1. Issues in International Accounting Researchby
Rashad Abdel-khalik
University of Illinois at Urbana-Champaign
5/28/2019
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2. Congress delegated this task to the SEC
In the USA, Congress has the ultimate responsibility for setting accounting standards (GAAP)
Congress delegated this task to the SEC
SEC entrusted the Profession to do it, with oversight
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3. Currently, there is a Foundation. Privately funded
Selects seven members to be the
Financial Accounting Standards Board (FASB) to make accounting standards
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4. Internationally There is a parallel organization based in London
International Accounting Standards Board (IASB)
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5. IASB Composition Australia / NZ* 1 Auditor 5 Canada* Preparer 3
France*
Analyst/User 2
Germany*
Academic
Japan*
Other
South Africa 14
Sweden
* National standard-setter liaison
United Kingdom*
United States* 4
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6. International Financial Reporting (IFRS)
EU countries were (in 2001) required to adopt IFRS Adoption as of 2005
(+ Australia/New Zealand/ South Africa….)
Consequences
EU 2005 (+ Australia, New Zealand, etc.) will bring significant body of countries onto IFRS.
May result in need for IFRS reporting for subsidiaries of foreign company, or when Canadian parent has foreign subsidiary required to report under IFRS, etc.
May result in voluntary IFRS information for comparison with foreign competitors – foreign investors.
Convergence – increasingly influenced by IFRS activity as well as US. Alignment of agendas, joint projects, etc.
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7. IASB & FASB Agreed on an eventual convergence of standards.
Works in close co-operation with other national standard setters.
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8. Process (both FASB and IASB, separately)
Research
Discussion Paper
Exposure Draft
Standard
Implementation
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9. Other countries had equally or even more advanced standards, notably the UK, Canada, Denmark, Belgium, etc.
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10. Yet, they all yield different outcomes
Other countries had equally or even more advanced standards, notably the UK, Canada, Denmark, Belgium, etc.
Yet, they all yield different outcomes
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11. Vodafone AccountingSystem
Using US GAAP
Assets $348,597m
Net Loss ($26,031m)
Using UK GAAP
$252,922m
($14,242m)
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12. Vodafone % of DifferenceVodafone Total assets  37.8% (of the UK #)
Net Loss  82.7% (of the UK #)
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13. United Utilities, PLC. Using the UK GAAP Using the IFRSs
Profit bef tax £ 408m
Net Assets £3,119m
EPS pence
Using the IFRSs
£ 395m
£2,144m
36.5 pence
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14. United Utilities, PLC. Using the UK GAAP Using the IFRSs
Profit bef tax £ 408m
Net Assets £3,119m
EPS pence
Using the IFRSs
£ 395m
Decreased by £ 13m
£2,144m
Decreased by£975m (or 31%)
36.5 pence
Decreased by 22%
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15. balance sheet is an estimate
First Massage:
Every number on the
balance sheet is an estimate
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16. Shifting Gears to Research
A major current research toping is the impact of these different numbers on investors
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18. Firms Culture, Institutions Investors etc 5/28/2019
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19. Let us now look at a different setting.
Let us now look at a different setting
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20. The alternative setting
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21. Why is this interesting?
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22. This contrast highlights the most difficult issue I see in international accounting research:
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23. This contrast highlights the most difficult issue I see in international accounting research:
Ignoring the institutional, legal, cultural, and … of the environment in which the research is done.
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24. Writing about Korea or France and
Namely,
Writing about Korea or France and
using the American or British literature
to tell us what they expect to happen or find in Korea or France and why.
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25. Second Message Must to go beyond replication.
Develop hypotheses and research expectations in light of the institutional and market arrangements of the country of study.
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26. the end.
thanks.
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