Explain the rationale for the global harmonization of financial reporting and disclosure requirements. -Make the financial statement more comparable across the global market so investors can invest their capital in more efficient comparable. 2. Identify two groups that are exerting pressure for pursuing global harmonization. How do these two groups stand to benefit from harmonization? -Investors are concerned with the reliability and comparability of sinacial statement in countries other than theirs.
They favor this because it will help lower cost of investing in countries aboard and enhance the effectiveness of investment decisions. Multinational companies want global harmonization because of the increase in international diversity of manufacturing and sales.
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The fact that all accounting practices are not compatible means that they devote more resources to prepare and consolidate there financial statements. 3. What are the main obstacles to global accounting harmonization? In your opinion, are these obstacles likely to be overcome in the near future? The main obstacles are due to economics and politics. I think it will be a very slow and hard process to invoke in the near future because of everyone sensitivity and pride of there own countries.
The polices would have to come from a super national organization and combine principals of many different countries. 4. What is the role of each of the following supra-national organizations? a. International Accounting Standards Board (IASB) -Developed as a parent entity of the IASB, it is an independent standards setter that assumes accounting standards setting responsibilities from IASC. . International Federation of Accountants (IFAC) -Organizational accounting organization that represents accountants employed in public practices, and the primary activity is to serve public interests and to facilitate cooperation among members. c. International Organization of Securities Commissions (IOSCO) -Known as the international standard setters for securities market, it promote high standards of regulation for sounds markets, and establishes standard and effective surveillance of international securities to name a few objectives. d.
Organization for Economic Cooperation and Development (OECD) -“Rich mans club”, comprised of 30 countries that produce 2/3 of the worlds goods and services in were all countries are committed to a market economy and pluralistic democracy, that provided governments with a setting to discuss, develop, and perfect economic an d social policies. 5. The FASB has described their proposal to transition to IFRS as an “improve and adopt” approach. What are the two parts of this “improve and adopt” proposal? Why does the FASB support this approach? First, the “improve and adopt” plan will require a joint effort by FASB and IASB to develop and improve standards in the areas that will benefit financial statements users universally. Secondly, a gradual approach transition to IFRS will reduce the disruptions that might occur from an abrupt switch. -Third, this approach allows other infrastructures elements to improve and converge while IFRS and improved and mandated. Finally, this approach avoids the added cost and complexity of dealing with two accounting systems. 6.
What is the current plan for joint projects between the FASB and IASB? What is your assessment of the reasonableness of this plan? -The current plan between the joint projects is on a modified strategy and a delayed timeline for several of their convergence project extended till the end of 2011. Even thought that are delayed it is said that it will not negatively impact the SEC’s timeline. I think it is a good idea to have a longer period of time to implement these joint projects because it gives the stakeholders more time to express there input. 7.
The PWC article identifies eleven (11) joint projects currently underway (i. e. , financial instruments, revenue recognition, leases, etc. ). Select three of these joint projects to consider in depth. For the three projects you have selected: -Financial Instruments- The issues with the financial instruments used to cause an inconsistent way of reporting value, revenue and other forms of financial information’s that could misleading investors. The joint project it to bring off these financial instruments together to make it easier to understand.
To bring convergence there is a need for multiple new a more useful approaches like, recognizing losses earlier and recognizing credit impairments when not thought to collect. -Revenue recognition- Revenue recognition currently recognizes revenue when the customer signs into an agreement and values the price of fulfillment as being a fixed value. The new joint project would require the recognition of a contract come after the contract is fulfilled and not be able to keep the value as fixed.
Another important aspect of the proposal is to establish principles to promote comparability among similar contracts. -Leases- -Consolidation- Under the ne joint projects, many of the companies will still be able to consider certain investment companies under the U. S. GAAP are likely to continue to meet qualifications under the new definition, but some may not. The one major change will be defining if the company has control over the investment company and how that will be determined. a. Provide a brief overview of the issue. b. Explain why it is important. c.
Describe what needs to be done to bring about convergence. 8. The authors of the last article, Paul Miller and Paul Bahnson, are not proponents of international uniformity of accounting standards. Identify three reasons they are against it (they provide more than three). Do you agree? -He believes that uniformity is not comparable, it kills innovation, and doesn’t believe IFRS is uniformed. I do agree with him in some aspects because uniformity across a global market, while a very noble goal, is almost impossible to achieve and could result in so many problems.