...1. Describe what accounting convergence means and assess the likelihood of the convergence being completed and implemented in the next five (5) years? Accounting convergence is a process or goal to establish one set of accounting standards that can be used internationally by attempting to eliminate the differences in the International Financial Reporting Standards (IFRS) and the US Generally Accepted Accounting Principles (US GAAP). Convergence also seeks to establish understandability amongst users and enforceable by regulators (Erchinger, Melcher, 2007). The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) have been trying to implement a global acceptable standard for financial reporting since the end of 2002 onwards (Fogarty, 2011). However to this day in 2013 the convergence of both IFRS and US GAAP has yet to be completed and implemented. The likelihood of the convergence being completely finished and implemented seems possible but yet so far as both the IASB and FASB have already been trying for ten years to get it completed despite the hurdles they have endured. In November 2007 the Securities and Exchange Commission (SEC) voted 4-0 in favor of eliminating the requirements that forces foreign companies with U.S listings to reconcile their results with to U.S GAAP therefore companies with a year end of 2007 are no longer required to follow these set of principles (Fogarty, 2011). 2. Evaluate and describe the...
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...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 be reported in financial statements. Contrast to U.S. GAAP, which is a rules-based accounting standard, IFRS is upon using principles based rather than hard set rules. As a result of this fundamental difference, IFRS allows management to use greater preference and...
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...“Weak Signal: Evidence of IFRS and US GAAP Convergence from Nokia’s 20-F Reconciliations” Nokia was created in 1967 through a merger and has become one of the world’s leaders in mobile communications and electronics. The Finland based company gained a lot of power through acquisitions within the telecommunication and electronic market, made around the 1980’s. The company is now specializing in four segments, mobile phones, multimedia, enterprise solutions, and networks. Nokia has ADRs (American Depository Receipts), which allow investors in the US to trade securities without having to trade in foreign capital, that are currently traded in the New York Stock Exchange as “NOK”. Company shares are also being traded on the Frankfurt, Helsinki, and Stockholm stock markets. Nokia’s first issuance of an ADR was in 1994. Since the communications market is changing and growing very rapidly, the best way to differentiate is to acquire smaller companies and share resources and knowledge. A lot of money is spent on research and development of more advanced technologies to gain a competitive advantage. Currently, Nokia has teamed with Microsoft to offer an alternative to the android and Apple’s iOS. Nokia also has a strong presence in markets such as the wireless handset and wireless infrastructure markets. According to Standard& Poors Communication Equipment 2006 Industry Survey, only Ericsson was ahead of Nokia in being the top supplier of wireless infrastructure. In the same report,...
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...The road to international reporting The Convergence of GAAP and IFRS | Leroy Meadows Advanced Accounting | The road to international reporting The Convergence of GAAP and IFRS | Leroy Meadows Advanced Accounting | The Road to International Reporting The convergence of a rules-based approach and a principles-based approach in relation to accounting and the dissemination of financial information is not something to be taken lightly. With the need for convergence increasing due to globalization, there are sure to be some contentious issues that must be addressed if convergence is to succeed. While the main issue for those who use a rules-based approach is the issue of comparability, there are other issues that must be taken into account as well. This paper will provide a brief history of globalization as well as the response of the United States in the wake of massive corporate fraud between 2000-2002. The differences between a rules-based approach and a principles-based approach and some difficulties that arise when trying to merge two different systems of accounting will also be examined. Lastly, this paper will address why convergence is not only probable, but necessary. The Need to Be One The modern push for globalization has occurred in two stages. The World Trade Organization, in its 2008 report, provides a chronology of this push which shows the first stage of globalization starting in the mid-19th century and continuing until the start of WWI. The...
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...This article was downloaded by: [Library Services City University London] On: 26 July 2013, At: 08:32 Publisher: Routledge Informa Ltd Registered in England and Wales Registered Number: 1072954 Registered office: Mortimer House, 37-41 Mortimer Street, London W1T 3JH, UK Accounting and Business Research Publication details, including instructions for authors and subscription information: http://www.tandfonline.com/loi/rabr20 International Financial Reporting Standards (IFRS): pros and cons for investors Ray Ball a a University of Chicago Published online: 28 Feb 2012. To cite this article: Ray Ball (2006) International Financial Reporting Standards (IFRS): pros and cons for investors, Accounting and Business Research, 36:sup1, 5-27, DOI: 10.1080/00014788.2006.9730040 To link to this article: http://dx.doi.org/10.1080/00014788.2006.9730040 PLEASE SCROLL DOWN FOR ARTICLE Taylor & Francis makes every effort to ensure the accuracy of all the information (the “Content”) contained in the publications on our platform. However, Taylor & Francis, our agents, and our licensors make no representations or warranties whatsoever as to the accuracy, completeness, or suitability for any purpose of the Content. Any opinions and views expressed in this publication are the opinions and views of the authors, and are not the views of or endorsed by Taylor & Francis. The accuracy of the Content should not be relied upon and should be independently verified with primary sources of information...
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...International Financial Reporting Standards (IFRS): Pros and Cons for Investors by Ray Ball* Sidney Davidson Professor of Accounting Graduate School of Business University of Chicago 5807 S. Woodlawn Ave Chicago, IL 60637 Tel. (773) 834 5941 ray.ball@gsb.uchicago.edu Acknowledgments This paper is based on the PD Leake Lecture delivered on 8 September 2005 at the Institute of Chartered Accountants in England and Wales, which can be accessed at http://www.icaew.co.uk/cbp/index.cfm. It draws extensively on the framework in Ball (1995) and benefited from comments by Steve Zeff. Financial support from the PD Leake Trust and the Graduate School of Business at the University of Chicago is gratefully acknowledged. 1 Abstract Accounting in shaped by economic and political forces. It follows that increased worldwide integration of both markets and politics (driven by reductions in communications and information processing costs) makes increased integration of financial reporting standards and practice almost inevitable. But most market and political forces will remain local for the foreseeable future, so it is unclear how much convergence in actual financial reporting practice will (or should) occur. Furthermore, there is little settled theory or evidence on which to build an assessment of the advantages and disadvantages of uniform accounting rules within a country, let alone internationally. The pros and cons of IFRS therefore are somewhat conjectural, the unbridled enthusiasm...
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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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...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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...é The Effects of Mandatory IFRS Adoption in the EU: A Review of Empirical Research October 2014 Information for Better Markets An initiative from the ICAEW Financial Reporting Faculty The Effects of Mandatory IFRS Adoption in the EU: A Review of Empirical Research forms part of the Information for Better Markets thought leadership programme of ICAEW’s Financial Reporting Faculty. ICAEW operates under a Royal Charter, working in the public interest. As a world leading professional accountancy body, ICAEW provides leadership and practical support to over 142,000 members in more than 160 countries, working with governments, regulators and industry to ensure the highest standards are maintained. The ICAEW Financial Reporting Faculty provides its members with practical assistance and support with IFRS, UK GAAP and other aspects of business reporting. It also comments on business reporting issues on behalf of ICAEW to standard setters and regulators. Its Information for Better Markets thought leadership programme subjects key questions in business reporting to careful and impartial analysis so as to help achieve practical solutions to complex problems. The programme focuses on three key themes: disclosure, measurement and regulation. We welcome comments and enquiries on this report and on the other aspects of the Information for Better Markets programme. To contact us, please email bettermarkets@icaew.com. © ICAEW 2014 All rights reserved. If you want...
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...The IMPLeMeNTATION OF IFRS IN The UK DeVOLVeD ADMINISTRATIONS Ciaran Connolly Tony Wall The IMPLeMeNTATION OF IFRS IN The UK DeVOLVeD ADMINISTRATIONS by Ciaran Connolly Tony Wall Published by CA house 21 haymarket Yards edinburgh eh12 5Bh First published 2013 © 2013 ISBN 978-1-904574-94-1 eAN 9781904574941 This report is published for the Research Committee of The Institute of Chartered Accountants of Scotland. The views expressed in this report are those of the authors and do not necessarily represent the views of the Council of the Institute or the Research Committee. No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the authors or publisher. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopy, recording or otherwise, without prior permission of the publisher. Printed and bound in Great Britain by Garnett Dickinson CONTeNTS Foreword .................................................................................................................... Acknowledgements .................................................................................................... Abbreviations .............................................................................................................. executive summary ...................
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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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...ACG 6805 Accounting Theory Fall 2015 Professor: Greg Trompeter Office: 323 BA I Phone: 407.823.2150 Office hours: Tuesday before class; as announced in class; and by appointment. Required texts: Readings available as noted below. • Trueblood cases from Deloitte. Available at: http://www.deloitte.com/view/en_US/us/About/university-relations/Deloitte-Foundation/0ac1264f0b0fb110VgnVCM100000ba42f00aRCRD.htm • FASB codification—password to be handed out in class. You may log in at http://aaahq.org/ascLogin.cfm Objectives This course examines: • How accounting principles are established and monitored by standard setters. • The strengths and weaknesses of various accounting methods and how applications of such methods affect decisions of users and preparers of financial statements. • Current issues facing standard setters and the profession. Grades will be determined as follows: 1. Class participation 45 possible points 2. Financial reporting timeline 5 possible points 3. Mini-cases (Trueblood, FASB, HBS or similar) 35 possible points 4. Problem sets and discussion question write-ups 30 possible points 5. Group presentation 10 possible points 6. Research paper 20 possible points 7. Final exam 5 possible points 150 possible points NOTE: I assume that you should plan to invest—at a minimum—three...
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...C H A P T E R 2 CONCEPTUAL FRAMEWORK FOR FINANCIAL REPORTING LEARNING OBJECTIVES After studying this chapter, you should be able to: •1 •2 •3 •4 Describe the usefulness of a conceptual framework. Describe efforts to construct a conceptual framework. Understand the objective of financial reporting. Identify the qualitative characteristics of accounting information. Define the basic elements of financial statements. •6 •7 Describe the basic assumptions of accounting. Explain the application of the basic principles of accounting. Describe the impact that constraints have on reporting accounting information. •8 •5 What Is It? Everyone agrees that accounting needs a framework—a conceptual framework, so to speak—that will help guide the development of standards. To understand the importance of developing this framework, let’s see how you would respond in the following two situations. SITUATION 1: “Taking a Long Shot . . . ” To supplement donations collected from its general community solicitation, Tri-Cities United Charities holds an Annual Lottery Sweepstakes. In this year’s sweepstakes, United Charities is offering a grand prize of $1,000,000 to a single winning ticket holder. A total of 10,000 tickets have been printed, and United Charities plans to sell all the tickets at a price of $150 each. Since its inception, the Sweepstakes has attracted area-wide interest, and United Charities has always been able to meet its sales target. However, in the...
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...markets was the idea of generally accepted accounting principles (GAAP). We agree with Mr. Summers. Relevant and reliable financial information is a necessity for viable capital markets. Without it, our markets would be chaotic, and our standard of living would decrease. This textbook is the market leader in providing the tools needed to understand what GAAP is and how it is applied in practice. Mastery of this material will be invaluable to you in whatever field you select. Through many editions, this textbook has continued to reflect the constant changes taking place in the GAAP environment. This edition continues this tradition, which has become even more significant as the financial reporting environment is exploding with major change. Here are three areas of major importance that are now incorporated extensively into this edition of the text. A New Way of Looking at Generally Accepted Principles (GAAP) Learning GAAP used to be a daunting task, as it is comprised of many standards that vary in form, completeness, and structure. Fortunately, the profession has recently developed the Financial Accounting Standards Board Codification (often referred to as the Codification). This Codification provides in one place all the GAAP related to a given topic. This textbook is the first to incorporate this Codification—it will make learning GAAP easier and more interesting! Convergence of U.S. GAAP and International GAAP (iGAAP) As mentioned above, the most important innovation shaping...
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...Fourth Edition Financial Statement Analysis & Valuation Peter D. Easton University of Notre Dame Mary Lea McAnally Texas A&M University Gregory A. Sommers Southern Methodist University Xiao-Jun Zhang University of California, Berkeley Cambridge Business Publishers To my daughters, Joanne and Stacey —PDE To my husband Brittan, and my children Loic, Maclean, Quinn and Kay —MLM To my wife Susan, and my children Christian, Peter and Philip —GAS To my wife Sharon, my daughter Jasmine, and my parents 滕惠清 and 张祥林 —XZ Financial Statement Analysis & Valuation, Fourth Edition, by Peter D. Easton, Mary Lea McAnally, Gregory A. Sommers, and Xiao-Jun Zhang. COPYRIGHT © 2015 by Cambridge Business Publishers, LLC. Published by Cambridge Business Publishers, LLC. Exclusive rights by Cambridge Business Publishers, LLC for manufacture and export. ALL RIGHTS RESERVED. No part of this publication may be reproduced, distributed, or stored in a database or retrieval system in any form or by any means, without prior written consent of Cambridge Business Publishers, LLC, including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning. Student Edition ISBN 978-1-61853-104-9 Bookstores & Faculty: to order this book, call 800-619-6473 or email customerservice@cambridgepub.com. Students: to order this book, please visit the book’s Website and order directly online. Printed in...
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