An analysis of the growing importance of international accounting
First, there is little direct use of IASC standards in developed capital markets. The G20 and other major international organisations, as well as very many governments, business associations, investors and members of the worldwide accountancy profession support the goal of a single set of high quality, global accounting standards.
In some countries, for example, accounting standards have been shaped primarily by the needs of private creditors, while in other countries the needs of tax authorities or central planners have been the predominant influence.
Otherwise, the comparability and transparency that are the objectives of common standards will be eroded.
An analysis of the differences, however, could serve as a useful tool for highlighting what differing information might be provided in financial statements prepared using IASC standards compared with U. For your convenience, a listing of questions is included as Appendix A.
Is there a better approach?
Scope of international accounting standards
If convergence of disclosure and accounting standards contributes to an increase in the number of foreign companies that publicly offer or list securities in the U. The G20 and other major international organisations, as well as very many governments, business associations, investors and members of the worldwide accountancy profession support the goal of a single set of high quality, global accounting standards. There are concerns that current IASC standards may not be rigorously and consistently applied. For example, we have amended our requirements for financial statements of foreign private issuers to permit use of certain IASC standards without reconciliation to U. SUMMARY: With the activities and interests of investors, lenders and companies becoming increasingly global, the Commission is increasing its involvement in a number of forums to develop a globally accepted, high quality financial reporting framework. The total number of foreign reporting companies increased from in to approximately 1, currently. Who should be responsible for development of those elements? Elements of this infrastructure include: effective, independent and high quality accounting and auditing standard setters; high quality auditing standards; audit firms with effective quality controls worldwide; profession-wide quality assurance; and active regulatory oversight. Profession-Wide Quality Assurance The accounting profession should have a system to ensure quality in the performance of auditing engagements by its members. First, large multinational corporations have begun to apply their home country standards, which may permit more than one approach to an accounting issue, in a manner consistent with other bodies of standards such as IASC standards or U. Audit Firms with Effective Quality Controls Accounting and auditing standards, while necessary, cannot by themselves ensure high quality financial reporting. To that end, the standards must i result in a consistent application that will allow investors to make a meaningful comparison of performance across time periods and among companies; ii provide for transparency, so that the nature and the accounting treatment of the underlying transactions are apparent to the user; and iii provide full disclosure, which includes information that supplements the basic financial statements, puts the presented information in context and facilitates an understanding of the accounting practices applied.
GAAP requires, current disparities in accounting practices may be a reason foreign companies do not list their securities on U. If these responsibilities are not met, accounting standards, regardless of their quality, may not be properly applied, resulting in a lack of transparent, comparable, consistent financial information.
based on 54 review