i have question

Anonymous

Question Description

Please find the attachment below, and paraphrase the answers that are in the word document.

I need this job done before Wednesday 11am

Unformatted Attachment Preview

1. The ultimate goal of both harmonization and convergence is to achieve international comparability in financial reporting, and both are processes that take place over time. However, while harmonization refers to the reduction of alternative accounting practices in different countries, convergence refers to the process of developing a set of high quality financial reporting standards for use internationally (the process of global standard setting). Until the establishment of the IASB in 2001, the main objective of the IASC was to achieve international harmonization in accounting standards. Accordingly, the focus was to achieve consensus among different countries with regard to accounting standards. In this process different countries were allowed to have different accounting standards as long as they did not conflict, for example, the harmonization program of the European Union. On the other hand, convergence implies the adoption of one set of standards internationally. 2. The potential benefits for a multinational corporation from convergence of financial reporting standards are derived mainly as a result of international comparability of financial reporting standards and practices. Examples of such benefits include: reduction of financial reporting costs for multinational corporations that seek to list their stocks on foreign stock exchanges; reduction of cost of preparing worldwide consolidated financial statements; and ability to transfer accounting staff to other subsidiaries overseas more easily. 3. The EU Directives were not completely effective in generating comparability across EU member nations because the Directives: a. allowed countries to choose among available options in many areas and b. did not cover many accounting issues, such as leases and translation of foreign currency financial statements. 4. The three phases in the life of the IASC were: a. 1973-1988 – lowest common denominator approach to standard setting b. 1988-1993 – reduction of existing options in IASs through the Comparability of Financial Statements Project c. 1993-2001 – development of core set of standards under the IOSCO Agreement 5. IOSCO’s endorsement of IASs legitimized the IASC’s claim as “the” international accounting standard setter. This also helped in addressing, at least partly, the problem of IASC’s lack of enforcement power. 6. Twelve of 14 members of the IASB are full-time. They are required to sever all ties to former employers to establish their independence. The most important criterion for selection of IASB members is technical competence. These aspects of the Board’s structure confirm the IASB’s commitment to develop the highest quality standards possible. In addition, the IASB follows an open process in which constituents are able to provide input and feedback on IASB projects and proposed standards. The geographical representation is achieved through the method of appointing the IASC Foundation Trustees. 7. A principles-based approach to accounting standard setting refers to the development of standards that provide the basic guidelines for accounting in a particular area without getting bogged down in detailed rules. The IASB uses a principles-based approach in developing IFRS. Traditionally, the U.K. and the member countries of the British Commonwealth have adopted this approach. 8. IFRS appear to cover most of the major accounting issues. With the issuance of IFRS 2, “Share-based Payments,” IFRS even provide guidance with respect to the accounting for stock options. Other than banks and financial institutions (IAS 30), IFRS do not provide rules for specific industries. On the other hand, IAS 41, “Agriculture,” provides guidelines for a particular sector of the economy for which rules are lacking in many countries. 9. The IASB has adopted a principles-based approach to develop a set of accounting standards that constitute the “highest common denominator” of financial reporting. This approach is in sharp contrast to the approach adopted by the IASC in its early years. Also, unlike the IASC, the IASB is now formally linked to national standard setters. Seven of the 14 Board members have a direct liaison relationship with influential national standard setters and the IASB has entered into a formal agreement to converge its standards with those of the U.S. FASB. The major change is in the emphasis of the role of the IASB, from harmonization to global standard setting. 10. The different ways in which IFRS might be used within a country include: • Required of all companies domiciled within the country. • Required of parent companies in preparing consolidated financial statements; national GAAP used in parent company-only financial statements. • Required of all companies (both domestic and foreign) publicly traded within the country; non-listed companies use national GAAP. • Required of foreign companies that are publicly traded within the country. Domestic companies use national GAAP. • Required of domestic companies with foreign operations and/or foreign stock exchange listings. Domestic companies without a foreign presence use national GAAP. • Instead of requiring the use of IFRS in each example above, a country could allow the use of IFRS in lieu of domestic GAAP in each situation. 11. There are several factors that might inhibit worldwide comparability of financial statements even if IFRS are required in every country. First, even though the Comparability Project of the 1990s reduced the number of alternative methods allowed, several IFRS continue to allow companies to choose between a benchmark and an allowed alternative treatment. If the benchmark is adopted by one company and the allowed alternative by another company, strict comparability will not exist. (It should be noted that this is also true within a country if domestic GAAP allows choice among alternatives, for example, in depreciation and inventory valuation methods.) Second, even if the same treatments are selected, cross-national comparability could be harmed if accountants apply the principles-based IFRS differently. Differences in cultural values across countries could cause accountants to have biases, for example, with respect to conservatism that could influence their judgment in applying IFRS. 12. The objective of developing a set of high quality standards for financial reporting by companies internationally is commendable. There are many potential benefits associated with it. For example, it would increase the level of comparability of information contained in financial statements prepared by companies from different countries, and this would benefit investors when using those statements to assess the performance of companies as the basis for their investment decisions. Currently, about one hundred and twenty countries are adopting IFRS and some other countries, including the U.S., are taking steps so that they can use those standards in future. However, adoption of IFRS is different from their implementation on a consistent basis. If the standards are not implemented consistently by companies in different countries, the objective of international comparability of information contained in financial statements would not be achieved. There are many factors that are likely to influence the consistency with which IFRS are implemented in different countries. IFRS are principles-based standards. To start with, arriving at principles that satisfy all of the parties involved in different countries seems an almost impossible task. Further, accountants’ professional judgments play an important role in implementing principles-based standards, as there are many principles and uncertainty expressions that need interpretation. But, accountants’ professional judgments can be influenced by factors such as cultural values and the level of professionalism in a particular country. One can argue that it is unnecessary to force all companies worldwide to follow a common set of rules requiring to comply with a set of standards which may not be relevant to them as it would be unnecessarily costly and would lead to a situation of standards overload. Furthermore, not only is convergence difficult to achieve, but the need for such standards is not universally accepted. Finally, global convergence may not be necessary as the international capital market will force those companies that can benefit from accessing the market to provide the required accounting information without convergence. 13. IAS 1 indicates that, if existing IFRS do not provide guidance in a specific area, management should refer to the definitions, and recognition and measurement criteria for assets, liabilities, income and expenses set out in the Framework. 14. The amendments to IFRS 1 First-time Adoption of IFRS address the retrospective application of IFRS to particular situations and are aimed at ensuring that entities applying IFRS will not face undue cost or effort in the transition process. 15. Nearly 120 countries have either adopted or allowed the use of IFRS. 16. The SEC has ruled that beginning in 2007, foreign companies which have prepared their financial statements on the basis of IFRS need not include a reconciliation to U.S. GAAP in filing the Form 20-F. A possible reason for this rule is that it would help better serve investors. The AICPA, FASB and senior finance professional supported this view. Taking a step further, the SEC has considered allowing U.S. domestic companies also to use IFRS and developed a “Roadmap for the Potential Use of Financial Statements Prepared in Accordance with International Financial Reporting Standards by US Issuers”. ...
Purchase answer to see full attachment

Tutor Answer

Dr_MurpheyPhD
School: UT Austin

find t...

flag Report DMCA
Review

Anonymous
The tutor was pretty knowledgeable, efficient and polite. Great service!

Anonymous
Heard about Studypool for a while and finally tried it. Glad I did caus this was really helpful.

Anonymous
Just what I needed… fantastic!

Studypool
4.7
Trustpilot
4.5
Sitejabber
4.4

Brown University





1271 Tutors

California Institute of Technology




2131 Tutors

Carnegie Mellon University




982 Tutors

Columbia University





1256 Tutors

Dartmouth University





2113 Tutors

Emory University





2279 Tutors

Harvard University





599 Tutors

Massachusetts Institute of Technology



2319 Tutors

New York University





1645 Tutors

Notre Dam University





1911 Tutors

Oklahoma University





2122 Tutors

Pennsylvania State University





932 Tutors

Princeton University





1211 Tutors

Stanford University





983 Tutors

University of California





1282 Tutors

Oxford University





123 Tutors

Yale University





2325 Tutors