Financial Reporting in Different Countries Wednesday, June 29, 20161

Learning Objectives  Explain the most important domestic and international influences on financial reporting in different countries.  Describe the local GAAP in different countries.  Explain the general characteristic of accounting in different countries.  Outline the principal differences between country accounting rules and IFRSs. Wednesday, June 29, 20162

 To group countries according to the common elements and distinctive characteristics of their financial accounting systems. Wednesday, June 29, Review of selected classification studies  Muller(1967) identified the following four approaches to accounting development in Western market-oriented economies. –Under the macroeconomic approach –Under the microeconomic approach –Under the independent discipline approach –Under the uniform approach

Wednesday, June 29, Review of selected classification studies

Wednesday, June 29, Review of selected classification studies  Nobes’ classification is consistent with certain environment factors discussed earlier in Chapter 1.

 Others Legal Systems: Common Laws vs. Code Law Accounting Practice Systems: Fair Presentation vs. Legal Compliance Accounting Gray’s accounting values and Hofstede’s cultural dimensions Anglo-Saxon accounting systems vs. The Continental accounting systems  “Anglo-Saxon model”  The level of financial disclosure Wednesday, June 29, Review of selected classification studies

 This chapter more closely examines accounting in a few selected countries. (France, Germany, Dutch, Japanese, U.K.,U.S.A).  What--- characteristics  Why--- environmental factors  How---regulations, convergence Wednesday, June 29, Review of selected classification studies

 What--The Characteristics of Accounting in the U.K.  U.K. influence  Business practice,Pragmatic,British origin Accounting in the U.K. developed as an independent discipline, pragmatically responding to the needs and practices of business.  Micro-uniform Wednesday, June 29, British Accounting

2016年6月29日星期三 2016年6月29日星期三 2016年6月29日星期三  What--The Characteristics of Accounting in the U.K. The legacy of British accounting Companies Acts Accounting profession and accounting standards setting British Accounting

2016年6月29日星期三 2016年6月29日星期三 2016年6月29日星期三  What--The Characteristics of Accounting in the U.K. The legacy of British accounting The United Kingdom was the first country in the world to develop an accountancy profession. The concept of a fair presentation ( the view of “True and Fair” ) U.K. influence: Professional accounting thinking and practice were exported to Australia,Canada,U.S.,and other former British possessions including Hongkong,India,Keneya,New Zealand, Nigeria,Singapore,and South Africa. British Accounting

2016年6月29日星期三 2016年6月29日星期三 2016年6月29日星期三  How-- Accounting Regulation and Enforcement The two major sources of financial accounting standards in the United Kingdom: Companies Acts The Accounting Profession British Accounting

2016年6月29日星期三 2016年6月29日星期三 2016年6月29日星期三  How-- Accounting Regulation and Enforcement Companies Acts  Activities of companies incorporated in the United Kingdom are broadly governed by statutes called companies acts. Companies acts have been updated, extended and consolidated through the years. 1948,1967,1976,1980,1981(the EU Fourth Directive); The Companies Act 1985 consolidated and extended earlier legislation Amended in 1989 to recognized the EU Seventh Directive, the EU Eighth Directive and The Companies Act 1989 created FRC 2006 British Accounting

Companies Acts  Over time, successive companies laws added structure and other requirements, but still allowed accountants considerable flexibility in the application of professional judgment.  Since the 1970s, the most important source of development in company law has been the EU Directives, most notably the Fourth and seventh Directives. Wednesday, June 29,  How-- Accounting Regulation and Enforcement British Accounting

 How-- Accounting Regulation and Enforcement The Accounting Profession  The legal stipulations are general and allow considerable flexibility in case-by-case applications. Accounting Profession British Accounting

2016年6月29日星期三 2016年6月29日星期三 2016年6月29日星期三  The Consultative Committee of Accountancy Bodies(CCAB), organized in 英国会计职业团体协商委员会 The Institute of Chartered Accountants in England and Wales 英格兰和威尔士特 许会计师协会 The Institute of Chartered Accountants in Ireland 爱尔兰特许会计师协会 The Institute of Chartered Accountants of Scotland 苏格兰特许会计师协会 The Association of Chartered Certificated Accountants 特许注册会计师协会 The Chartered Institute of Management Accountants 管理会计师特许协会 The Chartered Institute of Public Finance and Accountancy 财政与会计工作者 特许协会 British Accounting  How-- Accounting Regulation and Enforcement The Accounting Profession

 How-- Accounting Regulation and Enforcement The Accounting Profession British Accounting  The above six accountancy bodies in the United Kingdom are linked through the Consultative Committee of Accountancy Bodies (CCAB), organized in  Until 2000,auditing standards were the responsibility of a board of the CCAB. In that year the Accountancy Foundation was set up to regulate and oversee the auditing profession.  The Accountancy Foundation had direct responsibility for discipline, indirect responsibility for auditor independence but no responsibility for monitoring audit quality.

 How-- Accounting Regulation and Enforcement The Accounting Profession The UK system of setting, monitoring and enforcing accounting standards has changed several times in the last few decades. Before 1990 standard-settings was in the hands of the accountancy profession and had no legal backing. The position of standards was strengthened as a result of the Dearing Report (1988) and the Companies Act 1989 (then replaced by the Companies Act 2006). At the same time, accounting standards and the standard setting process have become more authoritative. British Accounting

2016年6月29日星期三 2016年6月29日星期三 2016年6月29日星期三  How-- Accounting Regulation and Enforcement Accounting profession and accounting standards setting  Accounting Standards Steering Committee(ASSC,1970) 会计准则 筹划委员会  Accounting Standard Committee(ASC,1976) 会计准则委员会  Financial Reporting Council ( FRC,1990) 财务报告委员会 The1989 Act created FRC. Financial Reporting Council has responsibility for both accounting and auditing standards, and their enforcement. British Accounting

2016年6月29日星期三 2016年6月29日星期三 2016年6月29日星期三  How-- Accounting Regulation and Enforcement Accounting profession and accounting standards setting  FRC have the duty of overseeing its offshoots: The Accounting Standards Board(ASB) 会计准则委员会 --replaced the ASC in the issues Financial Reporting Standards(FRSs),guided by a Statement of Principles for Financial Reporting,a conceptual framework for setting accounting standards. Financial Reporting Review Panel(FRRP) 财务报告检查小组 Urgent Issues Task Force(UITF) 紧急问题工作组 --respond quickly to new problems and issue British Accounting

 How-- Accounting Regulation and Enforcement Accounting profession and accounting standards setting  ASC was superseded in 1990 by ASB.  The ASB was not given a monitoring or enforcement role. Instead a FRRP was established to monitor the financial statements of public and large private companies.  Both the ASB and the FRRP were established as subsidiaries of a Financial Reporting Council (FRC) set up to be independent of both the profession and the government. Wednesday, June 29, British Accounting

2016年6月29日星期三 2016年6月29日星期三 2016年6月29日星期三  How-- Accounting Regulation and Enforcement Accounting profession and accounting standards setting  In 2002,The system was reformed and six operating bodies are responsible to the FRC:the ASB,the APB,the FRRP,the Professional Oversight Borad(POB) and an Accountancy Investigation and Discipline Board(AIDB). British Accounting

2016年6月29日星期三 2016年6月29日星期三 2016年6月29日星期三  How-- Accounting Regulation and Enforcement Accounting profession and accounting standards setting  POB:overseeing the regulation of auditors, monitoring the quality of the audits of economically significant entities, and overseeing the regulation of the accountancy profession.  APB:responsible for the issue of auditing standards, ethical standards, standards for investment reporting, and statements of standards for reporting accountants.  AIDB:responsible for administering an independent disciplinary scheme covering members of the six UK professional accountancy bodies. British Accounting

2016年6月29日星期三 2016年6月29日星期三 2016年6月29日星期三  How-- Accounting Regulation and Enforcement Accounting profession and accounting standards setting The Companies Act 2006 introduced a requirement that audit reports be signed for and on behalf of the audit firm by the senior statutory auditor(the partner in charge of the audit). It also allowed for the first time companies I and their auditors to enter into liability limitation agreements that limit the auditors’liability to what is fair and reasonable. Rotation of auditors is not required by the Act. British Accounting

 How-- Accounting Regulation and Enforcement Accounting profession and accounting standards setting  All of these reforms were designed to strengthen the accounting and audit profession, and provide a more effective system of regulation of the profession. Thus, the Financial Reporting Council has responsibility for both accounting and auditing standards, and their enforcement. Wednesday, June 29, British Accounting

 How-- Accounting Regulation and Enforcement Accounting profession and accounting standards setting  British standard setting evolved from Recommendations on accounting principles(issued by the Institute of Chartered Accountants in England and Wales) to the 1970 formation of the Accounting Standards Steering Committee, later renamed the Accounting Standards Committee (ASC). The ASC promulgated Statements on Standard Accounting Practice (SSAPs). SSAPs were issued and enforced by the six accounting bodies, any one of which could effectively veto the standard. SSAPs were more 1n the nature of recommendations than compulsory requirements, and had little authority. British Accounting

2016年6月29日星期三 2016年6月29日星期三 2016年6月29日星期三  How-- Accounting Regulation and Enforcement Accounting profession and accounting standards setting  Statements on Standard Accounting Practice( SSAPs) 标准会计 惯例 25 SSAPs remains in force. The ASC promulgated Statements on SSAPs issued and enforced by the six accounting bodies （ any one can effectively veto the standards; more recommendations than compulsory requirements, and little legal authority ）  Financial Reporting Standards （ FRSs) 财务报告标准 Issued by ASB Changed, the ASB’s aim of setting the agenda on convergence to IASs/IFRSs From 2005 British Accounting

 How-- Accounting Regulation and Enforcement Convergence of U.K. GAAP and IFRSs P Wednesday, June 29, British Accounting

Appendix: Fourth, Seventh, and Eighth Directives The EU’s Fourth Directive, issued in 1978, is the broadest and most comprehensive set of accounting rules within the EU framework. Both public and private companies above certain minimum size criteria must comply. Fourth Directive requirements apply to individual company accounts and Include format rules for financial statements, disclosure Requirements, and valuation rules. The true end fair view is the overriding requirement and holds for footnote disclosures just as it does for financial statements. The Fourth Directive also requires that financial statements be audited. It aims to ensure that European companies disclose comparable and equivalent information in their financial statements. Wednesday, June 29,

The Seventh Directive, issued in 1983, addresses the issue of consolidated financial statements. At the time, consolidated financial statements were the exception rather than the rule. The Seventh Directive requires consolidation for groups of companies above a certain size, specifies disclosures in notes and the directors’ report, and requires an audit. Wednesday, June 29, Appendix: Fourth, Seventh, and Eighth Directives

The Eighth Directive, issued in 1984, addresses various aspects of the qualifications of professionals authorized to carry out legally required (statutory) audits. Essentially, this directive lays down minimum qualifications for auditors. It covers requirements for the education and training of auditors and independence. Wednesday, June 29, Appendix: Fourth, Seventh, and Eighth Directives

The Eighth Directive was substantially amended in 2006 and now is referred to as Statutory Audit Directive. The new directive is a response to accounting scandals involving European companies, as well to as American accounting scandals involving WorldCom Global Crossing, and Enron, and others. It includes requirements for the appointment and removal of auditors, audit standards, continuing Professional education, auditor rotation, and public oversight. It requires that all statutory audits in the EU observe International Standards on Auditing. Among its more important provisions is one requiring each member state to establish a public oversight body for the audit profession and the establishment of the European Group of Auditors’ Oversight Bodies to coordinate their activities. Wednesday, June 29, Appendix: Fourth, Seventh, and Eighth Directives