1. Comparative International Financial Accounting II
Chapter 4
Comparative International Financial Accounting II

2. Comparative Information
Exhibit 4.1 Economic Data for Developing 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)
India
$3,033.0
$2,900
1,065.1
9.5%
3.8%
3,287.6
$74.2
$57.2
Malaysia
$207.8
$9,000
23.5
3.6%
1.1%
329.8
$74.4
$98.4
Brazil
$1,375.0
$7,600
184.1
12.3%
14.7%
8,512.0
$48.3
$73.4
Argentina
$435.5
$11,200
39.1
17.3%
13.4%
2,767.0
$13.3
$29.6
Mexico
$941.2
105.0
3.3%
4.5%
1,972.6
$168.9
$164.8
China
$6,449.0
$5,000
1,298.8
10.1%
1.2%
9,597.0
$397.4
$436.1
Indonesia
$758.8
$3,200
238.5
8.7%
6.6%
1,919.4
$40.22
$63.89
Thailand
$477.5
$7,400
64.9
2.2%
1.8%
514.0
$65.3
$76.0
Poland
$427.1
$11,100
38.6
20%
0.7%
312.7
$63.7
$57.6
Russia
$1,282.0
$8,900
143.8
8.5%
13.7%
$74.8
$134.4
Czech Republic
$161.1
$15,700
10.2
9.9%
0.1%
78.9
$50.4
46.8%
Source: Compiled from The World Bank and The World Factbook December 2004.
International Accounting & Multinational Enterprises - Chapter 4 - Radebaugh, Gray, Black

3. Comparative Information
Exhibit 4.2 Number of Companies in Developing Countries listed on Foreign Exchanges
NYSE
NASDAQ
London Stock Exchange
India 8 3 17
Malaysia
Brazil 37 1
Argentina 10
Mexico 22
China 5
Indonesia 2
Thailand
Poland
Russia 6 4
Czech Republic
Source: Compiled from New York Stock Exchange Nasdaq and London Stock Exchange
International Accounting & Multinational Enterprises - Chapter 4 - Radebaugh, Gray, Black

4. Comparative Information
Exhibit 4.3 IFRS Acceptance
Not Permitted for Domestic Listed Companies
Permitted for Domestic Listed Companies
Required for Some Domestic Companies
Required for All Domestic Listed Companies
India ?
Malaysia X
Brazil
Argentina
Mexico
China
Indonesia
Thailand
Poland
Russia
Czech Republic
Source: Deloitte IAS Plus
International Accounting & Multinational Enterprises - Chapter 4 - Radebaugh, Gray, Black

5. Comparative Information
Exhibit 4.4 Other Country Data
Legal Origin
Income Group
Rating on Accounting Standards*
India
English
Low 45
Malaysia
Upper Middle 76
Brazil
French
Lower Middle 54
Argentina
Mexico 60
China
German 52
Indonesia 65
Thailand 64
Poland 36
Russia
Socialist 32
Czech Republic 38
*Higher scores indicate higher rating on accounting standards
International Accounting & Multinational Enterprises - Chapter 4 - Radebaugh, Gray, Black

6. Anglo-American Influence
Less conservative and more transparent than German and Latin countries
India
Significantly improved economy over past decade
Focus on needs of investors
Institute of Chartered Accountants in India (ICAI) and the Accounting Standards Board (ASB)
Create and modify accounting standards
Give consideration to IAS and IFRS issued by IASB
International Accounting & Multinational Enterprises - Chapter 4 - Radebaugh, Gray, Black

7. Anglo-American Influence
Malaysia
Rapid growth over the last 30 years
Anticipated growth in GDP, private consumption, and private investment
Focus on needs of investors
Financial Reporting Foundation (FRF) oversees the MASB
MASB tries to converge with IFRS
International Accounting & Multinational Enterprises - Chapter 4 - Radebaugh, Gray, Black

8. Latin Accounting
More conservative and secretive compared to Anglo-American accounting
Brazil
Focus on needs to creditors and tax authorities
Government, company law, and tax regulations influence accounting
Corporation law of 1976
IBRACON and the Federal Accounting Council issue accounting standards
CVM – Securities Exchange Commission
Sets standards for listed companies
Approves IBRACON and FAC standards
Brazil has one of the major markets in Latin America
International Accounting & Multinational Enterprises - Chapter 4 - Radebaugh, Gray, Black

9. Latin Accounting Argentina
Focus on needs of creditors and tax authorities
Standards set by the Argentine Federation of Expert Councils in Economies (FACPCE)
Councils may ratify or amend each Technical Resolution (TR)
Confusion on what standard to follow in regard to General Price Level (GPL) accounting
Takes inflation into account
Government no longer accepts GPL adjusted financials
FACPCE – GPL is optional is inflation is below 8%
FACPCE works toward harmonization with IFRS, but believes differences should still exist
International Accounting & Multinational Enterprises - Chapter 4 - Radebaugh, Gray, Black

10. Latin Accounting Mexico
Focus on needs of creditors and tax authorities
Economic development has improved since NAFTA was created
Strongly influenced by U.S. GAAP and GAAS
Professional accountancy
IMCP – similar to AICPA
Issues standards and professional code of conduct
Formed the Mexican Council for Research and Development of Financial Reporting Standards (CINIF)
CINIF issues Mexican standards inline with IFRS
70% in line with international standards at beginning of 2005
International Accounting & Multinational Enterprises - Chapter 4 - Radebaugh, Gray, Black

11. Asian Accounting China
Focus is shifting from government to investors, creditors, and management
Information must now meet more than the needs of macroeconomic control
The Accounting Law of the People’s Republic of China
Established principles on nature & role of accounting
Ministry of Finance empowered to issue standards
New standards are unified and market-oriented
Accounting Society of China and Deloitte Touche Tohmatsu have aided in reforming accounting
International Accounting & Multinational Enterprises - Chapter 4 - Radebaugh, Gray, Black

12. Asian Accounting Indonesia Dutch influence in the beginning
Focus on needs of investors
Asian crisis hurt Indonesia, but reforms have returned Indonesia to pre-crisis levels
Financial Accounting Standards Board (DSAK) of the Indonesian Institute of Accountants
Working to harmonize standards with IFRS
International Accounting & Multinational Enterprises - Chapter 4 - Radebaugh, Gray, Black

13. Thailand Accounting system values transparency
Focus on needs of investors
Asian crisis
Implemented reforms to increase corporate governance and competition
Economy recovered quickly and has since sustained growth
Accounting standards issued by
Institute of Certified Accountants and Auditors of Thailand (ICAAT)
Standards approved by the Ministry of Commerce
Thai SEC
Requires all listed companies on the Exchange of Thailand to be reviewed by independent auditors
Supervises all listed companies
International Accounting & Multinational Enterprises - Chapter 4 - Radebaugh, Gray, Black

14. Eastern-European Accounting
Poland
Attempted the shock therapy model – 1990
All reforms made at once
A leader among the transition countries
Transition made in three stages
1991 – Decree issued by Ministry of Finance establishing rules for transition to market economy
1994 – “True and fair view” adopted
2002 – Standards more in line with IFRS
Became EU member in 2004 – harmonize with other EU countries
Adopted IFRS in 2005
International Accounting & Multinational Enterprises - Chapter 4 - Radebaugh, Gray, Black

15. Eastern-European Accounting
Russia – Government has control over the accounting system – socialist background.
Differs from other transition economies
Share of new enterprises is low compared to other economies
Many soviet-style units still exist that are operating at losses
Growth is constrained by reliance on oil and gas
Dominated by unreformed monopolies
Accounting rules created by Ministry of Finance
Standards reflect little of value and profits.
Central Bank of Russia creates standards for
Banks
Credit institutions
International Accounting & Multinational Enterprises - Chapter 4 - Radebaugh, Gray, Black

16. Eastern-European Accounting
Russia
Focus on taxation needs of the country
Highly reflects the result of a planned economy
Consolidated statements prepared using IFRS
Individual company statements prepared with antiquated Russian Accounting Standards (RAS)
Purpose of conversion to IFRS is to
Increase transparency
Encourage investment
International Accounting & Multinational Enterprises - Chapter 4 - Radebaugh, Gray, Black

17. Eastern-European Accounting
Czech Republic
Gained independence in 1993
Tried the shock therapy method
Ran into problems with inflation
Working to conform with IFRS
Accounting Act of 2002 – companies can opt for IFRS over Czech rules
Will adopt IFRS by 2005 as a member of the EU
More market-driven accounting standards exist
Tax system still depends on accounting rules
Government must change this or lose power over tax base
International Accounting & Multinational Enterprises - Chapter 4 - Radebaugh, Gray, Black