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What is Accounting?
The purpose of accounting is to:
identify, record, and
communicate the economicevents of an
organization to interested users.
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Accounting Standards
Definition: Accounting standards areauthoritative statements of how particular
types of transaction and other events should
be reflected in financial statements.(definition from International Accounting
Standards Board)
GAAP: Generally Accepted Accounting Principles
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The accountingprofession has
attempted to develop aset of standards thatare generally acceptedand universally
practiced.
GenerallyAcceptedAccounting
Principles (GAAP)
The Building Blocks of Accounting
Various usersneed financialinformation
Financial StatementsBalance SheetIncome StatementStatement of Owners Equity
Statement of Cash FlowsNote Disclosure
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Standardization
Standardization: the imposition of a rigid and narrow set of
rules that in the case of international accounting standards
would ensure full compatibility.
Standardization is more associated with the international
accounting standards committee, since it is more concerned
with setting new accounting standards for countries to follow,
in an attempt to unify the accounting practices around the
world.
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Internationalization There is considerable evidence that companies are increasingly
operating in a global marketplace.
Trade: from 1970 to 1998, world trade has grown from 600 billion to10,500 billion
Strategic alliances
Foreign direct investment
Portfolio investment
Today the worlds capital markets know no borders.
The participants in those markets need high quality, transparent,and comparable financial information to enable them to makesound economic decisions.
The diverse accounting and reporting practices across the worldhave been one of the major obstacles to economic globalization.
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Why Global Accounting Standards?
Enhanced worldwide comparability for
investors
Enhanced quality of reporting
Some national GAAPs are week
More company-friendly securities market
for foreign listings
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Reduced reporting costs
No need to develop and maintainnational standards
For audit firms and companies:
Easier movement of auditors and
accountants across borders
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GOING INTERNATIONAL
AND
INTERNATIONAL ACCOUNTING STANDARDSGlobalization of Business:
Ways to Export
Ways to Manufacture Overseas
Reasons for Manufacturing Overseas
International Accounting Standards:The Diversityof Worldwide GAAP
Efforts to Harmonize Worldwide GAAP
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http://www.fasb.org/intl/convergence_iasb.shtml8/14/2019 International Accounting Standards 2007 New
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IASC Restructured
The IASC was restructured in April 2001 resulting in an
organization called international accounting standards
board (IASB).
the IASB announced that future accounting standardswould be called International Financial Reporting
Standards (IFRSs). Standards issued by the IASC that are
still in circulation are referred to as International
Accounting Standards (IASs). 2003: IASB issues first new standard IFRS 1
2009 budget: 18.4 million
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Organizations Involved in Standard Setting:
Securities and Exchange Commission (SEC)
Financial Accounting Standards Board (FASB)
International Accounting Standards Board
(IASB)
http://www.fasb.org/
http://www.sec.gov/
http://www.iasb.org/
Governmental Accounting Standards Board
http://www.fasb.org/http://www.sec.gov/http://www.iasb.org/http://www.iasb.org/http://www.sec.gov/http://www.fasb.org/8/14/2019 International Accounting Standards 2007 New
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SecuritiesAct of 1933
SecuritiesAct of 1934
Securities and Exchange Commission
Established by federal governmentAccounting and reporting for public companies
Encouraged private standard-setting body
SEC requires public companies to adhere to GAAP
SEC OversightEnforcement Authority
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Securities and Exchange Commission
Regulates all publicly held companies and all companies
with more than a specified number of shareholders or
owners.
Determines the form and content of accounting reports
filed by companies under its jurisdiction.
Has authority to define accounting terms and to prescribe
accounting principles. Lets the accounting profession develop principles and
standards, but has the final authority.
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Financial Accounting Standards Board
Seven member board each having distinguished
accounting backgrounds who are full-time employees.
Responsible for developing financial accounting
standards and principles.
Develops and issues Statements of Financial Accounting
Standards.
Has issued about 150 standards that the SEC recognizes
as authoritative.
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American Institute of CPAs
National professional organizationEstablished the following:
Committee on
AccountingProcedures
Accounting
Principles Board
1939 to 1959
Issued 51 AccountingResearch Bulletins
(ARBs)
Problem-by-problemapproach failed
1959 to 1973
Issued 31 AccountingPrinciple Board
Opinions (APBOs)
Wheat Committeerecommendationsadopted in 1973
http://www.aicpa.org/
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Governmental Accounting Standards Board
Created in 1984 to address state and local governmental reporting
issues.FinancialAccountingFoundation
FinancialAccountingStandards Board
Financial AccountingStandards AdvisoryCouncil
GovernmentalAccountingStandards Board
GovernmentalAccounting StandardsAdvisory Council
http://www.gasb.org/
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IASB Structure
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Who issues standards?
International Accounting Standards (IASs) wereissued by the IASC from 1973 to 2000. The IASBreplaced the IASC in 2001. Since then, the IASB hasamended some IASs and has proposed to amendothers, has replaced some IASs with new
International Financial Reporting Standards (IFRSs),and has adopted or proposed certain new IFRSs ontopics for which there was no previous IAS. Throughcommittees, both the IASC and the IASB also haveissued Interpretations of Standards. Financial
statements may not be described as complying withIFRSs unless they comply with all of the requirementsof each applicable standard and each applicableinterpretation.
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In 1973, International Accounting Standards
Committee (IASC) was established byprofessional accounting bodies from nine
countries: the U.S., Canada, Australia, France,Germany, Japan, Mexico, Netherlands, andU.K.
I A S Committee became IASB in early2001(Also IFRIC came into being)
The organization was renamed InternationalAccounting Standards Board (IASB) in 2001
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1n 1975, first International Accounting
Standard (IAS) was published.
IAS No. 1 Disclosure of Accounting Policies
Since there, 41 international accounting
standards have been issued.
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TYPES OF IAS
GAAP(GENERALLY ACCEPTED ACCOUNTING
PRINCIPLE)
IFRS(INTERNATIONAL FINANCIAL REPORTING
STANDARD
And 41 OTHER STANDARD
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Generally Accepted Accounting Principles
(GAAP)
Ensure that financial statements are meaningful and
useful.
Are used whether the business is large or small. Allow financial statements of different companies to
be compared.
Allow a company to compare its own financialstatements from period to period.
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Accounting The House of GAAP
The role that accounting standards play in establishing the rules fordisclosing both public and private financial reporting assumes levels
of authority of "more to less" which guide reliance on anddetermines the weight of the standards. Understanding thishierarchy is paramount to grasping the meaning of"generallyaccepted accounting principles" (GAAP), and the manysupporting documents.
The concept of the "house of GAAP" was introduced in a 1984 article
from the Journal of Accountancy. The author describes and definesthe vast universe of accounting standards as a hierarchy structuredalong the lines of the floor plan of a house. "Like any otherstructure, the house of GAAP rests on a foundation, in this case afoundation of the basic concepts and broad principles that underliefinancial reporting, without which, like a house of cards, the houseof GAAP would tumble."
In 199I the AICPA's Auditing Standards Board remodeled the houseof GAAP by changing some of the levels of authority of certainaccounting pronouncements and distinguishing between thestandards defining state and local government entities, establishedby the Government Accounting Standards Board (GASB) and thosefor all others, falling under the FASB's jurisdiction.
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Principle of continuity: When stating financial information, one shouldassume that the business will not be interrupted. This principle mitigates the
principle of prudence: assets do not have to be accounted at their disposable
value, but it is accepted that they are at their historical value
Principle of periodicity: Each accounting entry should be allocated to agiven period, and split accordingly if it covers several periods. If a client pre-
pays a subscription (or lease, etc.), the given revenue should be split to the
entire time-span and not counted for entirely on the date of the transaction.
Principle of Full Disclosure/Materiality: All information and valuespertaining to the financial position of a business must be disclosed in the
records.
Principle of Utmost Good Faith: All the information regarding to the firm
should be disclosed to the insurer before the insurance policy is taken.
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What is IFRSs
The term International Financial Reporting Standards(IFRSs) has both a narrow and a broad meaning. Narrowly,IFRSs refers to the new numbered series ofpronouncements that the IASB is issuing, as distinct fromthe International Accounting Standards (IASs) series issued
by its predecessor. More broadly, IFRSs refers to the entirebody of IASB pronouncements, including standards andinterpretations approved by the IASB and IASs and SICinterpretations approved by the predecessor International
Accounting Standards Committee. [On this website,consistent with IASB policy, we abbreviate InternationalFinancial Reporting Standards (plural) as IFRSs and
International Accounting Standards (plural) as IASs.]
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IFRS
International Financial Reporting Standards Preface toInternational Financial Reporting Standards
IFRS 1 First-time Adoption of International FinancialReporting Standards
IFRS 2 Share-based Payment IFRS 3 Business Combinations IFRS 4 Insurance Contracts IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations IFRS 6 Exploration for and Evaluation of Mineral Assets
IFRS 7 Financial Instruments: Disclosures IFRS 8 Operating Segments Framework for the Preparationand Presentation of Financial Statements
Frameworkfor the Preparation and Presentation ofFinancial Statements
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Which are
http://www.iasplus.com/standard/preface.htmhttp://www.iasplus.com/standard/ifrs01.htmhttp://www.iasplus.com/standard/ifrs02.htmhttp://www.iasplus.com/standard/ifrs03.htmhttp://www.iasplus.com/standard/ifrs04.htmhttp://www.iasplus.com/standard/ifrs05.htmhttp://www.iasplus.com/standard/ifrs06.htmhttp://www.iasplus.com/standard/ifrs07.htmhttp://www.iasplus.com/standard/ifrs08.htmhttp://www.iasplus.com/standard/framewk.htmhttp://www.iasplus.com/standard/framewk.htmhttp://images.google.com/imgres?imgurl=http://g-ec2.images-amazon.com/images/I/211lNb4BkEL.jpg&imgrefurl=http://www.alldiscountbooks.net/SearchBook/defaultBrowse/k/Accounting-General/S17/Accounting-General-Books-Textbooks-S17.html&h=160&w=130&sz=7&hl=en&start=46&tbnid=niLVvAN0unDxmM:&tbnh=98&tbnw=80&prev=/images?q=General+accounting+standards++books&start=42&gbv=2&ndsp=21&svnum=10&hl=en&sa=Nhttp://images.google.com/imgres?imgurl=http://www.gammaholding.nl/content/formfield_files/extraForm_626.jpg&imgrefurl=http://www.gammaholding.nl/nl/Press/Financials/IFRS?session=2hc1msk643vda8b1cdkkgqmlu5&h=167&w=325&sz=15&hl=en&start=2&tbnid=PbDUzJKcBqV-RM:&tbnh=61&tbnw=118&prev=/images?q=IFRS++logo&gbv=2&svnum=10&hl=en&sa=Ghttp://www.iasplus.com/standard/framewk.htmhttp://www.iasplus.com/standard/framewk.htmhttp://www.iasplus.com/standard/framewk.htmhttp://www.iasplus.com/standard/ifrs08.htmhttp://www.iasplus.com/standard/ifrs08.htmhttp://www.iasplus.com/standard/ifrs08.htmhttp://www.iasplus.com/standard/ifrs08.htmhttp://www.iasplus.com/standard/ifrs07.htmhttp://www.iasplus.com/standard/ifrs07.htmhttp://www.iasplus.com/standard/ifrs07.htmhttp://www.iasplus.com/standard/ifrs07.htmhttp://www.iasplus.com/standard/ifrs06.htmhttp://www.iasplus.com/standard/ifrs06.htmhttp://www.iasplus.com/standard/ifrs06.htmhttp://www.iasplus.com/standard/ifrs06.htmhttp://www.iasplus.com/standard/ifrs05.htmhttp://www.iasplus.com/standard/ifrs05.htmhttp://www.iasplus.com/standard/ifrs04.htmhttp://www.iasplus.com/standard/ifrs04.htmhttp://www.iasplus.com/standard/ifrs04.htmhttp://www.iasplus.com/standard/ifrs04.htmhttp://www.iasplus.com/standard/ifrs03.htmhttp://www.iasplus.com/standard/ifrs03.htmhttp://www.iasplus.com/standard/ifrs03.htmhttp://www.iasplus.com/standard/ifrs03.htmhttp://www.iasplus.com/standard/ifrs02.htmhttp://www.iasplus.com/standard/ifrs02.htmhttp://www.iasplus.com/standard/ifrs02.htmhttp://www.iasplus.com/standard/ifrs02.htmhttp://www.iasplus.com/standard/ifrs01.htmhttp://www.iasplus.com/standard/ifrs01.htmhttp://www.iasplus.com/standard/ifrs01.htmhttp://www.iasplus.com/standard/ifrs01.htmhttp://www.iasplus.com/standard/preface.htmhttp://www.iasplus.com/standard/preface.htmhttp://images.google.com/imgres?imgurl=http://media.accountingeducation.com/518/ifaclogo.jpg&imgrefurl=http://www.accountingeducation.com/index.cfm?page=jobdetails&id=145176&h=94&w=105&sz=6&hl=en&start=1&tbnid=ouwENROrYPnWiM:&tbnh=75&tbnw=84&prev=/images?q=IFAC+logo&gbv=2&svnum=10&hl=en&sa=G8/14/2019 International Accounting Standards 2007 New
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Which areinternational accountingstandards(IAS)?
IAS 1 Presentation of Financial Statements IAS 2 Inventories IAS 3 Consolidated Financial Statements
Originally issued 1976, effective 1 Jan 1977. Superseded in 1989by IAS 27 and IAS 28.
IAS 4 Depreciation AccountingWithdrawn in 1999, replaced by IAS 16, 22, and 38, all of which
were issued or revised in 1998. IAS 5 Information to Be Disclosedin Financial StatementsOriginally issued October 1976, effective 1 January 1997.Superseded by IAS 1 in 1997. IAS 6 Accounting Responses toChanging PricesSuperseded by IAS 15, which was withdrawn December 2003 IAS7 Cash Flow Statements IAS 8 Accounting Policies, Changes inAccounting Estimates and Errors IAS 9 Accounting for Researchand Development Activities Superseded by IAS 38 effective 1.7.99IAS 10 Events After the Balance Sheet Date IAS 11 ConstructionContracts IAS 12 Income Taxes IAS 13 Presentation of CurrentAssets and Current LiabilitiesSuperseded by IAS 1. IAS 14 Segment Reporting.
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Segment Reporting
IAS 15 Information Reflecting the Effects ofChanging PricesWithdrawn December 2003
IAS 16 Property, Plant and Equipment IAS 17 Leases
IAS 18 Revenue IAS 19 Employee Benefits IAS 20 Accounting for Government Grants and
Disclosure of Government Assistance IAS 21 The Effects of Changes in Foreign
Exchange Rates IAS 22 Business Combinations
Superseded by IFRS 3 effective 31 March 2004. IAS 23 Borrowing Costs IAS 24 Related Party Disclosures
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IAS 25 Accounting for Investments
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S 5 ccou t g o est e tsSuperseded by IAS 39 and IAS 40 effective 2001.
IAS 26 Accounting and Reporting by Retirement Benefit Plans IAS 27 Consolidated and Separate Financial Statements IAS 28
Investments in Associates
IAS 29 Financial Reporting in Hyperinflationary Economies IAS 30 Disclosures in the Financial Statements of Banks andSimilar Financial InstitutionsSuperseded by IFRS 7 effective 2007.
IAS 31 Interests In Joint Ventures IAS 32 Financial Instruments: Presentation
Disclosure provisions superseded by IFRS 7 effective 2007. IAS 33 Earnings Per Share IAS 34 Interim Financial Reporting IAS 35 Discontinuing Operations
Superseded by IFRS 5 effective 2005. IAS 36 Impairment of Assets
IAS 37 Provisions, Contingent Liabilities and Contingent Assets IAS 38 Intangible Assets IAS 39 Financial Instruments: Recognition and Measurement IAS 40 Investment Property IAS 41 Agriculture
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IASBFormed in January 2001, the ISAB replaced its
predecessor, the International AccountingStandards Committee (IASC), as the internationalstandards setting body. Looking towards greaterformalization of international accountingstandards, IASB is structured similarly to the
FASB. It is currently the focus of the IASB, incollaboration with the FASB and other accountingfocused organizations, to "converge" standardsand develop a single, universally accepted set ofbiding international accounting standards. TheIASC, and now IASB, issue a series of standardsknown as International Financial ReportingStandards (IFRS), formerly called InternationalAccounting Standards (IAS).
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IASB, IASCF, and IASC DefinedThe International Accounting Standards Board is an independent,private-sector body that develops and approves International
Financial Reporting Standards. The IASB operates under theoversight of the International Accounting Standards CommitteeFoundation. The IASB was formed in 2001 to replace theInternational Accounting Standards Committee.
IASCF: International Accounting Standards Committee FoundationThe International Accounting Standards Committee Foundation isthe independent, non-profit foundation, created in 2000 tooversee the IASB. Click for more information about the IASCFStructure.
IASC: International Accounting Standards CommitteeFrom 1973 until a comprehensive reorganization in 2000, thestructure for setting International Accounting Standards wasknown as the International Accounting Standards Committee.There was no actual "committee" of that name. The standard-setting board was known as the IASC Board.
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Key to Understanding International
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Key to Understanding International
Accounting
Political, Economic, Cultural and
Infrastructure Influences on:
External Reporting
Taxes/Capital Markets/Gov.
Regulation/Standard Setting/Reporting
Requirements/Users
Internal Reporting Planning and Decision Making
Control
Performance Evaluation
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External Accounting
Standard Setters, Preparers and Users
Underlying Institutional Structures
Required reports
Internal Accounting
Decision Rights Assignment
Planning and Control
Performance Measurement and Evaluation
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Uses of International
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Uses of International
Accounting Standards As national standards
As basis for national standards
As benchmark to develop national
standards
By regulatory authorities
By companies themselves
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The world is getting smaller
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Conclusion
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Internationalize Accounting Standards:
The Grand Dream
World GAAP--so many hurdles.All are for it--BUTfew countries are willing to
change their own GAAP.
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International Accounting
Standards: World GAAPs
Advantages
Having a Uniform World GAAP:
Would greatly streamline the quarterly and year-endconsolidation process for the accountants of publicly-
owned companies.
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Efforts To Internationalize Accounting
Standards:
Progress Has Been Slow
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The Capital Markets--
A much-needed injection:
Relatively recent trend of raising capital
in world markets has given greatly added
emphasis to the desirability of having a
world GAAP. The BIG advantage:
Would greatly streamline the processby eliminating the need to comply
with multiple GAAPs in offering
securities.
Efforts To Internationalize Accounting
Standards: Capital Market Forces
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Advantages
Same basis with foreign competitors, easy tomake comparison
Easy to consolidate the parents company and theforeign subsidiaries
Disadvantages
Effectiveness of GAAP will be lost
Discourage the domestic public companies whichhave no significant market outside the US
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Time to Clear Things Up--
Any Questions?