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McGraw-Hill/Irwin Copyright 2012 by The McGraw-Hill Companies, Inc !ll rights reser"e#

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Chapter Topics

Convergencethebuzz word in international fnancial reporting.

Otherorganizations involved in harmonization.

The InternationalAccounting Standards Committee.

Evolution o the

International Accounting Standards !oard "IAS!#.IAS! ramewor$

and I%&S.'se o and support

or I%&S.(rinciples)based

vs. rules)based accounting.

IAS * and I%&S *.Arguments or and

against convergence.

Internationalconvergence towards and the adoption o I%&S.

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L

earning Objectives

1.

E+plain the meaning o convergence.

2.

Identi, the arguments or and against internationalconvergence o accounting standards.

3.-iscuss maor harmonization e/orts.

4.E+plain the principles)based approach used b, the

International Accounting Standards !oard "IAS!#.

5.-escribe the proposed changes to the IAS!0s %ramewor$.

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Lea

rning Objectives

6.-iscuss the IAS!s Standards related to frst)time adoption o I%&Sand the presentation o fnancial statements.

7.-escribe the support or and the use o I%&S across countries.

8.E+amine the issues related to international convergence.

9.-escribe the progress made in the IAS!1%AS! convergence

proect.10.

E+plain the meaning o Anglo)Sa+onaccounting.

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armonization

he process o reduction o alternatives while maintaininga high degree o 2e+ibilit, in accounting practices.

erm is now becoming 3anti4uated.5

onvergence ))the adoption o one set o standardsinternationall,. This is the main obective o the IAS!.

Learning Objective 1

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he to !eve!so" har#oni$ation

armonization in accounting standards7 which isincreased agreement in accounting rules.

armonization in practice7 which is increased agreementin actual accounting practices.

armonization in standards ma, or ma, not result inharmonization in practice.


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Is di/erent rom standardization.

6armonization allows or di/erent standards indi/erent countries as long as there are not logicalcon2icts.

Standardization involves using the same

standards in di/erent countries.


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%ros&

E+pedite the integration o global capital mar$ets and ma$e easier thecross)listing o securities.

%acilitate international mergers and ac4uisitions.

&educe investor uncertaint, and the cost o capital.&edu

ce fnancial reporting costs.Allow

or eas, and cost e/ective adoption o high)4ualit, standards b,

developing countries.Easie

r to transer accounting sta/ internationall,.


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Cons&Signif

cant di/erences in standards currentl, e+ist.

Thepolitical cost o eliminating di/erences.

Overc

oming 8ationalismand traditions.(erhap

s it will not provide signifcant benefts.

9illcause Standards Overloador some frms.

-iverse standards or diverse places is acceptable.


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Orga

ni$ations invo!ve'Assoc

iation o South East Asian 8ations "ASEA8#'nite

d 8ations "'8#

European 'nion "E'#Intern

ational Accounting Standards Committee"IASC#dissolved in :;;*Intern

ational Organization o Securities Commissions "IOSCO#

International %ederation o Accountants "I%AC#

IAS!"successor to IASC# and %AS!


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rgani$ations invo!ve'

OSCO < is essentiall, the international e4uivalent o the'.S. Securities and E+change Commission "SEC#.

%AC < is similar7 at the international level7 to theAmerican Institute o Certifed (ublic Accountants"AIC(A#.

AS! < is essentiall, the international e4uivalent o %AS!.


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O)CO

or$s to achieve improved mar$et regulationinternationall,.

or$s to acilitate cross)border listings.

dvocates or the development and adoption o a

single)set o high 4ualit, accounting standards.


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*+C

or$s to develop international standards o auditing7ethics7 and education.

egan International %orum on Accountanc,-evelopment "I%A-# to enhance the accountingproession in emerging countries.

tarted the %orum o %irms to raise global standards oaccounting and auditing.


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-

as wor$ed to harmonize accounting standards within theE'7 primaril, b, wa, o two directives.

ourth -irective < a set o comprehensive accountingrules built on the principle o a 3true and air view.5)))valuation rules7 disclosure and ormat.

eventh -irective < re4uires consolidated fnancialstatements or compan, groups o a certain size.


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+)

receded b, the IASC "International AccountingStandards Committee#.

or$s toward convergence o national and internationalaccounting standards.

ASC was established in *=>?.


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(+)

Comprised o *@ members "*? ull7 ? part)time#.

&epresents a geographical mi+.

-ev

elops I%&S and E+posure -rats using due process.

Approves I%&IC "International %inancial &eporting InterpretationsCommittee# Interpretations.

Stan

dards are principles)based.Sinc

e establishment o IAS!7 ocus is on global standard)setting ratherthan harmonizationper se.


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(

+) / ajor (nitiatives

Comparability Project"through IASC#

C

omprehensive review o e+isting IAS "International AccountingStandards#.

!egun in *==.

I

n order to eliminate most o the choices permitted under IAS.e

g IAS ** re4uiring use o percentage o completion methodwhen certain criteria are met.


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(+) / ajor (nitiatives

IOSCO AgreementEstablishment o a core set o ?; accountingstandards.

Standards agreed upon b, IOSCO and IASC.


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(+) %erspective

%ollows a principles)based approach to standardsetting vs a rules)based approach.

As such7 accounting standards are grounded in the

IAS! %ramewor$.Bimits guidance and encourages proessional

udgment in appl,ing general principles to entitiesor industries.


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(+) *ra#eor

Created to develop accounting standardss,stematicall,.

(rovides the basis or fnancial statementspresented in accordance with I%&S.

Similar to the relationship between '.S. AA(fnancial statements and the %AS! Conceptual%ramewor$.


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(

+) *ra#eorT

he obective and underl,ing assumptions o fnancialstatements.

Dualitative characteristics o inormation.

-efnition7 recognition7 and measurement o elements infnancial statements.

Concepts o capital and capital maintenance.


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(+) *ra#eor

(rimar, obective is to provide inormation useulto decision ma$ing.

'nderl,ing assumptions include accrual basis and

going concern.


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a!itative characteristics o" in"or#ation

nderstandability< should be understandable topeople with reasonable fnancial $nowledge.

omparability< allows or meaningul comparisonsto fnancial statements o previous periods and

other companies.


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a!itative characteristics o"

in"or#ation

Relevance< useul or ma$ing predictions andconfrming e+isting e+pectations.

Reliability< ree rom bias "neutral# andrepresents that which it claims to represent"representational aithulness#.


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!e#ents o" *inancia! )tate#ents

efnition< assets7 liabilities7 and other fnancialstatement elements are defned.

ecognition< guidelines as to when to recognizerevenues and e+penses.

eas!rement< various bases are allowed historicalcost7 current cost7 realizable value7 and present value.


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oncepts o" capita! #aintenance

inancial capital maintenance.

h,sical capital maintenance.


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%has

es&Obec

tives and 4ualitative characteristics.Elem

ents and recognition.Feas

urement.&epor

ting entit,.(rese

ntation and disclosure.(urpo

se and status.

Application to not)or)profts.

%inalization.


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%

ropose' Changes&

-ecision)useul obective encompassing inormation relevantto assessing stewardship "actuall, two parallel obectiveswith di/erent emphases#.

Sta$eholder approach "vs. '.S. ramewor$ shareholderapproach#))users other than capital providers e+plicitl,ac$nowledged.

Asset o an entit, present economic resource to which7

through an enorceable right or other means7 entit, hasaccess or can limit othersaccess.E

mphasis on air value measurements in I%&Se+it price asmeasurement base7 or7 i notdevelop additional guidance.


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Goint statement in 8ovember :;;= aHrmed Gune

:;** as target date or completing maor proects.

Farch :;*;oint e+posure drat issued3Conceptual %ramewor$ or %inancial &eporting

The &eporting Entit,5 GOAL: to signifcantl,improve and converge I%&S and '.S. AA(.

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This stan'ar' provi'es gi'ance in the"o!!oing areasP!rpose o" fnancial statements< to providedecision)useul inormation.

Components o" fnancial statements< balancesheet7 statements o income7 cash 2ows7 changes ine4uit,7 and notes to the fnancial statements.


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#air presentation< the overriding principle ofnancial statement presentation.

Acco!nting policies

Should be consistent with all IAS! standards.

9hen specifc guidance is lac$ing7 use standards onsimilar issues7 and defnitions o the fnancial statementelements.


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asic principles and ass!mptions

eiteration o underl,ing assumptions.Accrual basis1going concern1comparabilit,.

tr!ct!re and content o" fnancial statements

rovides inormation on presentation ormat

Current1noncurrent. Items to be included on ace o fnancial statements.Content o notes.


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(rovides guidance or frst time adoption.

&e4uires compliance with all e/ective I%&S. Allows e+emptions when costs deemed to

outweigh benefts.


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,vi'ence o" spport "or (*)

Adoption b, the E' < public companies in the E' were re4uired tobegin using I%&S in :;;.

IOSCO has endorsed I%&S or cross)listings.

I%AC :; accountanc, summit in Gul, :;;= issued renewedmandate or adoption o global accounting standards.

Batest I%AC lobal Beadership Surve,emphasized that investors

and consumers deserve simpler and more useul inormation.Ad

option o I%&S in :;** Gapan7 Canada7 India7 !razil and Jorea.


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The complicated nature o standards such as

fnancial instruments and air value accounting.The ta+)driven nature o the national accounting

regime.

-isagreement with signifcant I%&S7 such as fnancial

statements and air value accounting. InsuHcient guidance on frst time application o I%&S.

Bimited capital mar$ets little beneft.

Investor satisaction with national accounting

standards. I%&S diHculties in language translation.


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he ora! +gree#ent

eached in :;;:.

etween the IAS! and %AS!.

o wor$ toward accounting standards convergence.


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*+)s e initiatives in the ora! +gree#ent

%ointprojects< boards will wor$ together to address some issues "e.g.7revenue recognition#.

S&ort'term convergence< to remove di/erences between I%&S and '.S.AA( or issues where convergence is deemed most li$el,.

IAS$liaison< IAS! member in residence at %AS!.

onitoring IAS$ projects< %AS! monitors IAS! proects o most interest.

Conv

ergence researc& project< identifcation o all maor di/erencesbetween I%&S and '.S. AA(.

Convergence potential < %AS! assesses agenda items or possiblecooperation with IAS!.


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%ollowing global fnancial crisis both groups

ormed %inancial Crisis Advisor, roup "%CA#.

Gul, :;;= %CA report addresses E/ective fnancial reporting. Bimitations o fnancial reporting.

Convergence o accounting standards. Standard)setting independence and accountabilit,.

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Countries include '.S.7 '.J.7 Canada7 Australia and

8ew Kealand.

Accounting s,stems not identical but shareundamental eatures Ficro orientation "frm level# with emphasis on

proessional rules and sel)regulation. Investor orientationprimar, aim is eHcient operation o

capital mar$ets "ver, transparent#. Bess emphasis on prudence and measurement o ta+able

income or distributable incomesubstance over orm.

L i Obj ti 10

F01420010220124015Chap003-pertemuan 2

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