1. Chapter 3 Comparative International Financial Accounting I
Dosen Pengampu :
Dra. Siti Nurlaela, SE,Msi.,Ak. CA

2. Strategic Decision Point
IASB was created to increase comparability
How will differing cultures interpret standards?
Will standards be applied consistently?
What can the IASB do to mitigate this issue?
International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black

3. Founding Members of the IASC and IASB
Exhibit 3.1 Economic Data for Developed Countries
GDP PPP
(in billions)
GDP Per Capita
Population (in millions)
Unemployment
Inflation
Area per sq km
(in thousands)
Imports (in billions)
Exports (in billions)
U.S
$10,990.0
$37,800
293.0
6.0%
2.3%
9,631.4
$,1260.0
$714.5
U.K.
$1,666.0
$27,700
60.3
5.0%
1.4%
244.8
$363.6
$304.5
Australia
$571.4
$29,000
19.9
2.8%
7,686.9
$82.9
$68.7
Netherlands
$461.4
$28,600
16.3
5.3%
2.1%
41.5
$217.7
$253.2
Sweden
$238.3
$26,800
9.0
4.9%
1.9%
450.0
$83.3
$102.8
Germany
$2,271.0
$27,600
82.4
10.5%
1.1%
357.0
$585.0
$696.9
Switzerland
$239.3
$32,700
7.4
3.7%
0.6%
41.3
$102.2
$110.0
France
$1,661.0
60.4
9.7%
547.0
$339.9
$346.5
Italy
$1,550.0
$26,700
58.1
8.6%
2.7%
301.2
$271.1
$278.1
Spain
$885.5
$22,000
40.3
11.3%
3.0%
504.8
$197.1
$159.4
Japan
$3,582.0
$28,200
127.3
-0.3%
337.8
$346.6
$447.1
Source: Compiled from The World Bank and The World Factbook December 2004.
International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black

4. Anglo-American Accounting
Less conservative and more transparent
United States
Focused on large corporations and interests of investors
Securities markets are the dominant influence on accounting regulation
SEC has authority to formulate and enforce accounting standards
Delegated to the FASB
Only listed corporations are required by law to comply with GAAP
Very public standards-setting process
International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black

5. Anglo-American Accounting
United Kingdom
Focus on investors
Company law has a much wider remit
Accounting requirements are for all LLCs and corporations
Accounts present a “true and fair view” of company results
Accounting Standards Board (ASB) will incorporate International Financial Reporting Standards (IFRS) by 2005
International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black

6. Anglo-American Accounting
Australia
English influence
Focus on investors rather than tax needs
Australian Securities & Investments Commission
Regulate and enforce company law
Australian Accounting Standards Board – creates standards
Urgent Issues Group (UIG)
Financial Reporting Council oversees AASB
Provides guidance for public and private sector
International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black

7. The Netherlands Business economics approach to accounting Tradition of
Public ownership of shares
International business outlook
“Generally Acceptable Accounting Principles”
Provided by Council for Annual Reporting
Members from the accounting profession (NIVRA) and others
Not mandated by law, but followed by most companies
Company law is supplemented by case law
IFRS required for listed companies in 2005
International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black

8. Nordic Accounting
Nordic Countries: Denmark, Finland, Iceland, Norway, and Sweden
Sweden
Focus on creditors, government, and tax authorities
Two-tier approach
Individual accounts – traditional basis
Consolidated accounts of major groups – international capital market needs
The law provides a framework rather than detailed requirements
Accounting Standards Board and Accounting Council provide guidance in the context of company law
IFRS required for listed companies in 2005
International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black

9. Germanic Accounting Germany
Focus on needs of creditors and tax authorities
MNEs are becoming more investor-oriented
Company law is predominant influence
Accounting rules amend the Commercial Code
Annual accounts are the basis for tax accounts
Tax rules dominate legal accounting issues
Limited impact of accounting profession
German Accounting Standards Board
IFRS required for listed companies in 2005
International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black

10. Germanic Accounting Switzerland
Favors needs of creditors and authorities
More companies are making further voluntary disclosures
Very secretive and conservative system
Dominated by company law and tax regulations
New law – 1992
Improved disclosure and protection for investors
Secret reserves are still allowed
Accounting profession consists of
Foundation for Accounting and Reporting Recommendations – supervises the Accounting Standards Board
Recommendations elaborate and supplement company law
International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black

11. Latin Accounting France
Focus on needs of creditors and tax authorities
Consolidated groups can report in U.S. GAAP or IAS
Company law and tax law are the predominant influences
Focus on national economic planning
Tax laws tend to override accounting rules
Small accounting profession established by law
OECCA and CNCC for public accounting and auditing
Small stock market
Most capital contributed by banks, government, or family
French equivalent of the SEC – Commission des Opérations de Bourse (COB)
IFRS required for listed companies in 2005
International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black

12. Latin Accounting Italy
Focus on interests of government and tax authorities
Focus is shifting because of globalization
Accounts are used as the basis for taxation
Tradition of conservatism to minimize taxes
Italian equivalent of the SEC – CONSOB
Slow to adopt EU directives because
External investor interests are seen as less important than family and state interests
Tendency to protect the right of companies to keep business secrets
Professional accounting bodies are advisory
IFRS required for listed companies in 2005
International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black

13. Asian Accounting
Many countries have a colonial accounting history or foreign influence
Japan
Focus on needs of creditors and tax authorities
Commercial Code (similar to Germany)
Corporate tax law is very influential
Leads to conservative accounting
Government institutions are directly involved in standard-setting
Ministry of Finance – responsible for securities and exchange law
Ministry of Justice – responsible for application of Commercial Code
International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black

14. Asian Accounting Japan continued
Accounting for business combinations is a source of concern
Keiretsu – system of interlocking directorates of related businesses formed to work together
Small accounting profession
Makes recommendations on the practical application of legal accounting rules
Tendency for secrecy and a lack of disclosure
Increased international focus
ASBJ in Japan is similar to the FASB in the U.S.
Approximately 30 Japanese companies listed in the U.S. prepare financial statements in accordance with U.S. GAAP.
International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black