International Accounting Perspectives - Coursework Example

Running head: international accounting perspectives 30th May Evaluation of the purpose and context of International Financial Reporting International Financial Reporting entails the standards that are designed in order to ensure that the languages used by businesses are in such a way that their accounts are understandable as well as comparable across international boundaries. Based on the efforts by companies to engage in international trade, it is imperative that effective accounting policies are adopted to avoid losses as the result of changes in the exchange rates and inflation. The international accounting standards are progressively replacing the national accounting policies that have been adopted by countries. Being developed after an international consultation, international financial reporting standards are made after a due process. The standards are made through a process that consists of six stages. These includes setting the agenda, planning the project, developing and coming up with the discussion paper, developing and publishing the exposure draft, developing and publishing the standard and after the standard is issued. One of the major features of international financial standard includes fair presentation and complying with IFRS. This implies that all the transactions must be represented in a faithful manner. The income, expenses, liabilities and assets must be represented as outlined by the IFRS framework. The second feature of International Financial Reporting is that it ensures the principle of going on concern. This implies that financial statements must treat a business as a going on concern unless the owners want to cease trading or liquidate the company. Other key features of International Financial Reporting include offsetting, frequency of reporting, accrual basis of accounting, materiality, consistency of presentation and comparative information. One of the major goals of International Financial Reporting Standards is to provide guidance for the preparation of financial statement instead of setting rules that an industry is supposed to follow while it is reporting its financial position. It is worth to note that by use of International Financial Reporting Standards especially by firms operating globally, it is possible to emulate a reporting language that can be easily understood by auditors and investors. With more than 100 countries requiring all the public companies to apply the IFRS, the accounting policies globally will greatly improve by 2015. Discussion of the role and purpose of IASB International Accounting Standards Board (IASB) was formed in March 2001 in United States as a non profit firm. During the establishment of the organization, the purpose was to provide common global accounting standards for the countries that were willing to invest in capital market of the world. Additionally, the organization felt there was need to provide a common language that the outsiders of the organization together with the government financial information could use for it to understand and translate. The accounting standards in countries which are members of International Accounting Standards Board are set by the organization. However, main setters in United States and other parts of America Institute of Certified Public Accountants are set by Financial Accounting Standards Board. The main role of International Accounting Standards Board is to develop and approve International Financial Reporting standards (IFRSs). The organization operates under the oversight of the International Financial Reporting standards and under the constitution that is used to monitor the financial standards and thus all the technical matters relating to the International Financial Reporting Standards is in the hands of IASB (Bradshaw et al .2010). Another role that is carried by International Accounting Standards Board is to develop and pursue technical agenda that is to be represented to the member countries which is a requirement since the constitution together with the trustee and the public follow the constitution accordingly. As stipulated by the constitution, it is the role of IASB to prepare and issue international financial reporting standards and making sure that the drafts are exposed to the members. The interpretations that the committee discussed earlier are brought forward for the approval which is the role and the mandate of International Accounting Standards Board. Planning of the project which has to be started or already in progress is the role of International Accounting Standards Board to direct and manage the progress. Other than having common integrated global accounting standards for the capital market as the main purpose the organization implements the public interest which are of high quality and understood standard which the constitution has stipulated. All the members of the international accounting standards board work in order to achieve the goals set for the organization to produce high quality standards that are beneficial to all the member countries. Discussion of the role and purpose of FASB Financial Accounting Standards Board was developed in 1973 and the main purpose was to set financial accounting standards which were to be followed according the constitution concerned with financial accounting institutions. The financial standards that were set are known as Generally Accepted Accounting Principals (GAAP) and they are for the private and public sector though the organization itself is a private sector that is not for the profit but rather it is a non profit organization that is concerned with setting of financial accounting standards. The organization was formed to replace the Committee on Accounting Procedures (CAP), the Accounting Principles Board (APB) of the American Institute of Certified Public Accountants (AICPA). Financial information in the market plays a vital role in the market and generally in the economy and thus there is need to provide information that is transparent, credible and understandable. This is the reason why Financial Accounting Standard Board was established so that can improve accounting practices so that they will be transparent, credible and understandable by the private and public companies in united states (Spiceland, 2009). Another role that Financial Accounting Standard Board is associated with is that it must enhance that guidelines are set in the accounting reports using the rules that are stipulated in the organization constitution. During the normal working, problems and differences may rise in the organization and thus this is a role that Financial Accounting Standards Board is associated with so that it can indentify and resolve issues that can be a problem to the members and the organization. The organization ensures that the issues are resolved in a timely manner in addition it is the role of Financial Accounting Standards Board to make sure that uniform standards across the financial markets are set and followed accordingly for the private and public companies. Addressing of issues concerning the financial standards and interpreting them is another role and making sure that formal statements, reports including the policies and procedures used is published by the Financial Accounting Standards Board. The organization ensures that the standards are used in global markets without any problems. Evaluation of the Intel Company’s financial statements adherence to GAAP Generally accepted accounting principles (GAAP) refers to the accounting principles, procedures and standards that are utilized by companies during compiling of their financial statements. One of the major reasons as to why companies adopt GAAP is that they allow investors to be consistent with the financial statement of companies in order to make sustainable investment decision. Major concerns of GAAP include measurement of economic activity, time of making and recording the measurements, preparation and presentation of economic aspects in the companies’ financial statements and making disclosures that surrounds the business activities. One of the major rules of GAAP is the cost principle. According to the cost principle, all business transactions must be recorded at historical or original cost. This implies the cost that was charged for something. Intel Company, the global leader in the silicon innovation and microprocessors among other wide range of products adopt the GAAP rules. For example, the company purchases in 2013 stood at $21,187 million the original cost that has been recorded by the company balance sheet despite the current changes in the prices of the purchases. The second GAAP rule is the revenue recognition principle. This rule requires that firms only record the revenue when it is earned. Revenue is recognized when the seller has delivered the right product, the amount of the revenue can be measured and the buyer is expected to pay. As indicated by financial Statements for Intel corp (2013), the company revenue stood at $52,708 million which the organization actually earned after selling to its customers globally an indication that Intel follows the revenue recognition principle. The third rule according to GAAP is the matching principle. This principle requires that the accountants identify the expenses that have generated particular revenue and then match the expenses against those revenues. Being a technology company that incurs high expenses due to wide range of products, Intel accountants fully embarks on matching the company expenses with the revenue they have generated. The fourth GAAP rule is the going concern rule. This means that a firm will continue to operate for a long time and achieve its objectives. Having being established in 1968, Intel Company has operated for a long time and there is no possibility of the company liquidating in the near future. This indicates that Intel strictly follows the principle of going concern. References Bradshaw, M et al .2010. Response to the SECs Proposed Rule- Roadmap for the Potential Use of Financial Statements Prepared in Accordance with International Financial Reporting Standards (IFRS) by U.S. Issuers. Accounting Horizons (24)1. Financial Statements for Intel corp (INTC) (2013). Available at http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker=INTC Spiceland, D. 2009. Intermediate Accounting: Financial Accounting Standards Board. New York. McGraw-Hill/Irwin. Read More