Financial Statements Of The Firm 's Foreign Subsidiaries

Pologeorgis (2012) stated that the diversity of accounting principle has an essential impact on the stock markets, corporate management, and financial reporting. He pointed that when people seeking for international capitals, varies of dissimilar accounting principles create discrepancies in their financial reporting. If people cannot understand the differences between IFRS and GAAP, they may have the chance to make the wrong decisions and loss money in the capital markets. Pologeorgis (2012) also mentioned that international investors have to relearn the new principal in order to be more familiar with the international standards. Based on above, there is a keen motivation for people to understand the differences and similarities of GAAP and IFRS. This research will show business people the main similarities and differences of GAAP and IFRS.

The United States is currently going through a big decision. It is deciding on whether to fully adopt International Financial Reporting Standards (IFRS), or to stay with the current U.S Generally Accepted Accounting Principles (GAAP). Since this is such a major decision, now would be an opportune time to take a look at what the pros and cons would be of switching to this new way of financial reporting, and in doing so, show why I believe the costs (both financial and otherwise) are too high to adopt a new set of reporting standards.

Globalization has been changing the world. It has interconnected people, nations, and even businesses. Today´s business can share information to investors around the world thanks to the intelligent software of the actual society. Being more specific, the way in which investors and users evaluate businesses performance is through the information contemplated in their financial statements. These financial statements illustrate the current assets, liabilities, and stockholder equity a company has in order to help users take economic decisions. However, not all the companies are regulated to provide the same structuralized information around the world. Each country possesses its own accounting standard that regulates the preparation of financial statements of a company. In that way, companies’ information might differ between countries making the comparability between financial statements difficult to be implemented by users in order to assess the performance of foreign businesses. In view of the need of a globally accepted accounting standard that promotes uniform standards for worldwide financial reporting, the International Accounting Standards Committee (IASC), which then becomes replaced by the International Accounting Standard Board in 2001, was created (Cathey and Schroeder 130). The IASB issues International Financial Reporting Standards (IFRS) that stands as the set of accounting standards that prepare and present the financial

The globalization of business activity has resulted in the need for a uniform set of accounting rules in all countries. With U.S. corporations doing so much business in other countries, it is imperative that the SEC and international regulatory boards devise a set of rules and regulations that would benefit both parties. If this did not happen, international companies would be able to do whatever they wanted without repercussion because of the discrepancies in the differing sets of rules. Accomplishing this universal set of rules would allow companies to list securities in any market without having to prepare more than one set of financial statements. There have been so many

SFAC No. 8 addresses the cost constraint on useful financial reporting, “Cost is a pervasive constraint that standard setters, as well as providers and users of financial information, should keep in mind when considering the benefits of a financial reporting requirement.” (SFAC No. 8 BC 3.47) However, the ability to place a dollar value and fully enumerate a cost or benefit is almost an impossible task for standard-setters. Additionally, there is no way to successfully identify and measure all of the economic consequences associated with a new standard. The FASB should be applauded though for advancing uniformity in accounting standards, however; uniform financial reporting suggests a one size fits all approach. “Smaller, non-publicly listed firms (and their auditors) argue that accounting standards are formulated mainly for larger, publicly traded firms” and that “compliance costs are disproportionately higher and the

In 1973, the Financial Accounting Standards Board (FASB) was created and their mission is “to establish and improve standards of financial accounting and reporting for the guidance and education of the public, including issuers, auditors, and users of financial information.” (FASB.org, 2009a). The FASB is a private, not-for-profit organization whose primary purpose is to develop generally accepted accounting principles (GAAP) within the United States. The Securities and Exchange Commission (SEC) designated the FASB as the organization responsible for setting accounting standards for public companies in the U.S. Therefore, the FASB plays a vital and important role in protecting the financial well being and the overall stability of our

This research project will inform the reader of the difference between the United States accounting standards and International accounting standards. The United States uses the Financial Accounting Standards Board (FASB) to issue financial reporting procedures. The International Financial Reporting Standards (IFRS) are issued by the International Accounting Standards Board (IASB). There are proposals for the United States to adopt the International standards. Financial reporting procedures are debated about the United States using the Generally Accepted Accounting Procedures (GAAP) or following the global procedures. This

Accounting standards are important. For example, if accounting is considered as the language of business, accounting standards are its grammar. Properly developed and implemented, they can encourage business expansion and help regulate the economic system. High-quality accounting standards can facilitate the flow of information from businesses to a range of different users. These include investors, banks, creditors, the revenue commissioners, regulators, employees and the general public. The availability of accounts prepared in accordance with recognized accounting standards encourages trade by promoting confidence in businesses.

The American Institute of Certified Public Accountants currently has over 386, 00 members since founded in 1887, under the name American Association of Public Accountants. The AICPA is integral to rule making and standard setting in the CPA profession, as well as serves as an advocate before legislative bodies and public interests groups("American Institute of Certified Public Accountants", 2010). In 1934 the New York stock exchange and the AICPA jointly published the Audits of Corporate Accounts of 1934, but a few short years later in 1938, the SEC voted to forgo this prerogative and allow the private sector to regulate its accounting practice—a policy that the commission has maintained to date. The AICPA's Committee on Accounting Procedure (CAP) assumed the financial accounting standard-setting role in 1939. The AICPA shifted this responsibility to its Accounting Principles Board (APB), equipped with its own research staff, in 1959.

One of the primary goals of the AICPA is to set and maintain professional accounting standards. These include setting the industry standards for ethics, auditing, tax practices, quality control and financial planning. However, the AICPA has stepped away from setting certain financial industry standards. For example, the AICPA originally set the generally accepted accounting principles (GAAP), but they relinquished control to the Financial Accounting Standards Board (FASB). In addition to this, the recently formed Public Company Accounting Oversight Board (PCAOB) now oversees financial audits of public companies, while the AICPA oversees private companies.

Indeed accountants are ethically obligated to report financial information accurately. In effect, Emerson, Conroy and Stanley (2007) stated that corporate scandals that made news, including Enron and WorldCom, triggered the public attention on the accounting practices that caused the fall of these companies. Consequently, the debate focused on blaming accounting practices or the standards. In order to resolve the issues of the standards, the US Congress has passed the Sarbanes-Oxley Act of 2002. In fact, the American Institute of Certified Public Accountants (AICPA) revealed that this Act represented the most crucial legislation that affects the accounting profession since 1933. Moreover, one of the provisions of Sarbanes-Oxley constitutes

Chris Gilmore has been given the task to convert the financial reportings of Ruckmac Inc from the generally accepted accounting principles of the United States (GAAP) into the internationally accounting standards (IFRS). They share the many similarities, including the same framework and goal, however they both require different techniques and have different regulations and allowances to attain this goal. In general, GAAP utilizes a rule based approach, its straight forward in exactly what is allowed and what is taboo. This fits mirrors a low context culture, such as the United States, where communication is concrete. On the other hand, IFRS leaves more room for interpretation and is a little more open ended. This is befitting of high context cultures such as China, where communication is more abstract, like IFRS.

In contrast the US structure is a fragment more complex than that of the UK. To understand accounting standard setting in the US, one must start with the SEC (Securities and Exchange Commission) which is a regulatory agency established in 1934 by the congress. Previous to this no national system existed to govern the data flow of communication to investors. SEC has been given the statutory power to promulgate accounting principles. Even though it consists of its own policy, it does rely on the private sector in the US to establish financial reporting standards. Its role of standard setting on financial reporting and accountancy principle guidelines is backed with its powerful influence. Another standard setting board is the FSAB with its role to expand accounting standards outside the profession by encouraging. As a result the main source for accounting standards in the US internally is GAAP (Generally Accepted Accounting Principles) which is mounded by authority's pronouncement by the FASB (Financial Accounting Standards Board). The role of the FSAB is to set up financial accounting and reporting standards in the US. The FSAB structure is very significant around the world today as the "IASC's framework and UK statement of principles are clearly

Both the U.S. GAAP and IFRS both have similar requirements when it comes to the basis of accounting. This means that they both place a heavy emphasis on fair values, essentially implying that Chris does not need to address the basis of his company’s policies. In addition, both standards require companies to inform the public regarding any uncertainties in the accounting records. However, Chris was already given sufficient information for the conversion in the Basis of Accounting section, as the accounting policies were applied by each consolidated company consistently to all relevant periods. Therefore, Chris is able to transition the company’s basis of accounting with no other

Unlike here in the United States., financial statements of foreign companies are not always readily accessible. Most importantly, it is often not in English. However, an analyst or any interested party can always obtain a convenience translation of financial statements either through pay-database-services or by requesting it directly from the companies. Of course, different currency is also a concern. Yet, it can easily overcome by converting and translating previous years’ balances as well as current year’s balances (and line items) at current year currency exchange rate; this helps eliminating distortion and translation adjustments. Nevertheless, some other serious concerns such as terminologies discrepancies, general accepted accounting principles (GAAP) differences, and financial ratio analysis may still arise when analyzing “translated” foreign financial statements (Doupnik & Perera, 2012) .