International Accounting

International Accounting, 7/e
Frederick D.S. Choi
Gary K. Meek
Chapter 4:
Comparative Accounting: The
Americas and Asia
www.HelpWithAssignment.com

Learning Objectives
 Understand how financial reporting is regulated and
enforced in five countries of the Americas and Asia: the
U.S., Mexico, Japan, China, and India.
 Describe the key similarities and differences among the
accounting systems of these five countries.
 Describe the auditor-oversight mechanisms in these
five countries.
 Explain the difference between principles-based and
rules-based accounting standards.

United States
 Overview
 Financial Accounting Standards Board (FASB)
 Private-sector organization that determines accounting standards
 The Securities and Exchange Commission (SEC) – a governmental
agency – underpins FASB’s authority
 Public Company Accounting Oversight Board (PCAOB)
 Private organization overseen by the SEC
 Regulates audits and auditors of public companies
 In 2002, took over the responsibility for setting auditing standards
from the American Institute of Certified Public Accountants (AICPA)
 Financial statements “present fairly”
 Compliance with GAAP is the test for fair presentation

United States (contin)
 Accounting regulation and enforcement
 Securities and Exchange Commission
 Has jurisdiction over listed companies
 Relies on private sector (FASB) to set accounting standards
 Pressures FASB on the direction of accounting standards
 Financial Accounting Standards Board
 Conceptual Framework is a significant feature of accounting standard setting
 Standard setting in the U.S. is both political and technical
 Generally accepted accounting principles (GAAP) are voluminous and detailed
 Committed to converging U.S. GAAP with IFRS
 Sarbanes-Oxley Act (2002)
 Expanded requirements on corporate governance, disclosure and reporting, and the
regulation of the audit profession
 Established PCAOB
 Sets standards for auditors
 Oversees and inspects audit firms
 Sanctions auditors for defective work
 CEO and CFO must certify financial statements
 Management must assess internal controls
 Auditors express an opinion on internal controls

United States (contin)
 Unusual features of U.S. financial reporting
 No federal law for preparing financial statements or having them
audited, except for listed companies
 LIFO
 Rules-based GAAP versus principles-based GAAP
 Rules-based
 More specific requirements
 More detailed implementation guidance
 May result in more comparability
 May foster “check-the-box” mentality
 Principles-based
 Sets forth broad objectives and fundamentals
 Requires professional judgment for implementation
 More flexible
 May result in more divergence in practice

Mexico
 Overview
 Accounting is oriented toward fair presentation despite code law legal system
 General price-level accounting (inflation-adjusted financial statements) was a
fundamental feature until 2008
 Listed companies will use IFRS starting in 2012
 Accounting profession is well-developed and influential in setting accounting and
auditing standards
 Council for Research and Development of Financial Information Standards
(CINIF)
 Independent public/private-sector partnership patterned after FASB and IASB
 Determines Mexican GAAP
 Aim – align Mexican GAAP with IFRS
 Mexican Institute of Public Accounting
 Issues auditing standards through its Auditing Standards and Procedures
Commission
 Unusual features of Mexican financial reporting
 Financial statements are adjusted for inflation when three-year cumulative
inflation rate equals or exceeds 26 percent

Japan
 Overview
 Strong bureaucratic control over business,
including accounting
 Structural reforms under way
 Keiretsu business model being transformed
 Accounting “big bang” to improve transparency
 Listed companies may voluntarily adopt IFRS starting in
2010 and required adoption expected around 2015

Japan
 Triangular legal system
 Company Law
 Administered by Ministry of Justice
 Creditor and shareholder protection the fundamental principle
 Securities and Exchange Law
 Administered by Financial Services Agency
 For publicly owned companies
 Providing information for investment decision-making the main objective
 Corporate Income Tax Law
 Expenses must be booked to be claimed for tax purposes
 Accounting Standards Board of Japan
 Private-sector organization
 Responsible for developing accounting standards
 Modeled after FASB and IASB
 Convergence with IFRS a major goal
 Took over from the Business Accounting Council (a government agency) in 2001
 Japanese Institute of Certified Public Accountants
 Provides guidance on conduct of audit
 Business Accounting Council
 Responsible for auditing standards
 Certified Public Accountant and Auditing Oversight Board
 Government agency
 Monitors and oversees the auditing profession www.HelpWithAssignment.com

Japan (contin)
 Unusual features of Japanese financial
reporting
 Forecasts of cash flows, capital investments, and
production in statutory filings

China
 Overview
 Embracing IFRS as part of structural market reforms
 Ministry of Finance responsible for all aspects of
accounting and auditing

China (contin)
 Chinese Accounting Standards Committee
 Under the Ministry of Finance
 Responsible for developing accounting standards
 Chinese Institute of Certified Public Accountants
 Under the Ministry of Finance
 Responsible for developing auditing standards and code of professional ethics
 China Securities Regulatory Commission
 Under Ministry of Finance
 Regulates China’s two stock exchanges
 Accounting Standards for Business Enterprises (ASBE)
 Comprehensive framework for accounting and financial reporting
 Includes detailed implementation guidance on accounting issues
 Largely in line with IFRS
 First introduced in 1992 by Ministry of Finance and revised several times since
 Unusual features of Chinese financial reporting
 Startling changes since original ASBE in 1992

India
 Overview
 British influence on accounting and auditing
For example:
 True and fair view
 Independent accounting profession

India (contin)
 Companies Act
 Broad framework for accounting and auditing
 Institute of Chartered Accountants of India
 Supervised by Ministry of Company Affairs, a government agency
 Regulates profession of chartered accountancy
 Responsible for developing both accounting and auditing standards
 Accounting Standards Board
 Issues Indian Accounting Standards
 Auditing and Assurance Standards Board
 Issues Auditing and Assurance Standards
 Securities and Exchange Board of India
 Agency of the Ministry of Finance
 Oversees stock markets
 Unusual features of Indian financial reporting
 Some practices are “behind” developed world, but will roll out adoption of
IFRS starting in 2011

Other Chapter Exhibits

Other Chapter Exhibits (contin)

For more details on Accounting Assignment Help visit our
website at
http://www.helpwithassignment.com/accounting-assignment-help

International Accounting

Recommended

More Related Content

What's hot

What's hot (19)

Similar to International Accounting

Similar to International Accounting (20)

Recently uploaded

Recently uploaded (20)

International Accounting