The Accounting Systems of the United States and France

4355 Words Oct 2nd, 2008 18 Pages
Why do we study comparative accounting? Countries around the world have different aspects such as taxation, legal systems, culture and colonial influence that differ the way accounting is reported. Ultimately the need for fair presentation is the final objective to comparative accounting. Thousands of years ago when accounting was first practiced, each country practiced financial reporting according to the power and strengths in their country, regardless of how accounting was reported in neighboring countries. Nowadays, because the world is becoming more globalized and harmonized, standard-setters feel the need to report their accounting in a uniform way. The International Accounting Standards Board [IASB] was formed as a non-for-profit …show more content…
The accounting system in the US was strongly influenced by the SEC as opposed to a governmental influence. The SEC sells, exchanges and trades securities, protects investors while maintaining fair, orderly and efficient markets and ultimately facilitates capital formation (Pereira, 1992, p17). The US has the largest and one of the most important, stock exchanges in the world - the New York Stock Exchange located on Wall Street in New York City. This makes the US a huge market for investors world-wide. All investors would like to have access to certain facts about an investment before buying it and while holding it. In order to achieve this, the SEC requires all public firms and companies to disclose meaningful financial and other information to the public, to follow GAAP (SEC, 2007). Thus, any company that wishes to be a market in the SEC’s securities must register with the SEC. For those companies with foreign registrants, the SEC requires them to either report under US GAAP or to provide reconciliations to US GAAP (Nobes, p146, 2006). The SEC also requires public firms to follow GAAP in order to be audited. It is quite evident that most of American accounting is rule based, not government based. According to Nobes’ textbook, Comparative International Accounting, the commission since its inception has intended to limit the exercise of its accounting standard-setting authority to a supervisory role, permitting and encouraging the private sector, currently
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