Ch 3 Flashcards
The advantages and disadvantages of harmonizing and accounting standards were summarized in this chapter.
Expand on these advantages.
Comparability: by creating one form of statements, users would not have to worry about differences in currency and standards.
Reduces costs: consolidated statements would not be as complex or as time consuming to prepare.
Consistency: having the same standards to reflect economic and social conditions would level the playing field.
Easier to make investments: users will know what to look for when analyzing information.
International credibility
The advantages and disadvantages of harmonizing and accounting standards were summarized in this chapter.
Expand on these disadvantages.
Very difficult to accomplish: Each country has different rules and regulations.
Smaller businesses: would suffer, hard to adapt and adjust to such large standards.
Enforcement: a new body would be in charge of making sure firms are in compliance with standards.
Too much and too many companies - probably impossible.
Five approaches to transnational financial reporting were identified in the chapter.
List some of the advantages and disadvantages of each approach:
Send the same set of financial statements to all users.
Advantages: This is one of the simplest approaches. Preparing only one set of statements is not too costly and it will aid some users in decision making. Every user gets the same report.
Disadvantages: The financial statements will not be helpful to all users. Foreign users will struggle to understand the data and compare the reports.
Five approaches to transnational financial reporting were identified in the chapter.
List some of the advantages and disadvantages of each approach:
Translate the financial statements sent to foreign users into the language of the foreign nation’s user.
Advantages: The foreign users will be able to understand the report and what is being explained.
Disadvantages: It limits comparability and is not the most accurate representation
Five approaches to transnational financial reporting were identified in the chapter.
List some of the advantages and disadvantages of each approach:
Translate the financial statements sent to foreign users into the foreign nation’s language and currency.
Advantages: Allows foreign users to understand all of the information included in the financial statements.
Disadvantages: More costly approach. It may be hard to translate the language and currency of the report. Users may think their principles are being used, when they are not.
Five approaches to transnational financial reporting were identified in the chapter.
List some of the advantages and disadvantages of each approach:
Prepare two sets of financial statements, one using the home country’s language, currency, and accounting principles, the second using the language, currency, and accounting principles of the foreign country’s users.
Advantages: Both sets of financial statements would be useful to users.
Disadvantages: It takes more time and resources to completely convert one set of financial statements into another set that reflects foreign accounting principles, currency, and language. This may limit the information included in the reports.
Five approaches to transnational financial reporting were identified in the chapter.
List some of the advantages and disadvantages of each approach:
Prepare one set of financial statements based on worldwide accepted accounting principles.
Advantages: The financial statements would be consistent and uniform each year. This would improve comparability to other companies and prior year data.
Disadvantages: Not all differences between reporting practices can be explained. Only possible is standards were harmonized.
The International Accounting Standards Committee (IAS was formed in 1973. In 2001, the IASC was replaced by the IASB.
What was the purpose of the IASC?
To develop worldwide accounting standards.
It was an independent private sector body whose objective was to achieve uniformity in accounting principles that are used for worldwide financial reporting.
The International Accounting Standards Committee (IAS was formed in 1973. In 2001, the IASC was replaced by the IASB.
How does the IASB attempt to achieve these objectives?
By retaining all of the IASC’s prior pronouncements, unless replaced by updates.
Publish standards for the presentation of financial statements that are audited by its member organizations.
Increase the reliability of financial statements for foreign users.
