Chapter 2 Worldwide Accounting Diversity

18181 Words Sep 2nd, 2013 73 Pages
Chapter Two Worldwide Accounting Diversity
Learning Objectives
After reading this chapter, you should be able to • Provide evidence of the diversity that exists in accounting internationally. • Explain the problems caused by accounting diversity. • Describe the major environmental factors that influence national accounting systems and lead to accounting diversity. • Describe a judgmental classification of countries by financial reporting system. • Discuss the influence that culture is thought to have on financial reporting. • Describe a simplified model of the reasons for international differences in financial reporting. • Categorize accounting differences internationally and provide examples of each type of difference.

INTRODUCTION
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competitor Verizon Communications Inc. A quick examination of these statements shows several differences in format and terminology between the United Kingdom and the United States. Perhaps the most obvious difference is the order in which assets are presented. Whereas Verizon presents assets in order of liquidity, beginning with cash and cash equivalents, Vodafone presents assets in reverse order of liquidity, starting with goodwill. On the other side of the balance sheet, Vodafone presents its equity accounts before liabilities. In the equity section, “Called-up share capital” is the equivalent of the common stock account on a U.S. balance sheet and “Share premium account” is the contributed capital in excess of par value. Vodafone uses a “Capital redemption reserve” to indicate an appropriation of retained earnings. Reserves are unknown in the United States. Vodafone includes “Provisions,” which represent estimated liabilities related to restructurings, legal disputes, and asset retirements, in both current and noncurrent liabilities. This line item does not appear in the U.S. balance sheet. Common for U.S. companies, Verizon includes only consolidated financial statements in its annual report. In addition to consolidated financial statements, Vodafone also includes the parent company’s separate balance sheet in its annual report. This is shown in Exhibit 2.3. In the parent company balance sheet,
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