Apply market research to generate audience insights. Measure content performance. Develop and improve products. List of Partners vendors. Generally accepted accounting principles, formally designated in the United States as GAAP , vary from country-to-country, and no universally accepted accounting recording and publishing system currently exists.
The GAAP are a combination of procedures and standards utilized by a company when generating its financial statements. Both authoritative standards, determined by policy boards, and the most widely used and accepted means of writing and publishing accounting information are joined to create GAAP. These standards are required of companies so an investor can have some basic consistency among the financial statements of companies for comparison. Covered under the GAAP are such things as classification of items on the balance sheet, share measurements and recognition of revenue.
These standards are used by the United Kingdom and member countries of the European Union, as well as a number of other countries. Part of the reason it is so difficult to generate one set of universally accepted accounting standards is the basis on which the standards are set. If not, what key elements of that infrastructure are missing? Who should be responsible for development of those elements? What is your estimate of how long it may take to develop each element?
A standard-setter's responsibility for ensuring consistent application of its standards includes providing an effective mechanism for identifying and addressing interpretive questions in an expeditious fashion. The IASC began addressing interpretive issues in with the creation of its Standing Interpretations Committee SIC to provide resolution of interpretive issues arising in the application of the IASC standards that are likely to receive divergent or unacceptable treatment in the absence of authoritative guidance.
Has the SIC been effective at identifying areas where interpretive guidance is necessary? Has the SIC provided useful interpretations in a timely fashion? Are there any additional steps the IASC should take in this respect? If so, what are they? The restructuring also is expected to integrate the roles of the IASC and those of national standard-setters.
Instead, we expect to continue a product-oriented approach, assessing each IASC standard after its completion. Nonetheless, the quality of the standard-setter has relevance to our consideration of the IASC standards, particularly with respect to implementation and interpretation questions.
Since many of the IASC standards are new or relatively new, application issues may arise that require the response of an effective and high quality standard setter. Additionally, the quality of the standard-setter has critical implications for the development and acceptance of future standards.
Without competent, independent audit firms and high quality auditing procedures to support the application of accounting standards, there is no assurance that the accounting standards will be applied appropriately and consistently. As discussed in the introduction to this release, increasing globalization of business and integration of capital markets raise challenging questions of how to provide oversight of audit professionals on a world-wide basis to ensure consistent high quality and ethical audit and accounting practices.
In the United States, implementation and application of U. GAAP are supported through professional quality control practices and professional and governmental state and federal oversight and enforcement activities. National technical offices of U.
GAAP and U. Will those practice guidelines and quality control standards ensure application of the IASC standards in a consistent fashion worldwide? Do they include a internal working paper inspection programs and b external peer reviews for audit work? If not, are there other ways we can ensure the rigorous implementation of IASC standards for cross-border filings in the United States?
If not, should there be disclosure that the audit firm is not subject to such standards? In many jurisdictions, including the United States, accountants and auditors are trained and tested in their domestic accounting standards, but do not receive training in IASC standards. For that reason, accountants and auditors around the world will need to develop expertise with IASC standards to support rigorous interpretation and application of these standards. What training have audit firms conducted with respect to the IASC standards on a worldwide basis?
What training with respect to the IASC standards is required of, or available to, preparers of financial statements or auditors certifying financial statements using those standards? This partnership with the private sector facilitates input into the accounting standard-setting process from all stakeholders in U. Our willingness to look to the private sector, however, has been with the understanding that we will, as necessary, supplement, override or otherwise amend private sector accounting standards.
The SEC staff is involved with the application of accounting standards on a daily basis through its review and comment process. This review process, administered by the Division of Corporation Finance, allows the staff to review and comment on a company's application of GAAP and related SEC disclosure requirements. The SEC staff would have the same significant interpretive and enforcement role in the application of the IASC standards when those standards are used to prepare financial statements included in SEC filings.
We are seeking to identify ways to reduce the development of diverging interpretations of IASC standards. How can the risk of any conflicting practices and interpretations in the application of the IASC standards and the resulting need for preparers and users to adjust for those differences be mitigated without affecting the rigorous implementation of the standards? In considering changes in our current financial reporting requirements, we will consider the effects of possible changes on the ability of our enforcement program to provide an effective deterrent against financial reporting violations by foreign issuers, their corporate officials and their auditors.
If so, how? To facilitate its investigations of possible securities law violations, the SEC staff may need to obtain access to a non-U. We also have the potential of using domestic compulsory mechanisms or enforcement tools such as memoranda of understanding and other arrangements with non-U.
However, these approaches for obtaining information about an auditor's work can cause delays in investigations, and may still not permit obtaining access to working papers and testimony that are needed to assess information the issuer has provided to its auditors and to investigate the adequacy of the work supporting the auditor's report.
The circumstances in which we need this information have grown, due to the expanded multinational activities of U. Greater acceptance of the IASC standards may increase further the instances in which an issuer's auditor is not based in the United States. For example, should we amend Regulation S-X to require a representation by the auditor that, to the extent it relied on auditors, working papers, or information from outside the United States, the auditor will make the working papers and testimony available through an agent appointed for service of process?
If not, should we require that the lack of access to auditors' workpapers be disclosed to investors? Is there another mechanism for enhancing our access to audit working papers and witnesses outside the United States? The assessment work has two aspects: 1 considering the quality of each of the IASC standards individually and 2 evaluating whether the body of standards operates effectively as a whole.
The goal of the core standards project has been to develop a high quality set of generally accepted international accounting standards that ultimately would reduce or eliminate the need for reconciliation to national standards. Any Commission action could take several forms, including, for example: Maintaining the current reconciliation requirements in all respects. Removing some of the current reconciliation requirements for selected IASC standards and extending that recognition to additional IASC standards as warranted based on future review of each standard.
Under this approach, when alternative treatments are specified such as benchmarks and allowed alternatives , we may specify one treatment as acceptable, while retaining the reconciliation requirement to those financial statements that employ the unacceptable treatment. For example, we might require reconciliation if a company applies the allowed alternative treatment of periodically writing-up long-lived assets to estimated fair value. GAAP and SEC supplemental disclosure requirements for footnote disclosures and the level of detail for the line items in financial statements.
Accepting financial statements prepared in accordance with the IASC standards without any requirement to reconcile to U. There may be other approaches, or combinations of approaches, that would be appropriate. In addition, the approach we adopt initially may change in light of future modifications of the IASC standards or further development of the related infrastructure elements. GAAP reconciliations?
Please explain, from your viewpoint as a preparer, user, or auditor of non-U. GAAP financial statements, whether the reconciliation process has enhanced the usefulness or reliability of the financial information and how you have used the information provided by the reconciliation.
Please identify any consequences, including quantification of any decrease or increase in costs or benefits, that could result from reducing or eliminating the reconciliation requirement.
Are there any other appropriate bases for distinction? Most standards are not required to be applied until fiscal years beginning on or after January 1, , at the earliest.
In contrast, the tradition in Switzerland, Germany, and Japan is for companies to rely more on banks for funding. Companies in these countries have a tighter relationship with banks. This means that less information is disclosed to the public. The two accounting standards can show quite different results for the same company, which is why convergence proponents advocate using one global accounting standard.
Further problems arise when different country accounting rules make the financial statements look different. If the same transaction is accounted for in different ways based on different country accounting rules, the comparability of financial reports is undermined.
For example, converting to IFRS would make it possible for IBM to create a globally shared service center for accounting, rather than having accounting departments in different regions. Tyco International, for example, is the parent of 1, legal entities, of them outside the United States.
For Tyco, having to follow only IFRS rules would be positive, because it would enable Tyco to prepare financials on the same basis worldwide and to more freely move accounting staff from country to country and business to business.
By the end of , IFRS had been translated into nearly 40 languages. Translations primarily have been into European languages, but Chinese, Japanese and Arabic translations also have been made. Its translation process is well-organized and quite rigorous. However, despite the care taken by translators and the oversight provided by translation review committees, translation problems exist.
In some cases, words and phrases used in English-language accounting standards cannot be translated into other languages without some distortion of meaning. Several research studies have shown this to be true. Davidson and Heidi H. In the study, cited earlier by Doupnik and Richter, German accountants fluent in English assigned values to both the English original and the German translation of probability expressions used in IFRS.
For several expressions, the original and translation were interpreted differently. A particularly troublesome term to translate is remote , which is used to establish a threshold for the disclosure of contingent liabilities in IAS 37, Provisions, Contingent Liabilities and Contingent Assets , and in IAS 31, Interests in Joint Ventures. IAS 37 para. It is at the end of a continuum that begins with probable , moves to possible , and ends with remote.
The fact that remote has several different meanings in English suggests that translation might create some problem. Translating remote into Spanish appears to cause little or no difficulty.
The online translation dictionary available at www. On the other hand, remoto can only be translated into English as remote. Translating remote into French is not quite as easy. Similarly, the French word faible is translated into English as faint , light or weak but not remote. The French translator of IFRS selected a French word that is intended to convey the same meaning as remote, in the sense of very unlikely, even though it is not a direct translation.
Given that the IASC used remote in both IAS 31 and IAS 37, there is no evidence that the standard writer intended for the nondisclosure threshold to be higher in one standard than in the other; yet the French version gives that impression.
Translation of remote into German is even more problematic, as evidenced by the fact that the translation is inconsistent between the two international standards. As a result, the German translation of IAS 31 establishes a much more stringent threshold for nondisclosure of contingent liabilities than the German translation of IAS 37; this difference does not appear to have been the intent of the IASC.
Moreover, neither translation appears to be the equivalent of what is intended in the original English-language standard.
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