Global Harmonising of Accounting Standards

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Abstract

In this study we try to explore the concept of harmonisations of accounting standards in a holistic concept. The main focus on this research is on the US and UK accounting standards i.e. US GAAP and IFRS respectively. The research analyses many aspects of both the accounting standards and through a case study finds the differences between both the accounting periods. Finally the research provides recommendation that how harmonisation of accounting standards can be in the best interest on US organisations.

Table of Contents

CHAPTER 1: INTRODUCTION1

1.1 Background Theory1

1.2 Aims and Objectives3

1.3 Research Questions4

1.3 Scope and Limitations4

1.4 Ethical Concerns5

CHAPTER 2: LITERATURE REVIEW7

2.1 Problems Faced By Regional and International Organizations in Harmonisation7

2.2 Development in Harmonising Accounting Standards10

2.3 Issues surrounding the development of harmonisation16

2.3.1 Systems for Change16

2.3.2 Extra-territoriality17

2.3.3 Politicising18

2.3.4 The American system of financial reporting- GAAP19

2.4 The Basic Principles Underlying the Us-GAAP Accounting19

2.4.1 Principles guiding US-GAAP practices21

2.5 International Accounting Standards and Rules23

2.5.1 Advantages of International Financial Reporting Standards23

2.5.2 The Future of UK GAAP24

2.6 US GAAP and IFRS Financial Statement Presentation28

2.6.1 Similarities28

2.6.2 Differences29

2.6.3 Convergence30

2.7 Interim Financial Reporting31

2.7.1 Similarities31

2.7.2 Differences32

2.8 Joint Venture Accounting and Consolidation32

2.8.1 Similarities32

2.8.2 Differences33

2.9 The Challenges Facing Companies Migrating From U.S GAAP to IFRS34

2.9.1 Swings and Roundabouts34

2.9.2 People Issue35

2.9.3 Diversity of Groups35

CHAPTER 3: METHODOLOGY37

3.1 Research Instrument38

3.2 Pros and Cons of Chosen Methodology40

3.3 Research Process42

CHAPTER 4: DISCUSSION AND ANALYSIS43

4.1 Causes of Differences in Financial Reporting Systems43

4.1.1 Taxation policies43

4.1.2 Valuation Basis44

4.1.3 Foreign currency translation44

4.1.4 Audit Reporting45

4.1.5 Legal Systems46

4.1.6 Financial Providers and Sponsors46

4.1.7 The Accounting Profession47

4.2 Case Study Analysis48

CHAPTER 5: CONCLUSION50

5.1 Convergence of US GAAP and International Financial Reporting Standards50

5.2 Recommendation59

REFERENCES61

APPENDIX A73

APPENDIX B77

APPENDIX C78

APPENDIX D80

Chapter 1: Introduction

1.1 Background Theory

The International Accounting Standards Committee (IASC), headquartered in London, England, has become the lead organisation in accomplishing the harmonisation of international accounting standards. In 2000, the IASC modified its constitution and constituted the International Accounting Standards Board (IASB), which assumed the responsibility for setting standards. Many countries without domestic standards have adopted the International Accounting Standards (IAS). In addition, many countries allow the use of IAS in cross-border filing of financial information with stock exchange listing and regulatory boards.

The primary objective of the IASC has moved from harmonisation to the convergence of accounting standards. Its primary goal is to develop a single set of understandable and enforceable global accounting standards. These seek to provide transparency and comparability of financial reporting. In May of 2000, the International Organization of Securities Commissions recommended that multi-national reporting use IAS ...