...IFRS In a perfect, ideal world, financial statements would be consistent for market participants to easily understand, regardless of location. In reality, there are people that exist that have put that idea into real-life action. These people are known as the International Accounting Standards Board (IASB). IASB formed in 2001 with a commitment to develop “a single set of high quality global accounting standards that provide high quality, transparent and comparable information in general-purpose financial statements.” The IASB developed the International Financial Reporting Standards (IFRS), which is the light at the end of the tunnel that provides a globally recognized set of Standards for financial statement preparers. Consistent with the IASB’s vision, the mission of IFRS is to bring transparency, accountability, and efficiency to financial markets all over the world. Ideally, investors are enabled to make sound economic decisions from transparency, which arises from enhancing international comparability as well as the quality of information for financial statements. Extending the quality of information goes hand in hand with decreasing the information gap – in turn providing regulated accountability to investors. Bringing a uniform trusted accounting language to investors increases economic efficiency through lowering both international reporting costs and cost of capital. These accomplishments are developed and made possible from the IASB, which consists of professionals...
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...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 for non-U.S. companies with securities listed in the United States suggests a need for users of financial statements to be aware of the potential for differences resulting from the two sets of standards. “The European-U.S. ‘GAAP...
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...the beachhead of accounting field. International Accounting Standards Board (IASB) little by little surpasses Financial Accounting Standards Board (FASB) in dominance over accounting framework. There are more than 100 countries have adopted or have permitted to use or have been converging with International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS), instead of following Generally Accepted Accounting Standards (GAAP) and Statements of Financial Accounting Standards (SFAS). For example, the United States, who requires foreign firms listed on America should compile financial statements under IFRS or SFAS, declares its specific adoption road-map for local firms. The European Union requests its member states starting to take up IFRS at 2005. When it comes to Asia, China has already announced to adopt IFRS since 2007. Over the last few decades, the fruitful areas of research have focused on the variation that arises from disparity between IFRS and GAAP. The two accounting systems have many constitutional differences, such as IFRS is principle-based standard while GAAP is ruled-based one, the former is fair value accounting while the latter is conservative. * Background of the FASB’s due process The FASB claims that, “The FASB is committed to following an open and orderly process for setting standards. It designed its comprehensive due process procedures to permit timely, thorough, and open study of financial accounting and reporting issues...
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...goal ……………………………………………………………………………………………………………………7 Conclusion ………………………………………………………………………………………………………………………………………………8 References & bibliography………………………………………………………………….…………………………………………………..9 1. Harmonisation – what it means Harmonisation is the process which aims to converge the accounting practices around the world and to increase the compatibility between countries in regards to financial statements. However, we must keep in mind that this process does not target uniformity in the accounting practice, but to reduce the differences over time. Standardising the accounting practices around the world comes as a boomerang effect of capitalisation. We have companies that trade in different countries and thus they must oblige with each of the accounting practices of every country where the company produces financial statements. This leads to the situation where you have a company reporting a shareholders’ equity of just over $15 million under the UK regulations, while in accordance with the US accounting rules the same company reports a shareholders’ equity value of $32 million, a difference of over 100% between the two financial statements of the same company. Accounting harmonisation and convergence have become important issues over the last couple of years and thus remain controversial. It...
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...Saadia 1. Accounting and Auditing Organization for Islamic financial institution (AAOIFI) The AAOIFI is a non-profit organization that focuses mainly on the area of accounting and auditing for Islamic financial institutions. While recognizing the need for standards, AAOIFI was established on February 1990 in Algeria and was registered on March 1991 in the kingdom of Bahrain. The organization is supported by 200 institution members from 45 countries across the global. The AAOIFI is one of prominent Islamic agency that attempts to install accounting and auditing standard for Islamic financial industry. The main object is to develop and disseminate accounting and auditing thought relevant to Islamic financial institutions and their applications. Its tasks include holding seminars, publishing periodicals, newsletters, commissioning research and prepare, promulgate, interpret and review, the accounting and auditing standards for Islamic financial institutions. Its notable efforts are to inform and encourage banking supervisors around the world to adopt its standard as the benchmark for Islamic financial institutions in their countries. These attempts to improve the transparency and comparability of the financial reporting of Islamic financial institutions are bearing fruit. The AAOIFI’s standard has been applied in various countries such as Bahrain and Sudan which require Islamic Banks in their countries to follow AAOIFI’s standards. In Qatar and Saudi Arabia AAOIFI’s standards are specified...
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...system of accounting to be inefficient. 2.Venice’s commerce was driven by sea traffic. 3.The Genoese system was the first to imply that unlike items could be compared in terms of a common monetary unit. 4.Double entry bookkeeping quickly had world-wide acceptance, as the British accepted it in the 1400s. 5.When hyperinflation exists, alternative systems to historical cost become necessary. 6. The International Accounting Standards Board, an international organization dedicated to the diversity of accounting standards worldwide. 7. One trend in European securities markets is consolidation. 8. The continental accounting system is closely linked to the tax collection system. 9. The first step into international business is usually the creation of a foreign subsidiary. 10. If a firm is not involved in international commercial transactions, knowledge of international business is unnecessary. Multiple Choice Learning Objective #1.1: Identify the key trends in the development of accounting through history 1. The Crusades were important in the development of accounting, because __a. the Arabs first developed double entry accounting, which was then adopted by the Italians. __b. the Christians needed double entry accounting to keep track of the relative profitability of the different Crusades. __c. the trade routes shifted the commercial center from Italy to Constantinople __d. none of the above. 2. The major Genoese influence on accounting was __a...
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...Executive summary This report has three main parts. Firstly, I describe the different users (Stakeholders) of Finance statements and their needs and assess the implications for users of financial statement. Then, I explain the legal and regulatory influences on financial statements preparation like Companies Acts. After that, I describe how different policies are dealt with by accunting and reporting standard including FRS, IASB, SSAP, GAAP and ASB). Furthermore, I calculate accounting ratio consisting of Solvency, Profitability, Capital Gearing, Dividend Yield, Assets to assess the performance and position of Vinamilk and then prepare a report incorporating and interpreting accounting ratio, compare against the previous year, regional and also local competitors. This report provides an analysis and evaluation of the current and prospective profitability, liquidity and financial stability of Vinamilk Corp. Methods of analysis include ratios such as Debt, Current and Quick ratios, etc. Results of data analysed show that all ratios are below industry averages. In particular, comparative performance is a little bit downfalls in the areas of profit margins, liquidity, credit control, and inventory management. The report finds the prospects of the company in its current position are not positive. The major areas of weakness require further investigation and remedial action by management. Recommendations include: • improving the average collection period...
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...users of financial statements and their needs 8 1.2. Explain the legal and regulatory influences on financial statements preparation like Companies Act etc. 10 1.4. How different laws/regulations are dealt with by accounting and reporting standards 12 1.3. Assess the implications for users of financial statements 16 4.1. Calculate accounting ratios to assess the performance and position of Vinamilk 18 4.1.1. Profitability Ratios 18 4.1.2. Liquidity Ratios 18 4.1.3. Gearing Ratios 20 4.1.4. Investment Ratios 21 Report 22 Conclusions 24 Reference 25 Executive summary This report has three main parts. Firstly, I describe the different users (Stakeholders) of Finance statements and their needs and assess the implications for users of financial statement. Then, I explain the legal and regulatory influences on financial statements preparation like Companies Acts. After that, I describe how different policies are dealt with by accunting and reporting standard including FRS, IASB, SSAP, GAAP and ASB). Furthermore, I calculate accounting ratio consisting of Solvency, Profitability, Capital Gearing, Dividend Yield, Assets to assess the performance and position of Vinamilk and then prepare a report incorporating and interpreting accounting ratio, compare against the previous year, regional and also local competitors. This report provides an analysis and evaluation of the current and prospective profitability, liquidity...
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...Chapter 1 Introducing Financial Accounting QUESTIONS 1. The purpose of accounting is to provide decision makers with relevant and reliable information to help them make better decisions. Examples include information for people making investments, loans, and business plans. 2. Technology reduces the time, effort, and cost of recordkeeping. There is still a demand for people who can design accounting systems, supervise their operation, analyze complex transactions, and interpret reports. Demand also exists for people who can effectively use computers to prepare and analyze accounting reports. Technology will never substitute for qualified people with abilities to prepare, use, analyze, and interpret accounting information. 3. External users and their uses of accounting information include: (a) lenders, to measure the risk and return of loans; (b) shareholders, to assess whether to buy, sell, or hold their shares; (c) directors, to oversee their interests in the organization; (d) employees and labor unions, to judge the fairness of wages and assess future employment opportunities; and (e) regulators, to determine whether the organization is complying with regulations. Other users are voters, legislators, government officials, contributors to nonprofits, suppliers and customers. 4. Business owners and managers use accounting information to help answer questions such as: What resources does an organization own? What debts are owed? How much income is earned? Are...
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...Chapter 1 Accounting in Business QUESTIONS 1. The purpose of accounting is to provide decision makers with relevant and reliable information to help them make better decisions. Examples include information for people making investments, loans, and business plans. 2. Technology reduces the time, effort, and cost of recordkeeping. There is still a demand for people who can design accounting systems, supervise their operation, analyze complex transactions, and interpret reports. Demand also exists for people who can effectively use computers to prepare and analyze accounting reports. Technology will never substitute for qualified people with abilities to prepare, use, analyze, and interpret accounting information. 3. External users and their uses of accounting information include: (a) lenders, to measure the risk and return of loans; (b) shareholders, to assess whether to buy, sell, or hold their shares; (c) directors, to oversee their interests in the organization; (d) employees and labor unions, to judge the fairness of wages and assess future employment opportunities; and (e) regulators, to determine whether the organization is complying with regulations. Other users are voters, legislators, government officials, contributors to nonprofits, suppliers and customers. 4. Business owners and managers use accounting information to help answer questions such as: What resources does an organization own? What debts are owed? How much income is earned? Are expenses reasonable...
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...Accounting Horizons Vol. 24, No. 3 2010 pp. 355–394 American Accounting Association DOI: 10.2308/acch.2010.24.3.355 Global Accounting Convergence and the Potential Adoption of IFRS by the U.S. (Part I): Conceptual Underpinnings and Economic Analysis Luzi Hail, Christian Leuz, and Peter Wysocki SYNOPSIS: This article is Part I of a two-part series analyzing the economic and policy factors related to the potential adoption of IFRS by the United States. In this part, we develop the conceptual framework for our analysis of potential costs and benefits from IFRS adoption in the United States. Drawing on the academic literature in accounting, finance, and economics, we assess the potential impact of IFRS adoption on the quality and comparability of U.S. reporting practices, the ensuing capital market effects, and the potential costs of switching from U.S. GAAP to IFRS. We also discuss the compatibility of IFRS with the current U.S. regulatory and legal environment, as well as the possible macroeconomic effects of IFRS adoption. Our analysis shows that the decision to adopt IFRS mainly involves a cost-benefit trade-off between ͑1͒ recurring, albeit modest, comparability benefits for investors; ͑2͒ recurring future cost savings that will largely accrue to multinational companies; and ͑3͒ one-time transition costs borne by all firms and the U.S. economy as a whole, including those from adjustments to U.S. institutions. In Part II of the series ͑see Hail et al. 2010͒, we provide an analysis...
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...Long-term Finance and Economic Growth Working Group on Long-term Finance The views expressed in this report are those of the Working Group on Long-term Finance and do not necessarily represent the views of the individual members of the Group of Thirty. ISBN 1-56708-160-6 Copies of this paper are available for $49 from: The Group of Thirty 1726 M Street, N.W., Suite 200 Washington, D.C. 20036 Tel.: (202) 331-2472 E-mail: info@group30.org; www.group30.org Long-term Finance and Economic Growth Published by Group of Thirty© Washington, D.C. 2013 Table of Contents Abbreviations ............................................................................................................................................................................... 5 Glossary .............................................................................................................................................................................................6 Foreword ..........................................................................................................................................................................................8 Acknowledgments ..................................................................................................................................................................10 Working Group on Long-term Finance ................................................................................................................
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...Chapter 2 THE AUDIT MARKET Revision: 11 September 2012 2.1 Learning Objectives After studying this chapter, you should be able to: 1. Distinguish between different theories of audit services including agency theory. 2. Understand drivers for audit regulation. 3. Understand the role of public oversight. 4. Distinguish between different audit firms. 5. Identify some current developments in the audit market. 6. Portray the series of industry codes of conduct and guidance 2.2 Introduction The emergence of today’s auditors happened during the Industrial Revolution that started in Great Britain around 1780. This revolution led to the emergence of large industrial companies with complex bureaucratic structures and, gradually, the need to look for external funds in order to finance further expansion: the separation between capital provision and management. Both developments resulted in demand for the services of specialists in bookkeeping and in auditing internal and external financial representations. The institutionalization of the audit profession was then merely a matter of time. Management Controls Operations and Communications Management has control over the accounting systems and internal controls of the enterprises that auditors audit. Management is not only responsible for the financial and internal control reports to investors, but also has the authority to determine the precise nature of the representations that go into those reports. However, management...
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... ВИКОНАЛА: ПЕРЕВІРИЛА: Харків 2012 MINISTRY OF EDUCATION AND SCIENCE, YOUNG PEOPLE AND SPORT OF UKRAINE KHARKIV NATIONAL UNIVERSITY OF ECONOMICS Department of Foreign Languages “Purpose and Principles of Accounting” “Accounting and audit” Faculty (2-2) Supervisor: Kharkiv 2012 Accountancy Accountancy is the process of communicating financial information about a business entity to users such as shareholders and managers. The communication is generally in the form of financial statements that show in money terms the economic resources under the control of management; the art lies in selecting the information that is relevant to the user and is reliable. Accountancy is a branch of mathematical...
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...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 greater accounting system...
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