Chapter 3

Comparative International
Financial Accounting I
Dosen Pengampu :
Dra. Siti Nurlaela, SE,Msi.,Ak. CA
Strategic Decision Point
 IASB was created to increase comparability
 How will differing cultures interpret standards?
 Will standards be applied consistently?
 What can the IASB do to mitigate this issue?

International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black

 Founding Members of the
IASC and IASB
Exhibit 3.1 Economic Data for Developed Countries
GDP PPP GDP Per Populatio Unemplo Inflation Area per sq Imports Exports
(in billions) Capita n (in yment km (in (in
millions) (in billions) billions)
thousands)

U.S $10,990.0 $37,800 293.0 6.0% 2.3% 9,631.4 $,1260.0 $714.5

U.K. $1,666.0 $27,700 60.3 5.0% 1.4% 244.8 $363.6 $304.5
Australia $571.4 $29,000 19.9 6.0% 2.8% 7,686.9 $82.9 $68.7
Netherlands $461.4 $28,600 16.3 5.3% 2.1% 41.5 $217.7 $253.2

Sweden $238.3 $26,800 9.0 4.9% 1.9% 450.0 $83.3 $102.8

Germany $2,271.0 $27,600 82.4 10.5% 1.1% 357.0 $585.0 $696.9
Switzerland $239.3 $32,700 7.4 3.7% 0.6% 41.3 $102.2 $110.0
France $1,661.0 $27,600 60.4 9.7% 2.1% 547.0 $339.9 $346.5
Italy $1,550.0 $26,700 58.1 8.6% 2.7% 301.2 $271.1 $278.1
Spain $885.5 $22,000 40.3 11.3% 3.0% 504.8 $197.1 $159.4
Japan $3,582.0 $28,200 127.3 5.3% -0.3% 337.8 $346.6 $447.1
International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black
Anglo-American Accounting
 Less conservative and more transparent
 United States
 Focused on large corporations and interests of investors
 Securities markets are the dominant influence on
accounting regulation
 SEC has authority to formulate and enforce accounting
standards
 Delegated to the FASB

 Only listed corporations are required by law to comply with

GAAP
 Very public standards-setting process

International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black

Anglo-American Accounting
 United Kingdom
 Focus on investors
 Company law has a much wider remit
 Accounting requirements are for all LLCs and
corporations
 Accounts present a “true and fair view” of
company results
 Accounting Standards Board (ASB) will
incorporate International Financial Reporting
Standards (IFRS) by 2005

International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black

Anglo-American Accounting
 Australia
 English influence
 Focus on investors rather than tax needs
 Australian Securities & Investments Commission
 Regulate and enforce company law
 Australian Accounting Standards Board – creates
standards
 Urgent Issues Group (UIG)
 Financial Reporting Council oversees AASB
 Provides guidance for public and private sector

International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black

The Netherlands
 Business economics approach to accounting
 Tradition of
 Public ownership of shares
 International business outlook
 “Generally Acceptable Accounting Principles”
 Provided by Council for Annual Reporting
 Members from the accounting profession (NIVRA) and
others
 Not mandated by law, but followed by most
companies
 Company law is supplemented by case law
 IFRS required for listed companies in 2005

International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black

Nordic Accounting
 Nordic Countries: Denmark, Finland, Iceland, Norway, and
Sweden
 Sweden
 Focus on creditors, government, and tax authorities
 Two-tier approach
 Individual accounts – traditional basis
 Consolidated accounts of major groups – international capital
market needs
 The law provides a framework rather than detailed requirements
 Accounting Standards Board and Accounting Council provide
guidance in the context of company law
 IFRS required for listed companies in 2005

International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black

Germanic Accounting
 Germany
 Focus on needs of creditors and tax authorities
 MNEs are becoming more investor-oriented
 Company law is predominant influence
 Accounting rules amend the Commercial Code
 Annual accounts are the basis for tax accounts
 Tax rules dominate legal accounting issues
 Limited impact of accounting profession
 German Accounting Standards Board
 IFRS required for listed companies in 2005

International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black

Germanic Accounting
 Switzerland
 Favors needs of creditors and authorities
 More companies are making further voluntary disclosures
 Very secretive and conservative system
 Dominated by company law and tax regulations
 New law – 1992
 Improved disclosure and protection for investors
 Secret reserves are still allowed
 Accounting profession consists of
 Foundation for Accounting and Reporting
Recommendations – supervises the Accounting Standards
Board
 Recommendations elaborate and supplement company law

International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black

Latin Accounting
 France
 Focus on needs of creditors and tax authorities
 Consolidated groups can report in U.S. GAAP or IAS
 Company law and tax law are the predominant influences
 Focus on national economic planning
 Tax laws tend to override accounting rules
 Small accounting profession established by law
 OECCA and CNCC for public accounting and auditing
 Small stock market
 Most capital contributed by banks, government, or family
 French equivalent of the SEC – Commission des
Opérations de Bourse (COB)
 IFRS required for listed companies in 2005

International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black

Latin Accounting
 Italy
 Focus on interests of government and tax authorities
 Focus is shifting because of globalization
 Accounts are used as the basis for taxation
 Tradition of conservatism to minimize taxes
 Italian equivalent of the SEC – CONSOB
 Slow to adopt EU directives because
 External investor interests are seen as less important than
family and state interests
 Tendency to protect the right of companies to keep
business secrets
 Professional accounting bodies are advisory
 IFRS required for listed companies in 2005

International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black

Asian Accounting
 Many countries have a colonial accounting history or
foreign influence
 Japan
 Focus on needs of creditors and tax authorities
 Commercial Code (similar to Germany)
 Corporate tax law is very influential
 Leads to conservative accounting
 Government institutions are directly involved in standard-
setting
 Ministry of Finance – responsible for securities and
exchange law
 Ministry of Justice – responsible for application of
Commercial Code

International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black

Asian Accounting
 Japan continued
 Accounting for business combinations is a source of
concern
 Keiretsu – system of interlocking directorates of related
businesses formed to work together
 Small accounting profession
 Makes recommendations on the practical application of
legal accounting rules
 Tendency for secrecy and a lack of disclosure
 Increased international focus
 ASBJ in Japan is similar to the FASB in the U.S.
 Approximately 30 Japanese companies listed in the U.S.
prepare financial statements in accordance with U.S.
GAAP.

International Accounting & Multinational Enterprises - Chapter 3 - Radebaugh, Gray, Black