1. International Accounting - The Issues
National differences lead to different accounting systems
Reasons for differences in financial reporting
Attempts to reduce national differences
International analysis of financial statements
Country studies

2. National differences lead to different accounting systems
Importance of family
Family run businesses(e.g. France)
Maximisation of profit not necessarily the main priority
The firm has a responsibility to society (e.g. Germany)
Separation of ownership and control
Need for a “true and fair view” (e.g. UK)

3. Why do Accounting Systems Vary from Country to Country?
The national legal system
The way in which industry is financed
The relationship between the tax and the reporting systems
The influence and status of the accounting profession
The extent to which accounting theory is developed
Accidents of history
Language

4. The national legal system
Roman law system
set of defined rules
code of accounts
little flexibility
Common law system
encourages flexibility
case law
companies acts - true and fair view
in 1981 the European Fourth Directive was incorporated into UK companies legislation
a specified format of accounts for the first time

5. The way in which industry is financed
USA, UK, and Sweden
heavy reliance on individual investors (equity)
registered shareholders
active stock markets developed
need for stewardship accounting
France and Germany
much less equity investment
more loan capital
heavy bank involvement
bearer shares

6. The relationship between the tax and the reporting systems
USA and UK
separate rules for computing taxable profit and profit for financial reporting purposes
tax rules more prescriptive
financial reporting rules require more disclosure
France and Germany
tax rules effectively become the financial reporting rules

7. The influence and status of the accounting profession
Development of capital markets leads to the development of the accountancy profession
The need for audit in an advanced capital market environment
accountants held in high esteem
In countries where capital markets have not developed (Eastern Europe) accountants seen as book-keepers
Accountancy profession develops accounting standards

8. The extent to which accounting theory is developed
Accounting theory can influence accounting practice
Theory may be developed at an academic or practice level
Netherlands - accountants receive both academic and professional training
UK - too many practising accountants see academic development as irrelevant to practice

9. Accidents of history Occupation during war Membership of the EU
Effects of scandals associated with company failures

10. Language
Difficulty in translating concepts from one language to another

11. IASC established in 1973 by the accounting professions in: ( now the IASB )
Japan
Mexico
Netherlands UK
USA
Australia
Canada
France
Germany
Ireland

12. Support around the world
International Accounting Standards International Financial Reporting Standards
Support around the world

13. Some countries that have adopted IASs / IFRSs
Kenya
Kuwait
Malta

14. Some countries that have permitted listed companies to prepare their consolidated accounts in accordance with IASs / IFRSs
Austria
Belgium
Germany
France
Finland
Italy
Luxembourg
Russia
Switzerland

15. Some countries that have permitted foreign listed companies to apply IASs / IFRSs without reconciliation to national GAAP
Netherlands
New Zealand
Norway
South Africa
Sweden

16. Some countries that have permitted companies to apply IASs / IFRSs provided there is a reconciliation to national GAAP
Denmark
Hong Kong
Poland
Spain
USA

17. Some countries that have taken IASs / IFRSs into account when formulating their own financial reporting standards
Australia
Malaysia
Singapore
Sri Lanka UK

18. A strong desire for international harmonisation
Reduce costs for the preparation of accounts
Reduce pressure on auditors
Reduce criticisms of financial regulators
Improve decision usefulness for investors

19. International Analysis of Financial Statements
Language
Format and extent of disclosure
Currency
Valuation and profit measurement
Taxation

20. Major financial reporting issues
Accounting for groups of companies
Accounting for assets
Accounting for inventories
Substance over form
Capital instruments
Accounting for employee costs