1. International Developments in Accounting ACFI 3217
Dr. Samuel Owusu-Agyei HU 3.40

2. International Developments in Accounting ACFI 3217
Dr. Samuel Owusu-Agyei HU 3.40

3. United States of America

4. Development of accounting regulation
No regulation in early years
1929 stock market crash
Strict accounting rules, no revaluation
AICPA set standards (professional body) until 1972 subject to SEC regulations
FASB independent standard setter from 1972

5. Regulation after Enron
Sarbanes–Oxley (SoX)
Major legislation on corporate governance of listed companies
Rules versus principles
SoX criticized rules-based accounting standards
FASB to develop objectives-oriented standards

6. Consolidated accounts
Business combinations – acquisition only.
No ‘pooling of interests’ allowed effective mid 2001
Impairment testing of goodwill replaces policy of amortization

7. Institutions Economy: free market
Legal system: Federal law, state law. Common law family
Business corporations (Inc.)
Chief Executive Officer (CEO) is a strong influence

8. Institutions (Continued)
Corporate finance: major equity markets regulated by SEC (Security Exchange Commission)
Banks not as close to companies as they would be in Europe
Tax rules separate from accounting rules
Accounting profession: AICPA (American Institute of Certified Public Accountants).

9. External influences Importing ‘know-how’, initially UK
Exporting ideas to other countries especially the rest of the American continent
Founder member of IASC (international accounting standards consultancy), strong international influence

10. Accounting regulations and IASB
Regulation lies with FASB and SEC
SEC is concerned with disclosure
Aim of FASB/IASB is convergence by 2009 and SEC acceptance of IFRS financial statement without US GAAP reconciliation
SEC review of 2006 overseas company fillings

11. Current regulation Accounting standards from FASB
Independent board of experts
‘Due process’ is very thorough
Fair presentation
‘Safe harbor’ protection
Special Industry standards
Emerging Issues Task Force

12. Professionalism v statutory control
Professional but with detailed rules
Generally accepted accounting principles (US GAAP)
Accounting standards
Technical bulletins
Practice bulletins
Accounting interpretations

13. Professionalism v statutory control (Continued)
Fair presentation: rules will give fair presentation
Professional discretion over formats. They are not fixed but tend to look similar. Assets start with the most liquid asset.

14. Uniformity v flexibility
Tax law and accounting rules are separate but accountants may choose tax approach
Uniformity
Merger accounting not allowed
Capitalization is required for some items, e.g. software development costs

15. Conservatism v optimism
Cautious on tangible fixed asset valuation
But some less conservative aspects, e.g. capitalization of borrowing costs
Optimism
Fair values of financial instruments

16. Secrecy v transparency
SEC regulates disclosure by listed companies
Detailed information required
Management discussion and analysis
Proxy statement + annual report + Form 10-K (comprehensive summary of financial performance)
Proxy statement- Statement required when soliciting for shareholder votes as required by the SEC.

17. Abs GAAP- Generally Accepted Accounting Principles
FASB- Financial Accounting Standards Board
IASB- International Accounting Standards Board