needs • The law provides a framework rather than detailed requirements • 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

  9. Germanic Accounting • Germany • Focus on needs of creditors and tax authorities • MNEs are becoming more investor-oriented • Company 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 • IFRS required for listed companies in 2005 International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black

  10. Germanic Accounting • Switzerland • Favors needs of creditors and authorities • More companies are making further voluntary disclosures • Very secretive and conservative system • Dominated by company law and tax regulations • New law – 1992 • Improved disclosure and protection for investors • Secret reserves are still allowed • Accounting profession consists of • 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

  11. Latin Accounting • France • Focus on needs of creditors and tax authorities • Consolidated groups can report in U.S. GAAP or IAS • Company law and tax law are the predominant influences • Focus on national economic planning • Tax laws tend to override accounting rules • Small accounting profession established by law • OECCA and CNCC for public accounting and auditing • Small stock market • 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

  12. 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

  13. 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 standard-setting • 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

  14. 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

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