2.3. International Harmonization of Finanfial Reporting - IASB and IFRS Flashcards

1
Q

Why is there a need for harmonisation of accounting standards? (IFRS)

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Harmonisation | Definition

A
  • internationalisation of businesses
  • integration of financial markets
  • the process of increasing the comparability of accounting practices (by setting bounds to their degree of variation)
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2
Q

What are reasons in favor of accounting harmonisation?

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A
  • better for investors (greater transparency /comparability for investment purposes)
  • better for companies (reduction in cost of capital if accounting becomes more transparent & reliable)
  • Advantages for companies willing to list in foreign exchanges and cost savings for multinationals
  • Easier mobility for accounting employees
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3
Q

What are obstacles to accounting harmonisation? Why do they differ around the world?

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What would be an alternative to harmonisation?

A
  • cultural
  • economic
  • tax-related reasons
    -> attempting to harmonise practices is hard!
  • companies could follow two sets of rules, one for domestic purposes and one for international comparison purposes (bc one could say that finnancial reporting is designed to adequately serve the needs of the national standard setter)
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4
Q

Definition of IFRS

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A
  • international financial reporting standards
  • a set of high quality, principles-based financial reporting standards issued by the IASB
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5
Q

What is the main thing it deals with?

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  • what information should be disclosed?
  • how should information be presented?
  • how should assets be valued?
  • how should profit be measured?
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6
Q

IASB | Definition

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A
  • international accounting standards board
  • independent standard setting body, located in London
  • produces the IFRS, which are quickly becoming the globally accepted set of accounting standards
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7
Q

History about IASB and IASC (= International Accounting standards committee)

  • 1973?
  • main aim?
  • how many IASs exist?
  • 1980s
  • 2000
  • 2001
A
  • 1973 IASC founded by accounting bodies of 9 countries
  • to publish accounting standards and promote their worldwide acceptance
  • 41 standards IASs published until 2001
  • agreement between IASB and international organisation of securities commossions (IOSCO)
  • 2000: IOSCO endorses the IASB standard, particularly for use by foreign registrant and EU proposes IASs adoption from 2005
  • since 1st april 2001 IASB replaced IASC as an independent body
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8
Q

Whats the IFRS standard setting process? (Hint: similar to many national standard setters)

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  • project planning, agenda
  • exposure for comment of discussion paper and exposure draft
  • revision and publication of IFRS
  • follow up process after publication about practical issues of implementation
  • controvery over influence of various national standard setters, especially in relation to agenda setting and delegation of work
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9
Q

There are around 174 jurisdictions for domestic listed companies.

Where is IFRS not permitted in?

A
  • USA, iran, Cuba, pakistan, tunisia, thailand (total: 23)
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10
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A
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