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International Differences in Accounting - Essay Example

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Accounting rules are important determinants of financial reporting quality. However, because they differ across countries, they reduce the quality and relevance of accounting information. (Ding et al, 2007). Companies from different countries report different information as well as use different accounting methods because rules or regulations in different countries require alternative treatments…
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Download file to see previous pages IFRS 8 which replaced IAS14 (Deloitte & Touche, 2007), is the standard that deals with similar issues under IAS. Some of the major differences observed between SFAS 131 and IFRS 8 include the following: (Deloitte & Touche, 2007):
While IFRS requires that measures of segment liabilities be disclosed if those measures are provided regularly to the chief operating decision maker, under SFAS No. 131 such disclosures are not required.
Under IFRS 8, the core principle is used as the basis for determining the operating segments of an entity while under IFRS the products or services are used as the basis for determining the operating segments.
Differences may also arise as a result of different interpretation of rules by companies in different countries despite the similarities that may exist between the rules. (Roberts et al, 2005). For example because many areas of accounting require the use of estimates, forecasts or judgments companies may differ in the way they estimate, forecast or judge in different situations. (Roberts et al, 2005).
A distinction must be made between accounting r...
(Roberts et al, 2005). For example because many areas of accounting require the use of estimates, forecasts or judgments companies may differ in the way they estimate, forecast or judge in different situations. (Roberts et al, 2005).
iii. Differences in Preferred Accounting Practice.
A distinction must be made between accounting regulations or de jure issues, and actual practices, or de facto issues. (Weetman et al, 1998; Roberts et al, 2005). A number of options are contained in accounting regulations as well as there may also be a large number of issues which are not covered by accounting regulations at all, giving companies even more choice. (Roberts et al, 2005). While it is relatively straightforward (although not necessarily easy) to compare the accounting practices of two countries, this may tell us relatively little about how similar the accounting practices of two companies actually are in areas were discretion exists. (Roberts et al, 2005). De facto practices may differ considerably across countries, even if there are few de jure differences. Alternatively, all companies, irrespective of country domicile, choose wherever possible to use similar methods, de facto differences may be less than de jure differences. (Roberts et al, 2005).
b). Having identified the ways accounting practices may differ, the study will now take a look at the importance of the differences to preparers of financial reports and user groups. The main preparers identified by Roberts et al (2005), include companies while users include companies, investors and other user groups. Companies that carry out trade in different carries such as multinational companies are ...Download file to see next pagesRead More
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