contemporary issues in accounting

29
CONTEMPORARY ISSUES IN ACCOUNTING THE DEVELOPMENT AND EVOLUTION OF NATIONAL ACCOUNTING REGIEMES

Upload: michelle-mcmillan

Post on 25-Nov-2014

560 views

Category:

Documents


40 download

TRANSCRIPT

Page 1: Contemporary Issues in Accounting

CONTEMPORARY ISSUES IN ACCOUNTING

THE DEVELOPMENT AND EVOLUTION OF NATIONAL ACCOUNTING REGIEMES

Page 2: Contemporary Issues in Accounting

Overview We will consider the reasons why accounting

regimes vary from country to country throughout the world and the factors that impact upon their ongoing development and evolution.

The impact on the development of national accounting systems of the increasingly important role played by the IASB in defining global accounting norms

Page 3: Contemporary Issues in Accounting

Journal Articles (1) Gray S.J - Towards a theory of Cultural

Influences on Development of Accounting Systems Internationally

Flower J. - The future shape of harmonization: the EU versus the SEC verses the SEC

Howieson B - Accounting practice in the millennium: is accounting education ready to meet the challenge?

Page 4: Contemporary Issues in Accounting

Journal Articles (2) Whittington G - The Adoption of International

Accounting Standards in the European Union Brown P. & Tarca A - A Commentary on

Issues Relating to Enforcement of International Financial Reporting Standards in the EU

Page 5: Contemporary Issues in Accounting

Classification Identification of similarities and

differences Quantification of similarities and

differences Grouping together of countries with

more similarities than differences Ordering accounting systems

Page 6: Contemporary Issues in Accounting

Why are Accounting Systems Different?

The Political and Economic System The Legal System The Taxation System The Corporate Financing System The Accountancy Profession Other Influences

Accidents of History Export/Import of Accounting

Page 7: Contemporary Issues in Accounting

The Influences on an Accounting SystemGray’s Model 1988

ExternalInfluences

Domestic/EcologicalInfluences

PoliticalLegal

TaxationCorporate Financing

Accountancy Profession

SocietalCulture

AccountingSubculture

AccountingRegulations

AccountingSystem

Page 8: Contemporary Issues in Accounting

Cultural Influences on Accounting

Cultural Dimensions Identified by Hofstede (1984) Individualism v. Collectivism Large power distance v. Small power distance Strong uncertainty avoidance v. Weak uncertainty avoidance Low nurture v. High nurture

Culture and leadership style Culture and motivation Culture and organisational structures

Page 9: Contemporary Issues in Accounting

Organisational Types as Identified by Hofstede (1984)

A B C D

Power Distance Low High Low High

Uncertainty avoidance Weak Weak Strong Strong

Organisation Type Implicitly structured

Personnel bureaucracy

Workflow bureaucracy

Full bureaucracy

Implicit model of organisation

Market Family Well oiled machine

Pyramid

Countries Anglo/US

Nordic

Holland

South East Asia

Germany

Finland

Israel

Latin Med.

Islamic

Japan

Page 10: Contemporary Issues in Accounting

Accounting Subculture (1) Accounting is set up and run by and for

various groups of people Accountants Managers Auditors Owners Accounting Regulators

Page 11: Contemporary Issues in Accounting

Accounting Subculture (2) Each of these groups may be thought of as

as a distinct subcultural group with Shared values Common education Links to other countries

The unique factors influencing accountants will not normally be strong enough to completely override or obliterate society wide cultural differences.

Page 12: Contemporary Issues in Accounting

Accounting Values Identifiedby Gray (1988)

Professionalism v. Control Uniformity v. Flexibility Conservatism v. Optimism Secrecy v. Transparency

Page 13: Contemporary Issues in Accounting

Is Culture an Important Influence on Accounting?

Culture – in the sense of how people think and feel and their values - affects behaviour

Accounting Regulations are an outcome of human behaviour

Therefore culture affects accounting But not easy to prove this relationship Empirical studies have not found a perfect

match between culture and accounting Some empirical support for a relationship

Page 14: Contemporary Issues in Accounting

Differences between Accounting Systems

Differences in the rules of different countries

Differences in the way in which the rules are interpreted or implemented

Differences in preferred practices – including voluntary disclosure practices

Page 15: Contemporary Issues in Accounting

Differences in Information Disclosure Number of disclosures Environmental and Social disclosures Other types of disclosure

Page 16: Contemporary Issues in Accounting

Internationalization Bigger Companies Less Companies Companies

Large Investment Requirement Need Large Markets

Investors Large Portfolio Want to Maximize Returns

Page 17: Contemporary Issues in Accounting

Harmonisation Harmonisation is a process by which

accounting moves away from total diversity of practice.

Practice clusters around one of the available methods accounting.

Standardization is a process by which participants agree to follow the same or very similar accounting practices state of uniformity.

Page 18: Contemporary Issues in Accounting

What Drives the Process? Institutions Market (Users) Preparers Profession Culture

Page 19: Contemporary Issues in Accounting

IASC Foundation – 1973 To formulate and publish in the public interest

accounting standards to be observed in the presentation of financial statements and to promote their world wide acceptance and observance; and

To work generally for the improvement and harmonisation of regulations, accounting standards and procedures relating to the presentation of financial statements.

Page 20: Contemporary Issues in Accounting

The Development of IAS 1973-1979

Issue of general standards 1980-1989

Development of more detailed standards 1990-1995

Reduction of flexibility 1995-1999

IOSCO core standards project From 2000

Convergence and global implementation

Page 21: Contemporary Issues in Accounting

IASC Foundation – 2000 To develop in the public interest, a single set of high

quality, understandable and enforceable global standards that require high quality, transparent and comparable information in financial statements and other financial reporting to help participants in the world’s capital markets and other users to make economic decisions;

To promote the use and rigorous application of those standards; and

To bring about the convergence of national accounting standards and International Accounting Standards to high-quality solutions

Page 22: Contemporary Issues in Accounting

The Vision of International GAAP The vision is based on an approach to

company financial reporting that has been developed over the past several years by a group of Anglo Saxon accounting standard setters

It is based on a balance sheet oriented, fair value model

This approach is not necessarily particularly widely known or understood

Page 23: Contemporary Issues in Accounting

The Development of International GAAP “Generally Accepted” will refer to accounting

practices that are regarded as permissible by the accounting profession and regulators internationally

A broad consensus will come to exist between users, preparers, auditors, regulators and the markets, across what is currently regarded as national boundaries

Will mirror the way UK GAAP developed

Page 24: Contemporary Issues in Accounting

FlowerThe future shape of harmonization

The paper analyses the implications of the EUs proposal to permit large multinational corporations (global players) to present their consolidated accounts in accordance with the IASs of the IASC.

Page 25: Contemporary Issues in Accounting

FlowerThe future shape of harmonization

A major problem is identified as being that the IASC is dominated by the Anglo–American approach to financial reporting which is fundamentally different from the Continental European approach followed in the EUs directives.

Page 26: Contemporary Issues in Accounting

Brown & Tarca – A Commentary on Issues Relating to Enforcement of International Financial Reporting Standards in the EU

Goals not likely to be achieved without regulatory oversight that promotes rigorous and consistent use of IFRS.

Review ongoing activities in France, Germany, the Netherlands and the UK in setting up and modifying enforcement bodies before 2005.

Page 27: Contemporary Issues in Accounting

Brown & Tarca – A Commentary on Issues Relating to Enforcement of International Financial Reporting Standards in the EU

Principles for effective enforcement proposed in CESR Standard No. 1 on Financial Information.

Presents the views of the IASB, FEE and EFRAG about the challenges of achieving effective uniform enforcement.

Page 28: Contemporary Issues in Accounting

Whittington – The Adoption of International Accounting Standards in the European Union

The IASB’s process of developing accounting standards for adoption by listed companies within the European Union.

The structure of the IASB, its role as a global standard setter and its programme.

Particular attention is given to two topics: accounting for financial instruments; and reporting financial performance.

Page 29: Contemporary Issues in Accounting

Howieson - Accounting practice in the millennium: is accounting education ready to meet the challenge?”

Trends suggest that so-called ‘compliance’ work will form a diminished portion of accounting firms’ revenues as technology means that even small businesses become more empowered with respect to their recordkeeping needs.

Accounting educators need to anticipate the expected shift in accountants’ skills and develop courses and teaching methods that are far more interdisciplinary and analytical in their orientation