Globalization of accounting standards the United States is not a new idea. Standard convergence concept first emerged after World War II with the flow of money across international borders. Initially, efforts focused on harmonization, reducing the differences between the accounting principles used in key markets around the world. In the 1990s, the term was replaced by the concept of convergence of the harmonization of the encourages the development of a set of accounting standards to be used in at least all the major capital markets.
In 1973, the International Accounting Standards Committee was created and it became the first international standard-setting body. In 2001, became known as International Accounting Standards Board (IASB). Shortly after, the FASB and IASB to work together to deploy an international standard that has achieved the European Union and more than 100 other countries. In 2009, Japan and China are also working to converge their standards with IFRSs. And finally, in February 2010, the Securities and Exchange Commission (SEC) announced its support of the convergence of global accounting standards.
This is a business principle that financial information is comparable and trustworthy is very important for markets to operate smoothly. There has been a dramatic growth in the number and size of multinational companies, foreign investors, cross-border purchases and sales of securities. Therefore, because many different social, economic, legal, and culture between countries, accounting standards and practices in different countries vary greatly. Because of this, similar transactions accounted for differently in different countries. It has become increasingly difficult for the economy to operate smoothly due to the financial statements is now questionable. To enhance the comparability of financial statements, the harmonization of accounting standards advocate.
Harmonization of efforts to improve the comparison between the accounting principles by setting limits on possible alternatives for the same transaction. Another benefit of the international harmonization of accounting standards is that it will make the accounts more comparable companies and reliable. Thus, the investor will have the information to make appropriate investment decisions. These standards will dramatically improve the efficiency of global capital markets with lower capital costs, improve comparability, and improve corporate governance.
The goal of convergence in the U.S. Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) is to improve the consistency, comparability and efficiency in the global market. Boards agreed that trying to eliminate the difference between a good standard requiring significant improvement is not the best use of resources, by contrast, the new common standard should be developed. Eliminate differences between U.S. GAAP and IAS will result in replacing existing standards with completely new.
Staff and Board of Directors has developed a short-term plans and long range of action to achieve convergence. Currently, the IASB operates on joint projects with the FASB. Joint projects are possible because of cooperation between the two boards. Their cooperation involving different activities at the same time schedule to increase efficiency, such as resource sharing. Increased cooperation between the IASB and the FASB is the inclusion of members of the IASB on the site at the FASB offices to facilitate the exchange of information between the two
Convergence of short-term plans focus only on a select group of differences between U.S. GAAP and IFRS, such as choosing the most appropriate standard for the world economy. Until now, the FASB and IASB to work together on issues based Recognize Revenue and Business Combinations. Meanwhile, the FASB staff is currently working on a long-term research project that aims to identify all the differences between U.S. GAAP and IFRS. The project includes the differences in standards dealing with the recognition, measurement presentation, or disclosure. As a result of these and other initiatives, the FASB expects to make significant progress toward international convergence in the coming years.
Globalization of accounting standards will create important benefits. Investors will benefit because the appeal in the international financial reporting. This report will be understood globally so that the economy can watch and enforce accounting rules. Multinational companies benefit from not having to prepare different reports for different countries where they operate. Stock exchange listing and benefit from growth in market transactions. Important to note that the success of the globalization of this standard revolves around the coordination of the IASB and national standard setting bodies. Therefore, the IASB has become increasingly interested in examining national standards makers. This study provides insight into existing problems at the local level and help to regulate the activities of nations.
The process of harmonization of international accounting standards have come a long way since a lot of bumps in the road. Some critics doubt the need for global standards. However, the question is not whether or not it will happen, it’s when. There is a need for a set of accounting standards, and with the approval of the SEC, the application of these standards is not much time.
International accounting differences with other accounting is located at:
• Reporting to MNC / MNE
• Limit state
• Reporting to the other parties in different countries
• International Taxation
DEVELOPMENT AND CLASSIFICATION OF THE INTERNATIONAL ACCOUNTING
Here are the characteristics of the era of global economy:
1. International business
2. Loss of boundaries between States era of global economy is often difficult to identify the country of origin of a product or company, this is the case in multinational companies
3. Dependence on international trade
There are 8 (eight) factors that influence the development of international accounting:
1. Sources of funding
In countries with strong equity markets, accounting has focused on how well management runs the company (profitability), and is designed to help investors analyze the future cash flows and related risks. Instead, the credit-based system in which the bank is the main source of funding, accounting has focused on the protection of creditors through conservative accounting measurements.
2. Legal System
The western world has two basic orientations: the legal code (civil) and common law (case). In code law countries, law is a complete group that includes the provision of accounting rules and procedures that are incorporated in national law and tend to be very complete. In contrast, common law developed on a case by case basis without any attempt to cover all cases in which a complete code.
In most countries, tax rules effectively set the standard because the company should record revenue and expenses in their accounts to claim it for tax purposes. While a separate tax and financial accounting, tax rules sometimes require the application of certain accounting principles.
4. Politics and Economics Association
Inflation causes the distortion of historical cost accounting and affect the propensity (tendency) of a State to apply the changes to the accounts of the company.
6. Levels of Economic Development
These factors influence the types of business transactions are conducted in an economy and determine what is most important.
7. Level of Education
Standard accounting practices are highly complex would be useless if misunderstood and misused. Disclosures about the risks of derivative securities will not be informative unless it is read by the competent authorities.
Four dimensions of national culture, according to Hofstede: individualism, power distance, uncertainty avoidance, masculinity.
Dimensions Affecting Value Accounting Accounting Practice:
1. Professionalism versus control mandatory preference to the implementation of individual professional balance and regulation of their own professional circles as compared to the compliance with legal provisions that have been determined.
2. Uniformity versus flexibility preference for uniformity and consistency compared to the flexibility in reacting to a particular situation
3. Conservatism versus optimism
4. Confidentiality versus transparency preference for confidentiality and restrictions on business in accordance with the basic information need to know than the willingness to disclose information to the public.
The reasons for Go International company:
1. Theory of comparative advantage
2. Imperfect market theory
3. Product cycle theory
4. Technology transfer and Strategic Alliance
The challenge for the accounting profession in the development of accounting:
1. Skill and competency of
2. Understanding the Cross Functional Linkages, accountants are not only quite proficient in the techniques, procedures and accounting standards but should also be used to view the business as an integrated form. Such as: product quality, production flexibility and the ability to produce and export quickly to win the global competition
3. Financial analysis and comparison
INTERNATIONAL ACCOUNTING CLASSIFICATION
International accounting classification can be done in two ways: By considerations and empirically. Classification with consideration depends on the knowledge, intuition and experience. Classification empirically using statistical methods to collect data accounting principles and practices worldwide.
There are 4 (four) approach to the development of accounting:
1. Based on the macroeconomic approach, obtained from the accounting practices and are designed to improve the national macroeconomic objectives.
2. Based on microeconomic approach, accounting bekembang of microeconomic principles. The goal lies in the individual companies that have the purpose to survive.
3. Based on an independent approach, derived from accounting and business practices developed on an ad hoc, with the base slowly and consideration, trial and error, and errors. Accounting services is seen as a function of the concepts and principles taken from the business process being run, and not from the branches of science such as economics.
4. Based on a uniform approach, accounting being standarisation and used as a tool for administrative control by the central government. Uniformity in the measurement, disclosure, and will facilitate the presentation of the designer of government, tax authorities, and even managers to use accounting information in controlling all types of businesses.
Accounting system can also be classified by the laws of a State.
(1) Accounting in common law countries have a fair presentation of the character-oriented, transparency and full disclosure and the separation between financial and tax accounting. Dominate the stock market financial resources and financial reporting needs information shown to outside investors. Accounting law commonly referred to as the Anglo Saxon.
(2) accounting in code law countries have a legalistic-oriented characteristics, does not allow disclosure of the amount is less, and conformity between financial and tax accounting. Bank or financial risorce dominate the government and financial reporting and financial reporting is intended to protect creditors. Accounting is also called continental. Provision of accounting parallels the character referred to as the shareholder model and stakeholder role in corporate governance governance state common law and the legal code.
Many differences in national accounting is becoming increasingly lost. There are several reasons for this
(1) Hundreds of companies today noted its shares on stock exchanges outside their home country,
(2) Some of the code law countries, particularly Germany and Japan to shift responsibility from the government’s establishment of accounting standards to private sector groups and independent professionals,
(3) The importance of the stock market as a source of funding is growing around the world.
Classification based on fair presentation versus legal compliance pose a major influence on many accounting issues, such as
(1) depreciation, where the load is determined based on the reduction in the usefulness of an asset over the useful economic (fair presentation) or the amount allowed for tax purposes (legal compliance),
(2) leases have the substance of the purchase of fixed assets treated as such (fair presentation) or treated as operating leases are common (legal compliance),
(3) pension costs accrued at the time generated by the employee (fair presentation) or charged on the basis paid at the time to stop working (legal compliance).
Another problem is the use of reserves to smooth earnings discrete from one period to another. And fair presentation of substance over form (substance over form) is an accounting major CII common law. Accounting designed legal compliance to meet government regulations such as be used calculation of taxable income or meet the national government’s macroeconomic plans. Ensure conservative measurement that the number of shared care. Accounting for legal compliance will continue to be used in the financial statements of individual firms in code law countries where consolidated statements apply to the presentation of fair reporting. In this way, consolidated statements may provide information to investors, while individual company reports to comply with the law
Accounting and financial reporting in Japan reflects a combination of domestic and international influences. Two separate government agency responsible for the regulation of accounting and corporate income tax law in Japan have more influence as well. In the first half of the 20th century, reflecting the effect of German accounting thought; in the second half, the ideas of the influential U.S.. Lately, the influence of the International Accounting Standards Board began to be felt and in 2001 major changes occurred with the establishment of private sector organizations as a maker of accounting standards.
Firms – Japanese firms have equity shares each to each other, and often times together have another company. These investments are interlocked industrial conglomerate that produces very large called keiretsu.
Keiretsu venture capital is in line with the reform of structural changes in the Japanese to overcome economic stagnation that began in 1990 – an. The financial crisis that followed the breakup of the Japanese bubble economy is also pushing for a thorough evaluation of the Japanese financial reporting. It is apparent that many accounting practices to hide how bad the Japanese companies.
A major change in accounting was announced in late 1990 – to create an economic health of Japanese companies become more transparent and bring Japan closer to international standards.
Accounting Regulations and Enforcement Rules
The national government has the most influence significant of accounting in Japan. Accounting regulation is based on three laws: Commercial Law, Capital Market Law and the Income Tax Law of the Company. These three laws are associated and related to one another. Japanese researchers called the situation a person is a “triangle Legal System”.
Commercial law is governed by the Ministry of Justice (MOJ). The law is at the core of accounting regulation in Japan and most have a major influence. A company incorporated under the Commercial Law are required to meet the accounting provision, which was published in the “rules concerning the balance sheet, income statement, statement of business, and supporting schedules with a limited liability company.
Public-owned enterprises shall further comply with the Capital Market Law (Securities and Exchange Law – SEL) is regulated by the Ministry of Finance. SEL is made pursuant to – U.S. Capital Market Act and imposed on Japan by the United States during the U.S. occupation after World War II. The main purpose of SEL is to provide information in making investment decisions.
Accounting Business Advisory Council (Business Accounting Deliberation Council – BADC) is a special advisory body to the Ministry of Finance is responsible for developing accounting standards in accordance with the SEL. BADC was appointed by the Ministry of Finance and working part time. They come from academia, government, business circles as well as members of the Institute of Certified Public Accountants in Japan (Japan Institute Of Certified Accountants – JICPA). (BADC members have a background in accounting, in contrast to the legal background for individuals who work in the issue – the issue of Commercial Law at the Ministry of Justice). BADC is supported by a research organization known as the Research Institute of Finance (Corporate Finance Research Institute).
JICPA a CPA professional organization in Japan. All CPA must be a member of JICPA. In addition to providing guidance in the implementation of an audit, JICPA published guidance in the implementation of the accounting issues and consulting with BADC in the development of accounting standards. Auditing standards generally accepted (like those in the United States), distributed by the BADC more than by JICPA.
Company incorporated under the Commercial Law shall be obliged to prepare a report which must be approved in the annual meeting of shareholders, which contains the following:
2. Statement of Income
3. Business Report
4. Proposal for Determination of Use (appropriation) Retained Earnings
5. Supporting Schedule
Companies that list their stocks should also prepare financial statements in accordance with the Capital Market Law (Securities and Exchange Laws – SEL) which generally requires the same basic financial statements with the Commercial Law plus the cash flow statement. However, according to the SEL, consolidation reports of major concern, not the parent company financial statements. Additional schedule footnote is also required. Financial statements and schedules are prepared in accordance with the SEL must be audited by independent auditors.
Commercial law requires large companies to prepare consolidated reports. In addition, shares of listed companies must prepare consolidated financial statements in accordance with the SEL.
Most of the previously described practice accounting implemented in recent years as a result of the Great Changes in Accounting as mentioned earlier. Changes – changes in the past include: (1) requires companies that list their stocks to make a cash flow statement, (2) expand the number of subsidiaries are consolidated under the control of owned and not a percentage of ownership, (3) expand the number of affiliated companies accounted for under the based on the equity method and not a significant influence on the percentage of ownership, (4) assess the investment in securities of the market price rather than cost, (5) the full provision for deferred obligations, and (6) full accrual for pension and other retirement obligations. Accountancy in Japan being reshaped to fit the IFRS
Accounting in the United States governed by the Private Sector (GAAP / FASB), until 2002 the American Institute for Certified Public Accountants.
Accounting Regulations and Enforcement Rules
Accounting principles generally accepted (GAAP) consists of all standards, rules and financial regulations that must be considered when preparing financial statements, financial statements should present fairly the financial position and results of operations of an enterprise in accordance with accounting principles accepted in public.
The annual report should be made of a large U.S. companies include:
2.Reporting independent auditor
3.Riporting major financial (income statement, cash flows, comprehensive income, stockholders’ equity)
4. Discussion management and analysis of operating results and financial condition
5. Disclosure the accounting policies with the most important influence on the financial statements
6.Report to the financial statements
7. comparison certain financial data for five or ten years
8. Selected quarterly data
The consolidated financial statements and financial statements shall be published in the U.S. typically does not include only the parent report alone. Consolidation rules require that all subsidiaries that are controlled (ie, with holdings that exceed 50 percent of the shares with voting rights) should be consolidated in full, although operations were no longer homogeneous. Interim financial statements (quarterly) is required for a company whose shares are listed on major stock exchanges. This report usually contains only a summary financial statements are unaudited and management are briefly commented.
Accounting measurement rules in the United States assumes that a business entity will continue to carry out its business. Accrual basis of measurements with a very broad and the recognition of transactions and events are highly dependent on the concept competitors.