...Merging of numerous national generally accepted accounting principles with the International Financial Reporting Standards (IFRS) guarantees reliable and comparable financial information that will help investors in making the best investment decisions. Many countries and the International Accounting Standards Board plan to implement or converge with the International Financial Reporting Standards with a goal of comparing uniformed financial statements across countries. Having uniform standards for accounting worldwide not only would make it easier to compare financial statements, but it will coordinate the free movement of debt and equity capital worldwide. (Mukoro & Ojeka, 2011) Hofstede defined culture as, “the collective programming of the mind which distinguishes the members of one human group from another” (Gray, 1988). Hofstede went on to explain that “culture” is society at large or entire countries, while a “subculture” is used for a level of personal, professional, and organization. The amount of culture integration may vary from society to society, but most subcultures within a single society have similar characteristics (Gray, 1988). Hofstede identified four major types of societal/cultural characteristics. They are individualism versus collectivism, power distance, uncertainty avoidance, and masculinity versus femininity (MacArthur, 2006). In an individualistic society, individuals are independent of one another and self-sufficient whereas in a collectivist society...
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...of IFRS will benefit investors by allowing them to more easily compare financials from global markets, it will also benefit accounting and finance professionals in the same way. I believe the convergence will prove to be a valuable asset for professionals, as it increases transparency and comparability, it will also allow CPAs and analysts to provide more insightful information to their clients or companies. The convergence will also enable professionals to market their IFRS knowledge and generate more leads or employment opportunities than ever before. Post convergence issues and challenges will leave business in both the U.S. and foreign companies needing well-equipped CPAs and analysts to assist in facilitating the great change. U.S. professionals will not only be able to generate more native business, but will also be able to access cross-border opportunities. George, Ferguson, & Spear (2013) predict that audit fees alone will increase approximately 23% in the first year of IFRS adoption. While this is a significant boost in fees for U.S. companies, it will also boost employment opportunities and revenue in the accounting and finance sector. It is extremely important for professionals to begin familiarizing their selves with IFRS, not only to enable themselves to meet the needs of their clients after the convergence, but also to consult companies on the most efficient and effective strategies to facilitate the change. It is an optimal time for accounting and...
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...and IFRS is that GAAP is rule-based, whereas IFRS is principle-based. With a principle based framework there is the potential for different interpretations of similar transactions, which could lead to extensive disclosures in the financial statements. Although, the standards setting board in a principle based system can clarify areas that are unclear. This could lead to fewer exceptions than a rules-based system. Another difference between IFRS and GAAP is the methodology used to assess an accounting treatment. The difference in research and development costs is that under IFRS costs are capitalized and under the US GAAP costs are expensed. The industries that would be most impacted are industries such as medical and technological industries that deal worldwide and have a significant portion of their clients following accounting standards of IFRs. These companies will likely have mixed feelings about the shift. Under the current US GAAP with R&D costs being expensed, US GAAP allows for a higher net income which ends up benefiting the executives as a result of cost being expensed. On the other hand, for investors and auditors purposes it will become more challenging to follow a whole new system after having learned the US GAAP. The potential downfalls are that the united states, even though merging with IFRS who has a better track record for better accounting quality, are that the united states will become slow to understanding procedures of the IFRS convergence...
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...” – from the guide on accounting writing methods on BB. The collapse of Enron in 2001 has alerted the financial standard-setters worldwide for the need to develop a single set of global high quality accounting standards in order to achieve greater transparency, clarity, consistency and comparability of the financial reports. This is important for achieving more efficient global financial markets while benefiting users of financial reports such as the investors, creditors, multi-national companies and auditors. In additions, it is evident that the financial standard setters are reconsidering the merits of group accounting and its criteria for control to a large extent. In particular, it is indicated that the application of reviewed group accounting standards such as the FIN46 could also be subjective and easily manipulated. This contrasts with the criteria of Australia’s basis for group consolidation, namely, “effective control” which is determined by control over the entity's board and the proportion of potential and current voting rights. The observations call for the principle-based accounting system instead of the insufficient and easily manipulated rules-based system. In sum, the abovementioned suggests that the financial reporting standard-setting process is largely uncertain and that the accounting standards may often be incomplete. More importantly, comparisons are made between the IFRS and Australia’s modified versions of IFRS and the results highlighted...
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...Running Head: DIFFERENCES BETWEEN GAAP AND IFRS 1 Differences Between GAAP and IFRS Accounting Practices Sharon Woodards Liberty University Intermediate Accounting II 302 Professor Ashley Harper November 7, 2014 DIFFERENCES BETWEEN GAAP AND IFRS 2 Both the IFRS ( International Financial Reporting Standards ) and the GAAP ( Generally Accepted Accounting Principles ) are a set of accounting rules that companies either can or must follow when preparing their financial statements. Set by policy boards, the United States enforces the use of GAAP as the set of rules of processes and standards that its companies must use for reporting and recording of their financial statements. At the same, other parts of the words use the IFRS as their set of rules for companies to follow. This IFRS set of rules were developed by the International Accounting Standards Board (IASB). Due to this, the world has been talking about combining the two standards into one globalized set of accounting standards that will comprise of both standards. The object of this would be to have the world recognize one set of globalized set of accounting practices. There are some differences that the US should be aware of before the convergence between the two ever takes place. Some of the major differences between GAAP and IFRS revolve around grants to employees, vesting, modifications, tax withholding, inventory differences, revenues and...
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...Accounting for inventory under IFRS and U.S. GAAP ABSTRACT U.S. General Accepted Accounting Standards (U.S. GAAP) and International Financial Reported Standards (IFRS) both give guidance for inventory valuation. This study will give several examples, compare cost flow assumptions and inventory valuation under U.S. GAAP and IFRS, and indicate the possible influences to reported companies and financial information users. INTRODUCTION The U.S. Securities and Exchange Commission (SEC) continues to move forward in its proposed plans to replace U.S. GAAP for U.S. public companies with IFRS. Inventory valuation is important, because inventory is a crucial element not only in the computation of profit, but also in the valuation of assets for balance sheet purposes. Unfortunately, inventory values sometimes are manipulated by management in order to create a more favorable impression. In the following sections, I introduced several differences between U.S. GAAP and IFRS. I also analysis the possible reasons of information manipulation and influence. In section one and section two respectively I will talk about differences in cost flow assumptions and inventory valuation under both methods. I. COST FLOW ASSUMPTIONS Companies typically purchase merchandise at several different prices. Ending inventory equals the quantity on hand multiply the unit acquisition price. If a company use historical cost to determine the cost of inventory and it purchases inventory at different unit prices...
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...Are IFRS-based and US GAAP-based Accounting Amounts Comparable? Mary E. Barth* Stanford University Wayne R. Landsman, Mark Lang University of North Carolina Christopher Williams University of Michigan August 2011 * Corresponding author: Graduate School of Business, Stanford University, 94305-5015, mbarth@stanford.edu. We appreciate funding from the Center for Finance and Accounting Research, Kenan-Flagler Business School and the Center for Global Business and the Economy, Stanford Graduate School of Business. We appreciate comments from Elicia Cowins, Julie Erhardt, Margot Howard, Elmar Venter, an anonymous reviewer, and workshop participants at the University of Cologne, ESSEC Business School, George Washington University, Giessen Business School, University of Graz, IESE Business School, University of Leeds, University of Missouri, Oklahoma State University, Shanghai University of Finance and Economics, Singapore Management University, Southern Methodist University, Stanford University, Washington University at St. Louis, and the European Accounting Association Congress. We also thank Dan Amiram and Mark Maffett for assistance with data collection. Electronic copy available at: http://ssrn.com/abstract=1585404 Are IFRS-based and US GAAP-based Accounting Amounts Comparable? Abstract This study documents whether application of IFRS by non-US firms results in accounting amounts comparable to those resulting from application of US GAAP by US firms. IFRS firms have...
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...Does Mandatory Adoption of IFRS Improve Accounting Quality? Preliminary Evidence* ANWER S. AHMED, Texas A&M University MICHAEL NEEL, University of Houston DECHUN WANG, Texas A&M University 1. Introduction We provide evidence on the preliminary effects of mandatory adoption of International Financial Reporting Standards (IFRS) on accounting quality for a relatively broad set of firms from 20 countries that adopted IFRS in 2005 relative to a benchmark group of firms from countries that did not adopt IFRS matched on the strength of legal enforcement, industry, size, book-to-market, and accounting performance. Understanding the effects of mandatory adoption on properties of accounting numbers is of potential interest to standard-setters and securities regulators in countries that are considering IFRS adoption as well as in countries that have already adopted IFRS. Furthermore, evidence on this question is of particular importance to the IASB because it can help the board evaluate whether its stated objective of improving accounting quality is being accomplished (see IASC 1989; Barth 2008). Finally, analysts, investors, and other users may also find it useful to understand the effects of IFRS adoption on accounting quality to potentially reassess how they use accounting numbers. The effects of mandatory IFRS adoption on accounting quality critically depend upon whether IFRS are of higher or lower quality than domestic GAAP and how they affect the efficacy of enforcement mechanisms...
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...Romania’s Post Communism Accounting Practices and The Effects of Adapting IFRS for SMEs Abstract Romania, located in southeastern European, was heavily influenced by the Russian Soviet Union as a socialist republic between 1947 and 1989. With becoming a capitalist country in 1989, its accounting practices began its transformation. The purpose of this paper is to analyze Romania accounting practices post its revolution. The paper discusses three major accounting practice conversions made in Romania post communism. Included in this paper are comparisons of previous practices and the implications presented within each practice; along with the pros and cons and many challenges that are associated with the adaptation of International Financial Reporting Standards (IFRS) for small and medium-sized entities (SMEs). Romania’s Post Communism Accounting Practices and The Effects of Adapting IFRS Romania is country located in southeastern Europe and is the ninth largest country of the European Union. Between 1947 and 1989, Romania was controlled by the Russian Soviet Union and enforced by communism. Today, reported in its 2011 Census, Romania’s currently has a population of 21,390,000 people and a gross domestic product (GDP) of $179,793,512,340. Though now considered as an upper-middle income country by the World Bank, Romania has faced many transitions from communism to capitalism over the course of the past three...
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...com/locate/jaccpubpol On the global acceptance of IAS/IFRS accounting standards: The logic and implications of the principles-based system q Salvador Carmona *, Marco Trombetta IE Business School, Calle Pinar, 15-1B, 28006 Madrid, Spain a r t i c l e i n f o a b s t r a c t The widespread acceptance of International Accounting Standards (IAS)/International Financial Reporting Standards (IFRS) makes it timely to examine their technical determinants as well as their implications for the accounting profession and the process of accounting harmonization. In this respect, we suggest that the principles-based approach to the standards and its inner flexibility enables the application of IAS/IFRS to countries with diverse accounting traditions and varying institutional conditions. Furthermore, the principles-based approach involves major changes in the expertise held by accountants and, hence, in their educational background, training programs, and in the organizational and business models of accounting firms. Finally, we submit that the standards set by the IAS/IFRS constitute a step forward in the process of accounting harmonization, although there is still far to go in the comparability of accounting measures across countries and regions. Ó 2008 Elsevier Inc. All rights reserved. Keywords: Globalization Accounting harmonization Convergence Principles-based standards Rules-based standards 1. Introduction The harmonization of accounting standards has made considerable progress within...
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...1 Egypt’s Accounting Standards (EAS) against IFRS: The Reason behind Compliance and The Main Differences. Ahmed Mostafa Eliwa German University in Cairo Supervised By: Prof: Dr. Ehab K. A. Mohamed 2 Chapter 1: IFRS Historical Background 1.1 Introduction The purpose of this chapter is to gather information about the history of the international financial and reporting standards (IFRS), the committee that issued them, and what the reasons behind issuing such standards are to be agreed and implemented across the world. In the following sections we will know more about the International Accounting Standards Committee (IASC) “The IFRS Issuer” foundation and launching. Then we will talk about the IFRS and the IASC development during the period of 1973 - 2000. How the IASC started to issue their international accounting standards and to what extent they were agreed and implemented across the world. And also what are the difficulties that faced them to issue accepted international accounting standards during this period. Finally, in the last section, the factors that forced the IASC to be restructured to IASB “International Accounting Standards Board”. Moreover, and after correspondence and deliberations, the Securities Exchange Commission (SEC) endorsement on the IFRS. 1.2 IASC Foundation and Launching: Following World War II, each country had its own Generally Accepted Accounting Principles (GAAP, the U.S. designation), or proper accounting practice. Even among the GAAPs...
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...Contrast Analysis of United States Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) This paper examined the relationship between United States Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) and found merging both accounting standards into a worldwide standard is ideal for investors. Corporate financial statement requirements depend on location. The two accepted accounting standard systems are GAAP and IFRS. The differences between GAAP and IFRS are GAAP is rules-based and IFRS is principle-based. How can a worldwide accounting standard benefit the world economy? The answer depends on political will, culture, countries history, and business structure. Research indicated there are only slight differences between GAAP and IFRS. These slight differences must be explored further to predict the impact on companies, economic, and financial markets. GAAP and IFRS have to be reconciled as a worldwide accounting standard to efficiently allow investors to compare foreign companies. GAAP set the accounting standard for the United States since its inception in 1929. GAAP evolved over the last 60 years (Măciucă, Ursache, Moroşan, & Apetri, 2014). IFRS was established in 1973 (Smith, 2012). IFRS used GAAP as a source document for its standards, either to imitate, modify, or omit (Chevis, 2014). The European Union established IFRS as the standard in 2005 (Smith, 2012). In 2007, the...
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...contribution of IFRS to UK accounting standards Name Institutional Affiliation INTRODUCTION International Financial Reporting Standards (IFRS) are principles based on standards and the interpretations implemented by the Board of International Accounting Standards as the global financial reporting framework. IFRS are guidelines and definitions that require to be applied in the preparation of financial statements by the international companies. Before IFRS was referred to as International Accounting Standards (IAS), then in 2001 the board of the international accounting standards (IASB) took the control of setting the IAS. Then the IASB developed the standard known as IFRS. According to (Shim, Siegel, Shim & Shim, 2012), the designing of IFRS is done as a common language to be used by business affairs so that the accounts of the company are comparable and understandable across the international boundaries. They result from the rapidly growing trade and international shareholding, and they offer best solutions to the companies trading in several countries. Many different national accounting standards are progressively being replaced by the IFRS. They provide set rules to be followed by the accountants in the provision and maintenance of the accounts books which are reliable, comparable, relevant and understandable as per the users external and internal. IFRS was adopted in the UK in 2005, and all the public companies were required to use the IFRS policies for their...
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...Upton, Director of International Activities for the International Accounting Standards Board (IASB). It means that every country have their own accounting standards. There are many accounting standards in the world, with each country using a version of their own generally accepted accounting principles, also known as GAAP. Dissimilar financial reporting and accounting practices make it very difficult for users of accounting and financial reports to consolidate such information and make comparisons of firms that are listed in different countries (Prather-Kinsey, 2006). The complication arises when the firm does business in multiple countries. How can corporations be compared based upon their financials, which one are accurate, and how can investors then deal with multiple standards, which ones are accurate? The answer to these questions lies within the adoption of the International Financial Reporting Standards, or IFRS. IFRS are currently required or accepted in over 100 countries worldwide, and it looks certain that the number of countries to embrace IFRS will continue to rise over the coming years (Daske, Hail, Leuz& Verdi, 2008). It was already noticed that, IFRS issued by the IASB have been extremely doing well in terms of their acceptance and application on a worldwide basis. IFRS is the standards which is being developed and supported by the IASB. IFRS give a meaning as a set of international accounting standards that states how certain transactions and events should...
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...Highlights of IFRS Research By CYNTHIA BOLT-LEE, CPA and L. MURPHY SMITH, CPA, DBA NOVEMBER 2009 Conversion from U.S. GAAP to IFRS is a heavily discussed topic in the corporate world. Expected benefits of adoption include reporting consistency, enhanced global competition and improved financial reporting transparency. While many countries worldwide have already adopted IFRS, many other countries are closely examining its effects before adoption, not only from an economic perspective but also from a reporting quality position. COMPARING RESULTS Researchers Elaine Henry, Stephen Lin and Ya-Wen Yang evaluated the difference between financial results under U.S. GAAP compared to IFRS. Their results show that convergence between U.S. GAAP and IFRS is occurring. Using 2004 to 2006 reconciliation disclosures, the authors found that the calculated difference between shareholders’ equity under U.S. GAAP and under IFRS declined from 2004 to 2006. In addition, the difference between U.S. GAAP and IFRS reported net income during this period also declined but remained significantly different. Pensions and goodwill appeared to be the dominant reconciliation items. Reconciliation amounts varied by industry and country, raising questions about consistency between region and industry. Additionally, more than 70% of the companies examined in 2004 through 2006 had a higher return on equity under IFRS compared to U.S. GAAP. The 2007 SEC elimination of the IFRS-to-U.S. GAAP reconciliation...
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