International Accounting - appunti

Problem with this classification:

data are not collected for classifications purposes and they are not in codable form

Nobes (1998) agrees that Anglo-Saxon and Continental European countries are closer because of accounting harmonization progress, but underlines that application of international accounting standards in German financial statements does not mean a strong impact on German GAAP (accounting systems are the result of different influences, even though they are applying IAS/IFRS the other influences still remain -> accounting dualism IAS/IFRS + GAAP)

Classification after IFRS mandatory adoption [not important, it was revised, includes countries like China that between 2010 and 2011 has adopted IAS/IFRS for listed companies]

Intrinsic classifications – IFRS practices (Nobes, 2011)

Classification based on IFRS practices in 2008-2009 of large listed companies from eight countries

Australia and the UK are in the same group, while Continental European countries are in a different group

it is important to understand the distinction between them. Harmonization refers to the process of increasing the compatibility of accounting practices by reducing differences between them. It aims to make accounting practices more comparable across different countries or regions. Harmonization is often associated with the supranational legislation applied to Member States, such as the European Directives in the European Union. Standardization, on the other hand, involves the imposition of a set of rules or standards. In the context of accounting, it refers to the mandatory adoption of international accounting standards (IAS/IFRS) issued by the International Accounting Standards Board (IASB). Standardization is mainly associated with the IASB and its efforts to establish a common set of accounting standards that can be applied globally. While harmonization and standardization are sometimes used interchangeably, they have distinct meanings and applications. Harmonization focuses on reducing variation and increasing comparability, while standardization involves the imposition of a specific set of rules or standards. Both concepts play a crucial role in promoting consistency and transparency in accounting practices worldwide.

Their meaning is clear. When a European Directive is issued, then there is its enforcement on a local accounting system and its requirements follow the peculiarities of that system.

Such an example, in Italy an European Directive is enforced in the Civil Code and its requirements may be adapted because Italian accounting system is an accounting code-system. This is not for the application of the same Directive for example in the UK with an accounting practices-system.

The application of IAS/IFRS is not enforced on the local accounting system, but their application is fully and without any adaptation.

• De jure harmonization: mainly refers to the application of rules and accounting standards.
• De facto harmonization: focuses on corporate financial reporting practices.

Both terms refer to the main purpose of harmonization, which is the increase of comparability.

Convergence:

• The aim of establishing a single set of accounting standards that will be used internationally.

efforts of standard setters towards achieving such aim. The purpose is to issue accounting standards that could be applied at international level – in all the accounting systems – in order to delete differences between accounting systems. This purpose is achieved by the IASB. Uniformity: • two or more set of rules or standards are the same. European Commission achieves this purpose with Directives. Its goal is to make the accounting system of Member States uniform. Reasons for harmonization • Users, regulators and preparers of financial statements call for international harmonization for making financial statements comparable. • Investors and financial analysts call for comparable and reliable financial statements of foreign companies whose shares they want to exchange. This is particular relevant in financial markets, where the exchange of shares of companies from different countries have to be supported by comparable financial statements. If not, it may be difficult tothe large clients. On the other hand, tax authorities may create discrepancies when evaluating foreign income in various countries.• Investors rely on financial statements to make informed decisions about investing in a company. Consistent accounting standards ensure that financial statements are comparable and reliable, allowing investors to analyze the performance of a company accurately.• Standardized accounting standards also facilitate the allocation of resources for investments. When financial statements are consistent, it becomes easier for companies to assess their financial position and make strategic decisions regarding resource allocation.• In addition to financial statements, other performance indicators such as return on investment (ROI), earnings per share (EPS), and net profit margin are also crucial in analyzing the performance of a company. These indicators provide a comprehensive view of a company's profitability and efficiency.• It is essential for companies to regularly evaluate their performance and make adjustments accordingly. By analyzing financial statements and performance indicators, companies can identify areas of improvement and implement strategies to enhance their overall performance.

multinational and large clients. The differences maybe be justassociated to the different tax systems.

Obstacles to harmonization:

• Main obstacle is the length of differences between accounting practices of different countries, this makes their reduction more difficult
• As the purposes of financial reporting vary by country, companies could should follow both domestic and international set of accounting rules. In some countries, there could be the accounting dualism. Indeed, in the Member States of European Union, unlisted companies apply domestic accounting standards and listed companies apply IAS/IFRS.
• The lack of an international regulatory agency (for example EU is the agency of Member States belonging to EU, IOSCO – International Organization of Securities Commission is the international comprising the most important agencies regulating international stock exchanges, it’s a body that brings together the world’s securities regulators). We do not have an

agency operating worldwide.

• Nationalism: resistance to change accounting standards as it implies a change of circumstances or the privation of supremacy of some local accounting bodies. In countries where domestic accounting standards are considered more relevant than international accounting standards, companies are reluctant to apply international accounting standards.
• The impact of economic consequences on accounting standards that is not predictable as it varies country by country.

Measurement of harmonization

Statistical methods for the measurement of de facto harmonization by investigating accounting practices in companies' financial statements:

• Van der Tas indexes- (1988, 1992): H index of national harmony, I index of international harmony and C comparability index
• Archer et al.- (1995) revise the Van der Tas indexes: between-country C index (correction of C) and within-country C index (correction of I)

These indicators consider the consequences of European Directives on accounting harmonization.

Altre versioni di questi indicatori sono state proposte per considerare le revisioni delle Direttive europee così come l'applicazione delle IAS/IFRS. Ulteriori studi si concentrano sulle revisioni e sulle applicazioni ad hoc dei precedenti indicatori di armonizzazione de facto. Storia e scopo dell'IASC IASC (International Accounting Standards Committee) è stato fondato nel 1974 (ora noto come IASB). I membri originali erano Australia, Canada, Francia, Germania, Giappone, Messico, Paesi Bassi, Regno Unito e Stati Uniti; successivamente i membri sono cresciuti fino a oltre 100 paesi rappresentativi. Fino al 2001, l'IASB era governato da un Consiglio composto da 13 paesi. Dal 1983, un importante membro è l'IFAC (International Federation of Accountants), che si concentra su questioni come la revisione contabile, la contabilità di gestione e i Congressi internazionali degli Accountants. I membri non sono solo paesi, ma anche associazioni internazionali a diversi livelli e con scopi diversi (Nordic Federation of Accountants, ecc.).

Federation of Swiss Industrial Holding Companies, International Council of Investment Associations, International Association of Financial Executives Institutes

Reform of the IASC in 2001 and the IASB

• Reasons for a reform:
• reducing the load on the part-time Board representative, and proposing a technocratic executive board and supervisory board, change from part-time to full time and the presence of both a board with technical skills and a board with a supervising purpose
• enlarging the members of the Board with entries of new countries and organizations
• increasing the degree of partnership with national standard setters

IASCF International Financial Accounting

• After 2001 the IASC Board was succeed by the Committee Foundation IFRS Foundation, then namely whose operating arm is the IASB - International Financial Accounting Standards Board. IASCF was established in order to have a committee controlling the IASB

After 2001 the IASB was governed by a Board of 16

members or more, which are appointed by Trustees (USA, Japan, Australia, Canada, South Africa, France, Germany, Switzerland, Brazil, China, Denmark, Italy, Netherlands, UK) that are appointed by a Monitoring Group

Other bodies in the revised structure are the IFRS Interpretation Committee issuing interpretation of existing standards IAS/IFRS, the IFRS Advisory Council of analysts, preparers, auditors and other advisors of IASB agenda and work program, and the Monitoring Group for making the Trustees accountable

After 2001, the new accounting standards issued by IASB were defined IFRS

The IASB tasks

• New improvements projects: preparing exposure draft for amending (revision) previous standards
• Continuing projects proposed by IASC
• Major reforms, considering reforms into force and coming into force
• Program of accounting converge of IAS/IFRS with the FASB, US accounting standards (Memorandum of Understanding between the FASB and the IASB): - convergence of

ng duplication of efforts• Influence on accounting firms: IASB's standards are widely used by accounting firms inpreparing financial statements for their clients• Influence on investors: IASB's standards provide investors with consistent and comparablefinancial information across different countriesInfluence of the FASB• Influence on US GAAP: FASB has been working towards convergence with IFRSs toreduce differences between the two sets of accounting standards• Influence on international standard-setters: FASB collaborates with international standard-setters to develop common standards that meet the needs of global investors• Influence on accounting firms: FASB's standards are used by accounting firms in the UnitedStates to prepare financial statements for their clients• Influence on investors: FASB's standards provide investors with reliable and relevant financialinformation about US companiesThe convergence program between IASB and FASB aimed to improve the quality and comparabilityof financial reporting globally. By reducing differences between IAS/IFRS and US GAAP, theprogram sought to enhance the transparency and usefulness of financial information for investors.