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TRANSLATION AND THE DIFFERENCE AMONG CURRENCY CONVERSION
Strange currency formulation this Process at representation refinancial information of one currency goes to other currency. While strange currency conversion among interchange one currency goes to other currency physically. Its difference, translation only changing satuan monetary, e.g., on stated balance deep british pound is presented returns to point one par of ACE dollar. No happening physical interchange, and no transactions which pertinent happening. While conversion, one that enable happening physical interchange and available transactions relates to happen.
STIPUBTING IN STRANGE RATE
1. Conversion, interchange one currency goes to other currency.
2. Present rate, prevailing rate on the fifteenth financial statement which relevant.
3. Positioning clear asset beresiko, excess asset to be measured or deep strange currency and deep translation with present task rate is measured or deep strange currency and enlightened with present rate.
4. Currency gets contract meter, deal for currency interchange of a variety state by use of particular rate (forward is rate) on the fifteenth particular at future.
5. Functional currency is main currency that utilized by a firm deeping to carry on business activity. Usually that currency is State currency where that firm lies.
6. Trade historical rate, strange currency exchange rate that is utilized while asset or liabilities in currency stranging to buy or going.
7. Reporting currency, currency that is utilized in corporates finance write-up collation.
8. Spot is exchange rate, currency exchange rate in the period of soon.
9. Adjusted translation, evoked fitting of functional currency financial statement formulation corporate to reporting currency.
Strange currency formulation glossary, adapted from GAAP, (PSAK) No.52 is year 1981.
1. Attribute, item’s quantitative characteristic that is measured for the purpose accounting. Cost example, history and substitution cost that constitute attribute of asset.
2. Conversion, pertukatan is currency goes to other currency.
3. This interchange assesses, prevailing exchange rate on the fifteenth financial statement which relevant.
4. Discount, while inferior next exchange rate of currently level.
5. Positioning clear asset beresiko, as one is measured more than asset or deep strange currency and enlightened by use of present task rate is measured or deep strange currency and enlightened with present rate.
6. Strange currency, currency besides currency which utilized by a State, currency besides reporting currency that utilized by firm.
7. Financial statement in strange currency, financial statement utilizes intern currency as unit of measurement.
8. Foreign exchange transactions, transactions (which is sell or goods or service buy, or book debt or credit loan) accord stated condition deep currency besides corporate functional currency.
9. Strange currency formulation, process to declare for eye amount or is measured deep one currency goes to other currency with rate among two currencies.
10. Intern hads out, operate for that result financial statement that (1 ) are merged or dikonsolidasikan or one noted by ekuitas’s methods in corporate finance reporting and (2 ) ruled deep strange currencies besides corporate reporting currencies rapporteurs.
11. Keep up contact interchange, deal for commutes currency of state that variably by use of particular rate (forward is rate) on the fifteenth particular at future.
12. Currency functional, currency that utilized by firm outgrows business on tours, and in results or utilize cash.
13. Trade historical rate, strange rate of exchange that is utilized while asset or liabilities in currency stranging to buy or going.
14. Local currency, currency of State that is utilized; reporting currency that utilized by domestic and also intern operation.
15. Monetary policy product, liabilities to pay or rights to accept one currency unit in appreciative constant at future.
16. Reporting currency, currency that is utilized in statements.17’s corporate finance collation. Date working out, date of while that book debt paid by credit is not is charged.
18. Spot is exchange rate, currency exchange rate in the period of soon.
19. Date of transactions, date of noted transactions in accounting record of rapporteur firm.
20. Adjusted translation, evoked fitting of functional currency financial statement formulation corporate to reporting currency.
21. Measurement unit, currency that is utilized to measure asset, liabilities, income and charges.
THE DIFFERENCE GAIN AND INTERN RATE
If local currency viewpoint that will be utilized (viewpoints corporate local), its input is adjusted current unrealized formulation not necessarily been done. Insert gain translation and disadvantages in income will wreck real finance relationship and gets to mislead users that information. Gain translation or disadvantages has to be treated from local currency viewpoint as adjusted as ekuitas’s owner settle. If parent company reporting currency is financial statement measurement unit be enlightened (parent company dot sees), suggested to recognize gain or disadvantages on gain translation as soon as possible. Parent company viewpoint see subsidiary company beyond seas as extension of its parent company. Gain translation and disadvantages reflect ekuitas’s ascension or decrease of intern investment in domestic currency and has to be admitted.
1 ) Suspensi
Changing point one par with assets domestic currency clear strange subsidiary company don’t realise and not influential on Current local currency cash one is resulted from entitas intern. Rate difference that shall accumulate separately as part of ekuitas consolidation.
2 ) Suspensi and Amortisation
Suspensi is translation gain or disadvantages and does amortisation upon item that beneficent one is engaged balance fitting, particularly relates by debt be put off will amortised up to fixed asset which charged by balance reporting in the same way as depreciation or is put off and is amortised for retained loan as adjusted as to flower charges.
3 ) a portion Suspensi
Gain translation and disadvantages is subject to be admit loss as soon as possible happening afters, but admitting after gain realises, this just because constitutes a gain, ignore changing exchange rate.
4 ) Be Not been delayed
Recognizing translation gain and disadvantages in balance reporting soonest. But, inserting translation gain and disadvantages year profit walks will introduce random element in gain who can beget fluctuation that signifikan in propertied deep case changing translation gain point increases and loss reflect ascension or investment decrease in domestic currency and has to be admitted.
RATES ARITHMETIC BALANCE STRANGE
Gain / disadvantages transactions: the difference among rate on transactions and exchange rate date of record on the fifteenth amount payment x is paid deep strange currency.
• Importer Indonesianing to buy goods of USA firm for the price $ 1.000.000 while rate 1 USD = Rp 9.500.
• Corp’s Indonesia pay book debt in the period of 30 days while rates $ 1 = Rp 9600, therefore available transactions loses Rp 100.000 (1. 000. 000 x (Rp9. 600 Rp9.500))
To record disadvantages transactions, can utilize two approachings: one transactions and two transactionses
INFLUENCE METHODICS INTERN RATE ON FINANCIAL STATEMENT
Present exchange rate (now) are exchange rate on the fifteenth financial statement. Historical rate is rate at the moment a currency deep asset strange first time be gotten, or while does bit intern currency at first place. Zoom average (averagely) an average simple of present rate and historical.
Exchange rate influence to financial statement purpose
1. Exchange rate purpose to protect gains historical financial statement and disadvantages strange currency formulation.
2. Present exchange rate purpose cause gain or disadvantages on translation.
• Transactions in strange currency to be become while one firm buys or sell goods with paying one is given in strange currency or while firm borrows or loaning deep strange currency.
• One strange currency transactions gets deep eye one currency, but is measured or is noted deep another currency.
EVALUATION AND STRANGE RATE METHOD ELECT TERMINOLOGICAL THE BEST ONE AND MONEY MARKET CONDITION
Methodic translation can be clasified as two type methodic that utilize singles exchange rate for attending back strange currency balance formulation with appreciative one par in domestic currency or one method which utilize various rate.
1. Methodic Single Rate.
This method have so long popular at Europe, applying exchange rate, current exchange rate and foreclosure rate, to all lancer’s asset and liabilities. Income and charges in strange currency by and large enlightened by use of rate which applies at the moment avowed writing. But, to memfasilitasi this goods usually been enlightened by use of rate average most weighs period appropriate interchange walk. Financial statement hads out intern have domicile alone reporting, environmentally local currency whereabouts strange affiliation firm does business. Asset or liabilities in strange currency to be said face exchange rate risk if one par in currency that is utilized to translate asset or liabilities.
2. Severally methodics exchange rate
This method merge rate currency exchange rate Many historical and present deep translation processes.
3.Now Nonkini Methodics
Base Method Now, lancer’s current asset and liabilities intern subsidiary company is enlightened into parent company reporting currency it bases interchange now. Asset and liabilities was enlightened by price lancer trades historical. Item of balance reporting (but to depreciation and amortisation) enlightened bases rate average what do apply at each month operation, or bases averagely be weighed up to reporting period entire. Depreciation and amortisation is enlightened bases historical rate upon acquired asset. But, this method not regard economy element. Utilizing exchange rate year-end to translate lancer’s asset implies that cash, credit, and stockpiling in same strange currency beresiko exchange rate.
4. Monetary nonmoneter methodics
Non monetary Monetary method also utilize numeric scheme balance unutk determines translasi’s rate suitably. Asset and monetary liabilities to be enlightened bases rate now. Product non monetary, longterm investment, and stock investor is enlightened by use of historical rate. Item of balance reporting is enlightened by use of procedure which equals that is worded for concept non now now.
5. Temporal methodics
By use of method temporal, translation converts currency be process re measurement or given point representation. This method not revamp item’s attribute that is measured, but just change measurement unit. This translation currencies deep balance strange cause item’s repetitive measurement such a but not estimation that actually. Base US GAAP, measured by total cash on the fifteenth balance. Bill and liabilities is noted bases expected point will be accepted or is paid at the moment maturity value.
PRICES CHANGED DEFINITION:
There is two changed deep terminologies price which shall be understood as follows:
1 changing flat rate happen while average cost all goodses and services in subjek changed economy. Gain monetary unit or disadvantages energy buys. Collegial markup is known as inflation (inflation), while price decrease is known as deflation (deflation).
2 changing price specificing to point on change in goods or service price that because of requisition and offer change. So inflation rate per year at one state can ranging of around 5%, meanwhile price one apartment unit with one bedroom gets to increase as big as 50% than same periods.
Why Have Potency Financial Statement For More Price change Period misleads?
Up to inflation period, asset point is noted as big as lessened landed cost initially reflect currently point (excelsior). Asset point result cost inferior assessed by inferior and gain that valuably overbids.
Of management viewpoint, this inadvertence mendistorsi:
(1 ) didsarkan’s projection finance on time series historical data
(2 ) budget constitute basics for performance measurement
(3 ) performance datas can’t insulate uncontrollable inflation impacts.
This creates gain:
• Taxes proportion step-up
• See dammed hell first stockholders more divident
• Ask for and pays higher pay of employ
• Host state disservice (as taxation of huge gain)
And if corporate have distributed its gain therefore very likely corporate can’t do given asset substitution have increased price because reducing it resource.
Unadapted financial statement by energis to buy will also regard reader in conjugate write-up and compares oprerasi’s performance firm. If income is noted according to present point of energy buys, while energy cost buys to be noted by history income will make inaccurate measurement. Conventional accounting procedure also ignore energy gain buys and evoked loss of cash ownership (or one par) up to inflation period.
Admitting explicit of inflation impact needs to be done since:
1. Prices changed influence partly cling to transactions and faced situation corporate. User have no fledged information about this factor.
2. Bringing off because of problem price change clings to accurate pamahaman this problem settle. Needing accurate grasp about effort performance that is reported in condition which regard price change impact.
3. Reporting of manager about problem which because of labih’s price change is easily to believe while mempublikasikan’s business finance information that work through this problem.
Types Adjusted inflation
Quits statistic that measure flat rate zoom change and also specific by and large parallel ala still. Each price change type have effect that variably on financial position measurement and corporate effort achievement and because of aim which variably which cover-up.
Adjusted Level flat rate
Total currency that adjusted by changing constant overhead rate currency price history or energy buys one par of common. Total currency that was adjusted in such a way face at conceive of nominal amount. For example, up to markup period, asset long lived is reported in balance as big as landed cost initially is declared for deep nominal currency. If acquisition price is allocated on this period profit, income, one that reflects energy to buy now, square with cost that reflects to energi buys (overbid) than previous period while asset is bought.
Inflation is happening worldwide phenomenon a lot of effloresce state, but tren at state forwarding to adopts “inflation accounting” to correct deviation of historical conventional cost accounting one merges element of price and inflation change to income and asset.
A. Inflation influence to firm
Inflation regards financial position and firm performance, e.g., manager can make decision that don’t operating efficient if it doesn’t understand pegaruh’s inflation. Due to financial position, financial asset will be down its point up to inflation because energy buys to decrease. Therefore, inflation accounting system alternative is introduced, energy buys public accounting and present point accounting.
B. Accounting Measurement alternative
1. Power’s Common buy (Accounting Energis To Buy Common)
Buy common power accounting ranges all system be designed to keep energy buys substantive of capital owner for accounting for changed level price. Main philosophy is subject to be report asset, liabilities, income and charges in satuan money and energy buys same. According to GPP non finance in financial statement is looked backward to reflect energy buys energy equality buy by and large at the early balance dates. There is financial statement even asset and liabilities in shaped current asset usually unadapted for stable electricity buy on period 31st December but another asset, income and charges has to be adjusted.
2. Current Value is Accounting (Current Value’s Current accounting)
CVA ranges all system to account point now or current special price change included cost accounting, accounting and current substitution price accounting comes out / price accounting sell. CVA relates with rise descent of given asset point doesn’t energi to buy dwindling now, are not reputed production.
There is two main approachings in CVA. First, costs / currently substitutions (replacement cost) there are many is utilized deep asset non monetary for the price asset that is that is sacrified at its place. Both of, sticking out price / sell point while price / handal clean slate (Sells Subject charges) assessing asset on sells subtracted cost of goods sold complete. CVA begets holding gain and disadvantages non financial as asset is reassessed and more management complex.
3. Current Value: GPP’S accounting
GPP and CVA is merged in substantive pa system.
C. IASB about Price change Accounting and Inflation.
First thing that points out IASC, or present so-called IASB hits emerging inflation accounting on year 1977 at IAS 6, accounting responds to price change. At that moment, no default which must well at United States Of America or at England, and there is uncertainty about how accounting problem inflation can be solved at two states.
More definitive inflation default that misses fire, up until year 1981 by merilis IAS 15, Reflection influence changing Price Information, one that replaces PSAK 6. That Times, FASB publishes PSAK 33 Financial Reportings and Price Changes.
Informations main type following reflect price change impact that recommended for cast by IAS 15 as follows:
1 ) Total depreciation fitting or asset amount make a abode.
2 ) Total or total fittings for adjusted cost of goods sold.
3 ) Fitting relate with item financially, impact of loan, or ownership while fitting was inserted into account in determine income bases accounting method that is utilized.
4 ) overall Impacts of yielding or propertied adjusted as another item one reflects price change impacts be reported bases accounting method that is utilized.
5 ) In present cost method to be adopted, current cost for equipment and outfit asset.
6 ) Method those are used to account information as referred to in posting in advance, including index character that is utilized.
It is of important to make IAS 15 IAS 15 to recognize is that information needs to be revealed, impact of price and inflation change, and gives special guidance that shall be followed by various firm to increase openness quality. That fact base information of one state goes to other state can variably, this indeed is problem, but is clear unadaptable accounting profession with world solution.
D. Accounting system for developmental inflation at English, United states of america and Europe Continent
Accountant profession introduced by SSAP 16 (Accountings Standard statement Practicing 16), “Present cost accounting” on year 1980, one that needs financial statement to present cost accounting and affix reporting and main reporting. Provided that historical cost reporting shall be provided. But, SSAP 16 in an official way cold-drawn on year 1988 afters increases inflation and criticism reject of businesses. Upon same, there are many firm to evaluate back to reals property periodic ala base market value (output is estimated or selling price).
2. United states of america
First time regulation is introduced to sentence specified one by SEC on year 1976 (Break even Accounting Rilis 1990) revealing information substitution cost that bound up with depreciation, sells subject charges, fixed asset and stockpiling. Hereafter, on year 1979, FASB publishes PSAK No. 33 (Financials Accounting Standard statement 33), get title “Financial reporting and Price Changes”.
3. European continent
There is reducing enthusiasm for accounting system recognition for inflation, even official recommendation on subjek, e.g., at France and Germany. At France at the early 1970 while reevaluates it is done by use of government index are required for all longterm assets and regular assets. This reevaluation is not impacted on taxeses apt production, as depreciation of affix. At Swedish, no requirement for accounting for inflation, but many special voluntary casts were made.
E. Accounting system development at South America
At Brazil, accounting for inflation which is utilized deep early 1950 an, but firm law a new one on year 1976 to do fittings, firm presents is back akun akun fixed asset and ekuitas by use of price index which admitted by government to measure local currency devaluation.
At Argentina, accounting for inflation is introduced especially via initiative and accounting profession involvement. 1972, issuing statement that recommend GPP’S financial statement publication affix.
F. Present Appreciative accounting (Present Value is Accounting) in dutch
In dutch, person have realised prevailing accounting point (current appreciative accounting) long since. Extensive education for accountant at economic business results accounting philosophy that is focused on point and present cost and with principle and economy practice carry on business. Even not necessarily utilize accounting stipubting of currently point (present appreciative accounting), as information of main or affix, But there is umpteen factor which gets contribution to be utilized.
There is two reason why focuses on Dutch, even no stipubting for cost now or GPP IS accounting is:
1. Theodore Limperg’s professor involves theory, one that often at conceive of father of exchange rate theory because kepeloporannya in dutch on year 1920 and 1930. It centralizes attention on subjective strong one among economic and accounting, and trust that can’t be looked for without income source to keep business income of continuity of business or corner of perpetual. Therefore, income constitutes function of income and substitution than historical cost point. Besides, Limperg keeps that current information will be utilized by all spontaneous taker management as stockholder.
2. Dutch for learned of experience at big multinational, which is Philips, one that constitutes forthcoming cikal of present point financial statement. Even, Philips’s time first utilize this approaching on year 1936 for the purpose internal cost accountings on year 1952 and is introduced into main reporting for the purpose financial reporting. But on year 1992, firm decides to return to historical cost accounting and will increase communication to stockholder, with simple accounting system and procedural one is utilized, and nearer to international accounting practice.
Even just after, Philips is sample to pull and worth of practical application in present appreciative accounting. In present appreciative financial statement, by use of Philips’s substitution point now stands up with correlation process to reflect in as much as which there is fringe benefit of finance asset of ekuitas’s loan than capital. Under present appreciative accounting system, well that trial balance and balance reporting is adjusted at some stage point inferior carries on business (or approachable point) taken as point present. For stock, prescribed standard point in the early year. For price change, developed index by agglomerate asset buy homogeneous one and is applied on standard cost to result point now. Index that arranged by three-month or two months in situation whereabouts extreme more inflation.
Prescribed current point by purchasing department for fixed asset machine by department for specification to design for special equipment, and building and machine design for department stockpiling case buildings. On, index usually being utilized for memperbarui to assess currently of asset group a sort. Increase (or cut back) stockpiling and fixed asset point for changed price which gives to be creditted (at debit) on akun reappraisal difference on balance was compared with by reporting balance. Since current point change is featured deep write-up balance as charges of sell subject overbids or inferior (effect increase or stock price cut back) with superordinate or inferior depreciation cost.
As pointed out by Brink (1992), Philips tends some years to apply substitution point accounting by one restrains from to design conservative and to increase gain. Cure on stockpiling and point cut back of correlation process at state that experiences hiperinflasi, for example that so controversial it adequately separates from strange currency accounting policy, goodwill and asset abstracts same.
G. Problem and Prospect
Mark sense signifikan’s zoom inflation and price change at there are many state regard requirement and utility of inflation accounting system that may make a abode wills be subject a lot of controversy deeping to predict future.
Even Common Buy accounting Energy (energy buys common) was utilized at severally Latin America state that gets tall inflation, no current cost accounting default example or regulation at English and United States Of America at level national one felicitates from inflation accounting on middle 1989. Even just after, severally corporate European to make voluntary cast of currently point.
Controversy, still drawns round a lot of current cost accounting aspect, particularly with change in derived and equipment preserve and item is monetary damage. Included other problem index purpose, incremental cost beyond seas, and particular verification is now experience industrial enterprise with changed technological fast one.
Providing new flower in present Appreciative Accounting or fair, expected will there is many more research on type variation changing prices deep accounting system. And there is also growth of environment estimation of alternative approaching that may or may not be done in income and asset measurement. Utility from output or selling price in the context price change, particularly with point or property and investment, can also assess better. And there is also chance to utilize relevant information source as cash flow.
A number of companies seeking to raise capital in markets outside the country of origin and the investors who seek to diversify their investments internationally face increasing problems as a result of national differences in terms of accounting, disclosure, and audit.
Sometimes people use the term harmonization and standardization as if both have the same meaning. However, contrary to the harmonization, standardization generally means the determination of a group of rigid rules and narrow and may even be the application of a single standard or rule in any situation. Standardization does not accommodate the differences between countries, and therefore more difficult to implementation internationally. Harmonization is much more flexible and open, do not use one size fits all approach, but to accommodate some of the differences and have experienced great progress internationally in recent years.
Differences Of Harmonization And International Accounting Standard
1. The process to improve the compatibility accounting practices to determine the limits of how much these practices may vary
2. Not using a one size fits all
3. But accommodates be some agreement and has experienced great progress internationally in recent years.
4 Harmonization much more flexible and opened.
1 Determination of a group of rigid rules and narrow
2 Application of a single standard or rule in any situation
3 Standards do not accommodate the differences between countries.
4 More difficult for the international implementation.
Pro And Contra Of International Accounting Standards Harmonization
Until the present time, western countries are still heavily promoting the need for harmonization of international accounting standards. The main purpose of these efforts is to improve the comparability (comparability) of financial reporting, especially for multinational companies operating in various parts of the world. Not surprisingly, the western side to form a body called the International Accounting Standards Committee (IASC), which has now changed its name to International Accounting Standard Board (IASB). The agency is in charge of producing international accounting standards (International Financial Reporting Standards-IFRS). The main reason the presentation of financial statements that meet the standards for the survival of the company itself in the future, both in terms of internal and external users. Public recognition will comprehensiveness and transparency of financial statements of a publicly-listed companies increase the pressure of the business sector to provide financial statements in accordance with the standards. Other reasons to make it easier for investors who want to make their investment activities in other countries, which requires the financial statements of international standard in order to know the state of the company.
Although the IASB has no power to require all countries to prepare financial statements under International Financial Reporting Standards, to date the agency can be said to be very influential in the process of harmonization. This is not surprising because the capitalist countries, especially the United States played an important role in producing these standards. In other words, harmonization is the harmonization of international accounting standards are based on Anglo-Saxon accounting model, without notice and consider the system of accounting, environmental, economic, social and cultural rights of other countries (Hoarau 1995). Hoarau further said that the resulting standard is dominated by the accounting concepts practiced in the USA. In other words what is now American hegemonic efforts in the preparation of financial statements by the international accounting standards. Although the IASB accounting standards resulting discuss the guidelines are less detailed and limited scope when compared with the USA version of the accounting standard (Statement of Financial Accounting Standards), IFRS remains based on the concept and the same accounting approach. As a result, the possibility of much conflict with the IFRS financial reporting purposes and the social environment, economy and culture of other countries, especially those that have different characteristics with the capitalist state. More specifically, the standards produced a lot of conflict with Islamic values. This is due to the economic concepts underlying the capitalist Western world accounting standard setting is much different from the concept of Islamic economics. The resulting accounting standards of Anglo-Saxon model of accounting that recognizes adopts the time value of money, which produces the concept of interest. Meanwhile, Islam explicitly reject the use of the time value of money in carrying out economic activities. This is because the concept is synonymous with usury, and usury is clearly prohibited in Islam. Riba is prohibited in Islam because it shows the injustice of usury. Capra (1994) mentions that the injustice arises because the distribution of profits based on a fixed amount, can damage the price mechanism and led to the allocation of economic resources that lead to the accumulation of capital is concentrated in a particular group of people. Prohibition against usury has its own implications for the harmonization of international accounting standards. So far the standards of internationally accepted accounting always consider the interest factor, which is clearly prohibited in Islam (Hamid et al., 1993). Examples of the resulting IASB accounting standards (IASC) is accounting for the lease / lease (IAS 17), Accounting for Pension Funds (IAS 19 and IAS 26), and Cost Accounting Capitalization of Borrowing (IAS 23). The standard is essentially the same as the accounting standards issued by the Financial Accounting Standards American Board (FASB), such as pension fund accounting standards (SFAS 87 and 88), Long-Term Debt Amortization (Accounting Principles Board, APB 12), Interest on Receivables and Payables (APB 21), Leasing (SFAS 12), Restrukturization Debt (SFAS 15), Reporting Debt Retirement (SFAS 88) and the repayment of debt (APB 26). Another issue to consider is the issue relating to the valuation of the assets. In the Anglo-Saxon accounting, valuation of an asset, especially inventories and securities are generally based on the concept of conservatism. This concept recognizes income or loss or reduction of assets despite the decline has not been realized. In contrast, the concept is to delay recognition of revenues or increase in value of assets to income or an increase in the value of these assets are actually realized. The consequences of this concept is the use of the method of inventory valuation and short-term securities based on the lower of cost and market value (lower of cost or market). Meanwhile, for the purposes of calculating zakat, which is one of the purposes of reporting based on the teachings of Islam-Islam assess both types of assets are based on net realizable value or net realizable value (Gambling and Karim 1991). Thus it is clear that Islam does not recognize the concept of the lowest value between cost and market prices, such as those used in capitalist accounting.
The third problem is the application of the concept of sustainability (going concern). Use of this concept may use historical cost valuation of assets based on the measurement to demonstrate objectivity. On the basis of historical cost, the value of assets on a particular date (the date of the balance sheet) will be equal to the value of assets on the date the asset was first acquired. The main reason the application of the concept of going concern are: (1) to allow for the classification of assets and liabilities into current and noncurrent group, (2) allows for the matching (matching) between revenue and costs. From the standpoint of Islam, both of them may be questionable and irrelevant (Gambling and Karim 1991). In Islam, the classification of assets into current and noncurrent basically meant to determine the amount of wealth that will be used in determining the amount of zakat. Current assets are expected to be consumed, or sold to generate cash in the period of time in which the charity will be imposed on such property. While non-current assets, will remain detained or kept in the period beyond the period of zakat (Abdel-Magid 1981). On the basis of this, financial statements must be able to present information about the assets, which can be used as the basis for the imposition of zakat. Thus the zakat assessments will determine the method of valuation of assets. Appropriate method to assess the assets relevant to the purposes of calculating the net realizable value is the alms or assessment methods suggested by Chambers (1966) that is continuously contemporary accounting (COCOA).
On the basis of the method Cocoa assets should be assessed according to market value at balance sheet date. So each asset must be assessed individually, separate from the company’s overall wealth. Consequently, in the context of Islam there is no recognition of assets such as goodwill, because goodwill can not see his form and shape can not be individually assessed separately from the company’s overall value. Another thing that is contrary to the teachings of Islam is the use of the concept of economic substance over legal form. Anglo-Saxon accounting model clearly separates the economic substance of a transaction with the legal status of the transaction. On the basis of this concept, if a transaction has economic substance of the terms of the criteria as an element of financial statements (because they meet the definition, can be measured and recognized in the financial statements), the transaction can be recognized in the financial statements even though not legally recognized. The classic example is a machine that was hired by the company through a capital lease contract. If the economic substance meets the criteria as an asset (as stipulated in the standard), then the machine can be recognized as leased property the tenant and reported on the balance sheet as a tenant property. However, from the juridical aspect of the machine remains the property owners rather than renters. This concept, clearly contrary to the concept of ownership in Islam (Karim 1995). On the basis of different points of view above, it is quite reasonable to say that the accounting should be developed in accordance with the environmental conditions in which the accounting will be practiced. Accounting practices of the capitalist, obviously not everything can be practiced in an environment that Islam breath because the concept is clearly different and many are contradictory.
Reconciliation And Mutual Recognition Differences In Accounting Standard
Two other approaches are proposed as a possible solution is used to solve problems related to the content of cross-border financial statements: (1) reconciliation, and (2) mutual recognition (which is also referred to as reciprocity). Through reconciliation, foreign companies can set financial statement report using home country accounting standards, but should to serve reconciliation between accounting measures (such as net income and stockholder) in the country of origin and in countries where the financial statements report. For example, the Capital Market Commission United States (SEC). Recognition occurs when the parties together outside the home country regulator of financial get report foreign companies which are based on the principles of state. For example, the London Stock Exchange accept financial statements based on GAAP reporting made by foreign companies. The line trading capital then harmonization be important to the problems associated with the content to the content of cross-border financial reporting. Approach done by way of reconciliation and mutual recognition. With a complete harmonization of financial reporting based on different principles.
International Organizations That Promote Major Accounting Harmonization
Six organizations have become a major player in the determination of the international accounting standards and in promoting international harmonization of accounting:
1. International Accounting Standards Board (IASB)
2. Komite European Union (EU)
3. International Organization of the Capital Market Commission (IOSCO)
4. International Federation of Accountants (IFAC)
5. Intergovernmental Working Group of Experts on the United Nations International Standards of Accounting and Reporting, part of the United Nations Conference on trade and Development
6. Accounting Standards working group within the Organization of Economic cooperation and Development.
International Forum on Accountancy Development (IFAD) held its first meeting in 1999. Its main goal is to build the capacity of accounting and auditing in developing countries.
Also important is the International Federation of Stock Exchanges (FIBV), a trade organization for securities and derivatives markets are organized around the world. FIBV encourage professional development of financial markets business. FIBV goal is to harmonize standards for judge business processes (including financial reporting and disclosure) in cross-border securities trading, including cross-border public offerings.
International Accounting Standard Boards IASB objectives are :
1. To develop in the public interest, a set of global accounting standards are of high quality, can learn and can be applied which requires high-quality flow of information, and can be compared in the financial statements and other financial reporting to help participants in capital markets and other users in making economic decisions.
2. to encourage the use and application of these standards are strict stnadar
3. to bring the convergence of national accounting standards and International Accounting Standards and International Financial Reporting Standards in the direction of high-quality solutions.
International Accounting Standards
International Financial Reporting Standards (English: International Financial Reporting Standards (IFRS) is the standard basis, Understanding and Framework (1989) which was adapted by the International Accounting Standards Board (English: International Accounting Standards Board (IASB). A number of standards established as part of IFRS are known by the name of the former International Accounting Standards (IAS). IAS issued between 1973 and 2001 by the International Accounting Standards Committee (English: International Accounting Standards Committee (IASC). On 1 April 2001, the new IASB took over responsibility for preparing use of IASC International Accounting Standards. During the first meeting, the new agency is adapting IAS and SIC that already exist. IASB continues to develop standards and naming the new standards as IFRS.
New Approach To The EU In The EU In European Money Market Integration
a. Development Cooperation RI – EU
Development cooperation RI – The EU is one of the main pillars of bilateral relations between Indonesia – the EU. The development of relations between Indonesia – the EU is also reflected in the focus of development cooperation RI – EU that is recipient driven and tailored to the national development program of Indonesia. The EU underlined the need to build a new relationship more closely with Indonesia through increased development cooperation program that supports the process of democracy, good governance, sustainable economic and social development and poverty erodes. Good relations RI – is reflected in EU development cooperation set out in the Country Strategy Paper (CSP), which contains a joint strategy to support national development. CSP in 2002-2006 aimed to strengthen democracy and improve good governance through support to economic development, social and environmental. CSP 2002-2006 National Indicative Program set out in (NIP) which consists of two annual cooperation program. In the NIP 2005-2006, there are three priorities: education cooperation, law enforcement and security, economic cooperation in particular the management of public funding, with a value of 72 million Euro project. As a follow-up to the end of the CSP program during the period 2002-2006, the EU has adopted the CSP program period of 2007-2013 which focuses on the education sector, trade and investment, as well as law enforcement and good governance. For Indonesia, the EU is still an important market and one of the main sources of foreign investment in Indonesia. Bilateral trade in 2008 reached USD 28.20 billion and continues to show an increasing trend from year to year.
The EU is Indonesia’s export market potential. The EU is the main markets for Indonesia’s largest after the United States and Japan. Indonesia’s exports to the EU in 2008 stood at 15.45 billion U.S. dollars, while imports from the EU Indonesia in 2008, stood at U.S. $ 10.5 billion U.S. dollars. Development of bilateral relations between Indonesia and the EU are not apart of the dynamics of developments that occurred in the European Union (EU) and Indonesia. UE has succeed to as a solid regional grouping, continues to carry out consolidation through a process of integration in political and economic fields in order to achieve his ambition to unite all countries in Europe under the EU umbrella. Similarly, Indonesia’s democracy, a stable and recognized by the international community as an important partner in the region, both of which are important actors that continue approached each other to strengthen partnerships in order to be better able to respond to global challenges. The linkage between the issues and interests of Indonesia and the EU have created a common agenda to strengthen the bilateral cooperative relations of mutual benefit.
b. European Union (European Union – EU)
One goal is to achieve the integration of EU financial markets of Europe :
1 To achieve this goal, the EC has introduced a directive and take a huge initiative to achieve a single markek.
2 Acquisition of capital within the EU.
3 Creating a common legal framework for securities and derivatives markets are integrated.
4 Achieve a single set of accounting standards for companies whose shares are listed.
Directive Fourth, Seventh and Eighth Fourth EU directive, issued in 1978, is a set of accounting rules in the most extensive and comprehensive framework. Seventh directive, issued in 1983, addresses issues consolidated financial statements. Eighth Directive, issued in 1984, discussed various aspects of professional qualifications that are authorized to carry out the audit as required by law (mandatory audit). This directive will harmonize the presentation of profit and loss (income statement) and balance sheet and increase the minimum additional information in the record, specifically the influence of tax rules on disclosure of the reported results.
New Approach to EU and European Financial Market Integration Commission announced that the EU needs to move precisely in order to provide a clear signal that companies are trying to do the recording in the United States and other world markets will still be able to survive in the EU accounting framework. EC also stressed that the EU strengthens its commitment to the international standard-setting process, which offers the most efficient and quick solutions to problems faced by companies operating on an international scale. In 2000, the EC adopted a new financial reporting strategy. The interesting thing about this strategy is the proposed rule that all EU companies listed in regulated markets, including banks, insurance companies and SME (small and medium sized enterprises), prepare accounts according to IFRS konsolidation.
Analysis of business strategy is an important first step in the analysis of financial statements. This analysis provides a qualitative understanding of the company and its competitors related to the economic environment. By identifying the drivers of profit and risk factor is the main business, business strategy or business analysis will help the analyst to make a realistic prediction. The difficulties of analysis of international business strategy:
a. Availability of information
Analysis of business strategy particularly difficult in some countries due to lack information about macroeconomic developments. Obtain information about the industry is also very difficult in many countries and the number and quality of information companies are very different. Availability of specific information about the company is very low in developing countries. Lately, many large companies that keep records and raise capital in foreign markets and have expanded their disclosure voluntarily switch to accounting principles that are recognized globally as an international financial reporting standards.
b. Recommendations for analysis
Data limitations make the effort to analyze the business strategy by using traditional research methods to be difficult. Often frequent trips to study the local business climate and real to how industry and company operations, particularly in emerging market countries.
c. Basic Strategy
The basic strategy adopted in order to improve data and information services include:
Ø One of the doors of data; One of data meant that the Department of Agriculture just published a range of numbers for variables, indicators and time. A door that is data and agricultural information has been agreed by the echelon I units concerned before published outside through the Center for Agricultural Data and Information. Policy of the data and carried out by one door while the concept of centralizing the collection, processing, and presentation of data implemented in a distributed system by implementing an integrated information network.
Ø Centralized concept; in order to avoid duplication and do not statistical development activities and information systems, by dividing out all activities required in accordance with the functional tasks of each unit of data and statistics in the Department of Agriculture. By applying this strategy, expected to be achieved effectiveness and efficiency of use of available resources.
Ø Internal consolidation by building infrastructure that support the execution of work, building a culture of work and service to all levels in the organization;
Ø On the external side to coordinate with partners to establish cooperation in agriculture and information systems with the goal of mutual support, and complete support.
Step Analysis Of Accounting
The purpose of accounting analysis is to analyze the extent to which the company reported results reflect the economic reality. Analysts need to evaluate policy and accounting estimates, and analyze the nature and flexibility accounting of a company. The managers of the company is allowed to make a lot of considerations related to the accounting, because they know more about the financial condition and operations of their companies. Reported earnings is often used as a basis for evaluating the performance of their management.
Step in doing evaluation accounting quality of a company:
Ø Identify the main accounting policies
Ø Analyze the flexibility of accounting
Ø Evaluate the accounting strategy
Ø Evaluate the quality of disclosure
Ø Identifications potential problems
Ø Make adjustments for accounting distortions
Effect Of Accounting Analyst Accounting Between State
Analysts need to evaluate policies and accounting estimates, and analyze the nature and scope of a company’s accounting flexibility. Effect on the measurement of quality of accounting, and auditing are very dramatic.
Difficulties In Obtaining International Accounting
In obtaining the data of International Accounting, there are several difficulties, among others:
a. Depreciation adjustment
Depreciation will affect profits, it is necessary to consider the age of the functions that must be decided manajemen.
LIFO to FIFO inventory adjustment Inventories should be converted in FIFOc method. Reserve
Reserves are the company’s ability to pay or cover expenses for removing beban.d. Reformulation of Financial Statements Adjustment of some of the changes after a few calculations on the points above TSB.
Mechanism To Resolve Differences Between Accounting Principles Of State
Several approaches can be done, namely: – Some analysts present foreign accounting resize according to a group of internationally recognized principles or according to other, more general basis. – Some others develop a complete understanding of accounting practices in a particular group of countries and limited their analysis to firms located in these countries.
Difficulties And Weakness In The International Financial Analysis
a. Information access Information on thousands of companies from around the world have been widely available in recent years. Sources of information in countless numbers up through the World Wide Web (WWW). Companies in the world today have a website and annual report are available for free of charge from various other sources.
b. Timeliness of information timeliness of financial reports, annual reports, reports to regulators vary in each country.
c. Barriers of language and terminology.
d. Foreign currency issues. e. Differences in the type and format of financial statements.
Use Of The Website Or The www (World Wide Web)
To Obtain Information Research Company Many companies do not make optimum use of disclosure of corporate information via the website, both for financial and corporate sustainability. Another finding in this study is that many companies can`t provide information for investors, most of the information presented in the company’s website is about the products or services produced and the many companies that do not update the information presented.
REPORTING AND DISCLOSURE
accounting disclosure practices are influenced by differences in corporate financial governance in a country.
Disclosure rules are very different around the world in some ways like the statement of cash flows and changes in equity, related party transactions, segment reporting, the fair value of financial assets and liabilities and earnings per share. In this section attention is focused on:
A. Disclosure of information to see the future “information look to the future” that includes:
(A) the forecast revenue, profit and loss, profit and loss per share (EPS), capital expenditures, and other financial post. (B) information regarding the performance or prospective future economic position that is not too sure when compared with the projected post, fiscal period, and the projected amount. (C) statements of management plans and objectives of future operations.
Most companies in each country presents a disclosure of information about plans and goals manjemen. Conversely fewer companies that disclose prophecy, from the lowest two companies in Japan and the highest 31 companies in the United States. Most forecasts in the U.S. and Germany regarding capital expenditure, not profits and sales.
2. Disclosure of segment
3. Cash flow statement and fund flow
4. Disclosure of social responsibility
5. Specific disclosures for users of financial statements and the non domestic use prinsipakuntansi
issues – issues that affect management’s decision to make the disclosure decision.
Decision-making (desicion making) is to assess and impose pilihan.Keputusan was taken after some calculations and considerations alternatif.Sebelum option was dropped, there are several steps that may be traversed by the decision maker. These stages may include identification of major problems, menyusn alternative will be selected and arrive at the best decision.
purpose of accounting disclosure in the equity markets.
In a competitive economy, the disclosure is a means to channel koorperasi koorperasi accountability to capital providers (investors) and to mepermudah allocation of resources to their most productive use of a koorperasi need to attract capital in a very large amount to finance the production and distribution activities are extensive. Therefore internal pembiyaan is highly dependent on external capital invested by the investor on a koorperasi, In return, an investor requires disclosure (tansparansi koorperasi) in which investors can assess the quality of their stock to cultivate.
fundamental differences in corporate financial disclosure practices in various aspects.
Disclosure rules are very different around the world in some ways like the statement of cash flows and changes in equity, related party transactions, segment reporting, the fair value of financial assets and liabilities and earnings per share. In this section attention is focused on: Disclosure of information to see the future “information look to the future” that includes: Forecast revenue, profit and loss, profit and loss per share (EPS), capital expenditures, and other financial post.
FOREIGN CURRENCY TRANSLATION
translation and conversion between currencies.
Foreign currency translation The process is repeated presentation of financial information from one currency to another currency. While foreign currency conversion between the exchange of one currency to another currency physically. The difference is, the translation is simply a change of monetary units, for example, on a balance sheet that is expressed in British pounds are presented back to the U.S. dollar equivalent value. There is no physical exchange that occurred, and no relevant transaction occurs. While the conversion, allowing the physical exchanges that occur and there is a related transaction occurring.
Understanding the terms – in terms of foreign currency translation.
Conversion, an exchange of one currency into another currency.
Exchange rate now, the exchange rate prevailing on the date of the relevant financial laporang.
Net asset position at risk, the excess assets are measured or denominated in foreign currency and in translasikan at the exchange rate of duty is now measured or denominated in foreign currencies and translated at the exchange rate now.
Exchange forward contracts, an agreement to exchange currencies of different countries by using a specific rate (forward rate) at a given date in the future.
Functional currency, is the main currency used by a company in the conduct of business activities. Usually such currency is the currency of the State where the company is located.
Historical exchange rate, the exchange value of foreign currency that is used when an asset or liability denominated in foreign currencies bought or going.
Reporting currency, the currency used in preparing the company financial statements.
Spot exchange rate, the exchange rate for currency exchange in the time immediately.
Translation adjustments, the adjustments arising from the translation of financial statements of a company’s functional currency into the reporting currency.
different advantages and disadvantages of foreign currency translation.
If the point of view of local currency to be used (local companies viewpoint), the entry of the translation adjustment in current earnings do not need to be done. Enter translation gains and losses in earnings will distort the real financial relationships and can mislead the users of such information. Translation gains or losses should be treated from the standpoint of local currency as an adjustment to equity owners. If the parent company’s reporting currency is the unit of measurement of the financial statements are translated (the parent company’s point of view), it is advisable to recognize gain or loss on translation of profit as soon as possible. Point of view of the parent company saw overseas subsidiaries as an extension of its parent company. Translation gains and losses reflect the increase or decrease in equity of foreign investment in domestic currency and should be recognized.
Calculate gains and losses of foreign currency translation.
Changes in the value of domestic currency equivalent of the net assets of foreign subsidiaries are not realized and no effect on the local currency cash flows generated from foreign entities. Translation adjustment should be accumulated separately as part of consolidated equity.
Pengangguhan and Amortization
Suspension of translation gains or losses and to amortize it over the useful adjustment items related to the balance sheet, primarily related to debt ditangguha = kandan will be amortized over the related fixed assets, which is charged against earnings in the same way with the burden of depreciation or deferred and amortized during the remainder of the loan as an adjustment to interest expense.
Translation gains and losses is to recognize the losses as soon as possible after it happens, but admitted only after the profits realized, this is simply because it is an advantage, it ignores the changes in exchange rates.
Recognize translation gains and losses in the income statement as soon as possible. However, inserting translation gains and losses in the current year’s profit will introduce a random element in the profits that may result in significant fluctuations in earnings in case of exchange rate changes. Translation gains and losses reflect the increase or decrease in equity investments in domestic currency and should be recognized.
Understanding the effect of using various methods of foreign currency translation of financial statements.
Although most of the technical issues in accounting tends to resolve itself over time, foreign currency translation terrnyata is an exception. That this trend will continue to be supported by such developments as the collapse of the dominance of the dollar, the currency rate movements are approved by the government, and the globalization of world capital markets, which have increased the importance of reporting and financial disclosure.
Understanding the relationship between the translations of foreign currency with inflation.
The use of the exchange rate is now to translate the cost of non-monetary assets are located in berinflasi environment will ultimately lead to an equivalent value in domestic currency is much lower than the initial baseline measurement. At the same time, earnings will be much larger translated with respect to load depresisasi which is also lower. The translation as it can be more easily mislead readers as to give information to the reader. Assessment of the lower dollar typically lower earnings power akutal of foreign assets which are supported by local inflation and the ratio of return on investment that affected inflation in a foreign operation may create false expectations on future profits.
FASB rejected before the inflation adjustment process of translation, because the adjustment is not inconsistent with the historical cost basis of the assessment framework used in the basic financial statements in the U.S.. As a solution FAS No. 52 requires the use of the U.S. dollar as the functional currency for those residing overseas operations with hyperinflation environment. This procedure will maintain a constant value of the dollar equivalent of foreign currency assets, because these assets will be translated according to the historical rate. The imposition of losses on fixed assets in the translation of foreign currency to equity shareholders will cause a significant effect on financial ratios. Foreign currency translation problem can not be separated from the problem of accounting for foreign inflation.
FINANCIAL REPORTING AND PRICE CHANGES
Understand why the financial report has the potential to mislead during the period of price changes.
This measurement inaccuracies distort the financial projections based on historical time series of data, the budget is the basis of performance measurement, performance data can not isolate the effect of inflation that can not be controlled. While earnings are valued more in turn will lead to: Increase the proportion of tax, demand more dividends than shareholders, salaries and demand higher wages than workers, and adverse actions of the host country (such as taxation of very large gains ).
Knowing the term – inflation accounting terms and understand the effect of price adjustments to financial statements.
To understand the notion of price changes (changing prices), the following terms in use:
A general price changes occur when the average price of all goods and services in an economy subject to change. Price increases are collectively known as inflation (inflation), while the price declines known as deflation (deflation).
Specific price changes refers to changes in the price of goods or services which are caused by changes in demand and supply. A stable price level becomes a national priority for many countries around the world. Although the price changes occur throughout the world, the influence of business and financial reporting varies from one country to another.
Determine differences in current cost accounting model and the conventional.
In general, the conventional accounting, financial statements are presented based on the historical value that assumes that hargaharga (monetary unit) is stable. Conventional accounting does not recognize the changes in general price levels or changes in the level of rates. As a consequence, if there is a change in purchasing power as inflation period, the historical financial statements is economically irrelevant. In this period generally scored higher revenues while fixed assets valued lower. Actually, there are several methods of accounting on the effect of price changes, such as accounting fixed price, current value accounting, and general price level accounting. General price level accounting restatement will hold the components of financial statements into dollars at the same level of purchasing power, but did not change the accounting principles used in accounting based on the value historis.Pada practice, the controversy concerning the relevance of the use of price level accounting public still continues to this day. Some of the arguments that support or reject the application of the general price level accounting will be presented in this article. Similarly, the results of two studies on the effects of application of the general price level accounting on the financial statements will be compared to see whether the accounting adjustments based on the general price level is required.
Explain the differences of inflation accounting in the U.S., Britain, and Brazil.
In the U.S., the advantages and disadvantages of monetary items are determined by me restate, in constant dollars, from the beginning and ending balances, or transactions in, all assets and liabilities (including long-term debt). The results are intended to provide a useful basis for assessing the performance of companies in maintaining the general purchasing power of investors (FAS No. 89, paragraphs 65-66). Gains or losses are not included in profit but are disclosed in a separate stand-alone item. This treatment implies that the FASB looked at the advantages and disadvantages in the IEM-monetary item is different in nature with other spiders.
In the UK, gains and losses on monetary items are separated into monetary working capital adjustment and geraing. The second number is associated with the following changes in the price level is given (SSAP NO. 16 paragraphs 11-13) / when sales on credit, working capital tied sebebnarnya company (in a sense, corporate finance financial changes in the replacement cost of inventory) to accounts receivable associated billed. Conversely, when stocks and other supplies purchased on credit, the specific price changes related to these items are basically financed by the supplier during the crediting period. So that the working capital of the buyers are free to use for other purposes. Because these phenomena are the same and is seen as an extension of adjusting the running costs of sales to generate operating profit has been adjusted.
In Brazil, do not adjust the current assets and current liabilities are explicitly because the amounts are expressed in the running. Adjustments arising from calculating the net value of assets and capital that have been permanently adjusted to price levels represent a gain or loss in the general purchasing power of working capital financing with debt or equity. Adjustment of permanent assets in excess of capital adjustment to reflect the portion of assets financed with debt permanently, resulting in a gain purchasing power. Instead, the adjustment of capital assets is greater than the permanent adjustment shows the portion of working capital financed by capital. For the capital portion is recognized the loss of purchasing power during inflationary periods.
Understanding of financial reporting in hyperinflation economy.
This statement does not set at a certain level of inflation is considered hyperinflation. Consideration is required in determining when restatement of financial statements need to be done in accordance with this statement. Characteristics of the economic environment of a country which is an indication that the country is experiencing hyperinflation, among others: (a) inhabitants prefer to store their wealth in the form of non-monetary assets or in a foreign currency is relatively stable. Amount of local currency held immediately invested to maintain purchasing power; (b) the population consider the monetary amount is not in the local currency but in foreign currencies are relatively stable. The prices may dikuotasikan in foreign currency; (c) the prevailing price in the sales and purchases on credit is determined by inserting a factor expected loss of purchasing power during the credit period, even if the short loan period, (d) interest rates, wages and prices associated with the price index, and (e) the cumulative inflation rate over three years approaches or exceeds 100%. All entities that prepare financial statements in the currency of the same hyper-inflation economies are encouraged to apply this statement from the same date. However, this statement is applied to the financial statements of each entity since the beginning of the reporting period when the entity identifies the existence of hyperinflation in the country whose currency is used by such entities to prepare financial statements.
Knowing whether a constant dollar or current cost is better to measure the effects of inflation.
Proponents of historical cost model of constant purchasing power of the opinion that the cost model now violates the basic framework of the historical cost because it is based on the initial acquisition cost, the model is also based on a hypothetical cost estimates and therefore too subjective and difficult to put into practice. Ignoring changes in general purchasing power of money led to comparisons between periods is also not difficult to interpret and weigh the advantages and disadvantages of the ownership of monetary items such as debt. In the present model of adjustment costs, the business is not affected by inflation umu, but more influenced by the rising costs of special operations and fixed asset expenditures. Model of constant purchasing power of combining the characteristics of the current cost model of constant purchasing power historical cost and current cost models. The basic framework of this mixture increases recognize the present value of assets as the advantages of wealth, and thus allow for comparison between present income and earnings in the previous period. Companies considered it would be better only if the asset increases greater than inflation. Monetary gains or losses, are largely ignored in current cost models, is part of the measurement.
Definition of a double dip (double dip) and explains how to handle.
In Hall’s point of view, resembles a double-dip recession is punctuated by sustained periods of growth, followed by a long decline in the economy.
DEVELOPMENT AND INTERNATIONAL ACCOUNTING CLASSIFICATION
1. Factors that influence the development of the accounting world
There are many who claim that accounting is influenced by its environment and vice versa accounting also affects the environment. Choi et. al (1998: 36) describes some environmental factors are believed to have a direct impact on the development of accounting, among others:
Codification of accounting standards and procedures seems natural and appropriate in countries that adhere to the code of law. In contrast, the formation of non-legalistic accounting professional organizations working in the private sector more in line with the prevailing system in common law countries (common law). In the law of war or national emergency, all aspects of accounting functions can be set by a court or government agency. An example is Nazi Germany, when increased preparation for war and then during World War II the national accounting system requires a very uniform to control all activities of the national economy in total.
The existing political system in a country also color the accounting, because the political system “import” and “export” of accounting standards and practices. For example, the existing UK accounting at the turn of the 20th century, “exported” to the Commonwealth countries. The Netherlands did the same to the Philippines and Indonesia, France to countries in Asia and the African colonies. Germany used to influence the political sympathies of accounting in Japan and Sweden.
The nature of Business Ownership
Public ownership of the shares of the company implies the principles of financial accounting reporting and disclosure that differ from the company whose ownership is dominated by the family or the bank. For example, a very high public ownership of the shares in U.S. companies have produced what is called the Sunshine disclosure of accounting standards is wide open, while the lack of community participation in the ownership of shares in French companies have limited financial communication is only effective to the communication channel “people in “only. Ownership of banks in Germany also produces a different response from accounting. In the U.S., AICPA standards make specific recommendations for certain financial and accounting practices used by small non-public companies.
Differences in the magnitude and complexity of the Company’s Business
The dichotomy between large and small companies that are ongoing, ranging from insurance, to all the parent-child hierarchy, including the complexity of the problem. Large conglomerates that operate in a very diverse line of business requires financial reporting techniques of small companies that manufacture a product. Multinational companies also require a different accounting system accounting system with domestic companies.
Social climate also contributed to the development of accounting in different parts of the world. In France, the cause of social responsibility reporting, while in Switzerland is still very conservative so large Swiss companies report their financial condition is relatively compact. The Italian is still very much oriented taxes, even in parts of East and South, together with the bookkeeping and accounting is not considered socially appropriate.
Competency levels of Business Management and Finance Society
Competence or ability of the user’s business management and accounting output will largely determine the development of accounting. Because the output is as sophisticated and as powerful as any accounting, business management, and if users can not read, interpret, and understand it will not do any good.
Legislative Interference with a Business degree
Tax laws may require certain accounting principles. As in Sweden, where certain tax concessions should be recorded in the accounting before it can be claimed for tax purposes, this situation also to the LIFO method of inventory valuation in the United States. Social protection laws also affect a variety of accounting standards. An example is the obligation to pay severance in several South American countries.
There are certain Accounting Legislation
In some cases, there are laws and regulations specific to certain accounting rules and techniques. In the U.S., SEC disclosure and accounting standards to determine to a large company, with reference to the FASB.
Speed Business Innovation
Initially, merger and acquisition activity is not taken into account in the accounting, but due to the incorporation of a business that is very popular in Europe in accounting policies were also developed to meet the needs of the person concerned.
Economic development stage
Countries still rely on the agricultural economy requires a different accounting principle of the advanced industrial countries. In agricultural states, the reliance on contracts and long-term credit business may still be small. So sophisticated accrual accounting useless and what is needed is a simple cash accounting.
Economic growth patterns
Stable economic conditions encourage greater competition for existing markets that require a stable pattern of accounting and will be much different in countries where conditions have prolonged the war.
Status of Education and Professional Organizations
In the absence of sources of accounting and accounting professionals organized the local authority of a country, the standard of other regions or countries can be used to fill these vacancies. English adaptation of the factors accounting is a significant environmental impact in the world of accounting until the end of World War II. Since then, international adaptation process to switch to U.S. sources. Development of accounting, both from the state itself or adapted from other countries will not succeed unless the environmental conditions such as those listed above are fully considered.
2. Approach to the development of accounting in a market-oriented economy
Initial classification proposed by Mueller mid-1960s. He identifies four approaches to accounting development in Western countries with market-oriented economic system.
(A) Based on the macro-economic approach
Retrieved accounting practices and are designed to improve the national macroeconomic objectives. Public use and do not follow national policy, because the business firms to coordinate their activities with national policy. So, for example, national policy work to avoid the cyclical changes of the stable business in accounting practices that generate revenues flatten. Or, to encourage the development of certain industries, a state may permit the rapid removal of capital spending in some industries. Accounting approach developed in Sweden and the macro economy.
(B) Based on the micro-economic approach.
Accounting developed from microeconomic principles. The focus is on individual companies that have the purpose to survive. To achieve this goal, the company must maintain its physical capital. It is equally important that the company clearly separate capital from profits to evaluate and control the business activities. Measurements based on replacement cost accounting is supported as the most suitable for this approach. Accounting in the Netherlands grew from micro ekonorni.
(C) Based on an independent approach.
Derived accounting and business practices and develop an ad hoc basis, with the base slowly and consideration, trial and error. Accounting services is seen as a function of the concepts and principles in the capture and execute business processes, drawn from disciplines such as economics. Businesses face the real world complexity and uncertainty that always happens through experience, the practice of intuition, and. Accounting develops the same way. For example, profit is the most valuable things in practice and disclosures in the pragmatic answer user needs. Independently developed accounting in Britain and the United States.
(4) Based on a uniform approach
Accounting standards and is used as a tool to control by the central government administration. Variability in the measurement, disclosure, and will facilitate the presentation of the designer of government, tax authorities and even managers to use accounting information in controlling all types of businesses. In general, a uniform approach is used in countries with greater government involvement in economic planning in which the accounting is used among others for performance measurement, resource allocation, to collect taxes and control prices. France, with a uniform chart of national accounting, is a major supporter of a unified approach. Legal system: General Accounting Law and the Code of Laws.
3. Dominant state in the accounting practices
Some countries are dominant in the development of accounting include:
c. United States
In the progress the countries France and Japan are less dominant than the United States. It can be seen from the Japanese accounting developments in the current development is based on IFRS (International Financial Reporting Standarts) existing and Japan continue to renew the existing accounting in Japan to match the United States.
4. The basis of international accounting classification by traditional accounting
International accounting classification can be done in two ways: With consideration and empirically. Classification with consideration relies on intuition, knowledge and experience. Classification empirically using statistical methods to collect data that accounting principles and practices worldwide.
Traditional accounting information system is based on what is usually called the accounting cycle and based on the accounting equation. Although the ideas are documented by Pacioli has changed over the years, the core of the initial proposal remains intact. At the heart of the concept of Pacioli is the classification scheme known as the chart of accounts. Chart of accounts used to classify and summarize the organization’s measurement of financial assets, liabilities, and equity.
1. Can help to determine the extent to which the system has similarities and differences.
2. Forms of development of the accounting system of a country compared to another, and the possibility for change.
3. Pension costs accrued at the time generated by the employee (fair presentation) paid or charged on the basis of the time you stop working (legal compliance).
5. Difference between the fair presentation and compliance with law and in which the dominant state in its application
Differences in the presentation reasonably and in accordance with the law through a lot of problems. It involves an adjustment to the application of IFRS as the basis for the presentation. Some problems include:
(A) Depreciation, where the load is determined based on the reduction in the usefulness of an asset during times of economic benefits.
(B) A lease which is substantially the purchase of fixed assets (property) treated as such (fair presentation) or are treated as operating leases are common (legal compliance).
(C) the cost of accrued pension at the time generated by the employee (fair presentation) paid or charged on the basis of the time you stop working (legal compliance).
6. An important thing between the presentation of a reasonable and legal compliance
Important issues going on right now is about the application of IFRS as the basis for the presentation. So that the countries that have not made reasonable adjustments to be inserted through the presentation of the report.
The difference between presenting a reasonable and lawful cause a major influence. The difference between presenting a reasonable and lawful cause a major influence on many accounting issues. Accounting for common law oriented to the needs of decision-making by outside investors. Meet the accounting law is designed to comply with government imposed such as the calculation of taxable income or meet the national government’s economic plan. After 2005, all listed shares of European companies will use the fair presentation of accounting in the report because they will be using IFRS.
INTRODUCTION1. INTERNATIONAL ACCOUNTING ACCOUNTING DIFFERENCES WITH OTHER
AccountingInternational accounting differences bring a number of problems from the standpoint of financial analysis.• First, in an effort to assess foreign companies, there is a tendency to look at revenues and other financial data from the standpoint of their home country, and because of the danger of ignoring the effects of accounting differences. Unless significant difference was taken into account, possibly with some involvement of a restatement, it may have very serious consequences.• Second, awareness of international differences suggest the need to become familiar with generally accepted accounting principles as a destination for foreign countries to know better income data in the context of measurement.• Third, the issue of comparable properties and the harmonization of accounting is reviewed in the context of alternative investment opportunities.
Differences that arise due to:A. economic growth,2. inflation,3. political system,4. education,5. accounting profession,6. tax laws,7. money market, and8. capital.
In this case, Choi and Levich (1991) provides a useful framework for analyzing the impact and relevance of the differences in similarity and no resemblance to the economic environment. In an environment or a situation similar to the accounting, the accounting differences is un logisan and clues to the results that can not be compared. Logical practices suggest that the accounting treatment of similar / same. When the economic environment is not the same, but, as in the case of international investment, accounting differences can be justified, particularly where lies the lack of similarity exists in company laws, tax laws, finance, business customs, culture, accounting and so on. On the other hand, a similar accounting treatment may be justified when several factors have some significant similarities. Understanding the importance of environmental factors and cultural / cultural are all concerned.
In a survey to examine how capital market participants respond to differences in accounting, Choi and Levich cited the opinion of institutional investors, multinational companies that issued securities, the bank under the international securities, and regulatory agencies. Only 48% of all respondents interviewed were influenced by differences in international accounting, but it seems 52% of respondents who claimed not affected by differences in accounting facts “coping” a wide range offactors, including:
A. repeat their own accounts with GAAP,2. development capabilities of foreign GAAP,3. use other sources of information, and4. use a different investment approach, for example, macro-economic approach “top-down” or from top to bottom to be paired with a diversified selection of shares of state in the country.
2. INTERNATIONAL ACCOUNTING IS Divided Broad INTO THREE AREAS
In the international accounting is Divided into three broad areas, accounting includes extensive Several proceedings were, Among others:A. The measurementIt can Provide in-depth feedback regarding the probability of operation of a company’s financial position and power. The process of identifying, categorizing and calculating aktivtias and transactions, in-depth Provide feedback regarding profitability and operations.
2. DisclosureThe process by the which the measurement accounting communicated to the users of the financial statements and is used in the decision making process or Communicate it to the user.
3. AuditingThe process by the which the special accounting professional circles (the auditor) do attest (testing) with respect to the reliability of the measurement process and communication.
3. HISTORICAL PERSPECTIVE
History of the International AccountingPreliminarySome time ago, accounting for its ability to attract public attention through the accounting and human resource measurement, reporting and audit of the social responsibility of organizations. Current accounting operations including behavior in the environment, public sector and international. Accounting provides information to capital markets, large capital markets, both domestically and internationally.
According to Choi and Muller (1998: 1) that there are three major forces that drive the field of international accounting into the growing international dimension, namelyA. environmental factors,2. Internationalization of the accounting discipline, and3. Internationalization of the accounting professionThese three factors are in transit / development accounting plays an important role in determining the direction of accounting theory for bertahun-tahun/dekade many experts and devote his mind to develop a theory of accounting and was a failure and that led to the evolution of “theorizing” to ” conceptualizing “.
Initially, the accounting begins with the double-entry system (double entry bookkeeping) in Italy in the 14th century and 15. Double entry bookkeeping (double entry bookkeeping), considered the beginning of the creation of accounting.Modern accounting started in double entry accounting was found and used in business activity, namely the multiple listing system (double entry bookkeeping) Luca Pacioli introduced by (yr 1447). Luca Pacioli was born in Italy in 1447, he was not an accountant but the priest who is an expert mathematician, and lecturer at several universities in Italy. Lucalah person who first published the basic principles of double accounting system in his book entitled: “Summa Arithmetica geometria the proportioni et proportionalita” in the year 1494.
Luca introduced the 3 (three) important notes that must be done:A. Memorandum book, the book records of all business transaction information.2. Journals, where the transaction whose information has been stored in a memorandum book and then recorded in the journal.3. Great book, is a book that summarizes the above journals. General ledger is the center of the accounting system (Raddebaugh, 1996).
1850’s double-entry bookkeeping reached the British Isles that causes the growth of public accounting and public accounting profession is organized in Scotland and England in the 1870s. UK accounting practice spread throughout North America and throughout the British Commonwealth. Besides the Dutch accounting model exported to Indonesia, among others.
First half of the 20th century, as the growing strength of the U.S. economy, the complexity of accounting issues arise simultaneously. Accounting then recognized as a separate academic discipline. After World War II, the influence of Accountancy increasingly felt in the Western World. For many countries, accounting is a national problem with national standards and practices that become embedded in national law and professional rules.
Trend of the National Financial Sector Policy
Do not feel we have entered in 2011. Government is optimistic the economy will be better next year. Of course, the measure used is the economic growth that is predicted to reach 6.4%, continuing the achievement of 2010. Moreover, according to President Yudhoyono in his speech in East Java, Indonesia’s economic growth ranked third in the G-20 after China and India.
When using indicators of economic growth, the claim is not false.Economic growth until the third quarter of 2010, which reached 5.9% is higher than this year’s target of 5.8%. Moreover, the financial indicators in 2010 has set new records for Indonesia Stock Exchange recorded an increase of composite stock price index (CSPI), the highest in the world of 2575 in the early years, through 3600 in December this year.
Other financial indicators, such as foreign exchange reserves and the strengthening of the rupiah also show a tremendous increase of only about U.S. $ 51 billion to over U.S. $ 90 billion at the end of 2010. Wave of hot money has inflated reserves and encourage the strengthening of the rupiah by 19%, the highest among Asian countries.
“Need a change in budget politics that is not just a collection of state budget funds allocated to stimulate economic growth.However, also as a political tool to maintain the level of social welfare by making changes in priorities.
However, how much financial benefit from the achievements of the shine for the national economy? In any country the size of the economic success rather than the achievement of the financial sector. The proof, since the beginning of the year, almost all countries are busy playing in the financial sector policy whose main objective for the real sector. Like for example, developed countries and developing a continued attempt to lower their interest rates to near zero and weaken its currency to boost the real sector and reduce unemployment.
Very surprising that during the 2010 Indonesia would take a different policy direction to the trend of financial policies in the countries of the world. Rupiah strengthened precisely assessed as a strength. JCI is considered performance rebound, but there is the threat of financial bubbles. Trends in the financial sector policies are not integrated with strategy and policy on trade and industry sectors. That way, no consideration is unclear why the exchange should be strengthened or weakened. “How the financial sector policy in 2011?
Financial policy in 2010 will certainly continue and there will be no fundamental change. The government and Bank Indonesia would not make changes to the policy of flooding the global money market funds that will go to Indonesia. Loose fiscal policy tends to allow and even encourage the influx of hot money, and Indonesia will remain a haven for the world’s investment portfolio.
Intervention from the developed countries and multilateral institutions to Indonesia still maintains a policy of financial sector that is very loose it will continue to occur through a variety of ways because Indonesia is becoming increasingly important. Since early 2010, many countries have to erapkan various control policies on the entry of short-term funds.
In Thailand for example, the government has imposed a withholding tax for interest or capital gains received by foreigners. Brazil has raised taxes for foreign investors to buy domestic bonds. Meanwhile, in South Korea, the government has even banned the withdrawal of foreign currency loans and lower portion of the foreign debt.The consequences of a policy to keep interest rates and bond yields are high foreign ownership in the SUN, SBI, and the stock will continue to increase as the current trend. When in 2008 the total foreign funds amounting to Rp548 trillion only, to Rp1.374 trillion this year, in 2011 certainly will be much greater.
In fact, besides the threat of reversal of capital, the economic cost to be paid from the amount of foreign ownership is very expensive. Capital Bank Indonesia will continue to erode, the cost of private capital will be more expensive due to high lending rates and yields of bonds issued.
The changing demands
Policy changes in the financial sector is also a demand for high cost of the current financial policy must also be paid to the low economic performance of the real sector. Without policy changes in the financial sector, real sector performance in 2011 there will be no significant improvement when compared to 2010. In fact, as the last six years, in 2010 economic growth in three main sectors, namely agriculture, mining, and processing, which became the main economic activities to absorb 52% of the population and employment grew only 3.5%, far below the economic growth.Slow performance of the real sector impact on the inability to provide sufficient jobs to hamper the completion of a serious unemployment problem. Indeed, the open unemployment rate declined in 2010. However, the number of underemployed people was 32.8 million. Meanwhile, the BPS data show thatof 12.2 million jobs created, 41% of whom are business service organizations (including political organizations, service repair, cleaning, laundry, etc.), rather than on sectors that will drive productivity and high added value.Poor performance in job creation would be more difficult for eradicating poverty. Indeed, the poverty rate has dropped to 13.3% this year and 11.5% -12% target by 2011 is likely to be reached. However, the reduced number of people who are below the poverty line is only about 1.5 million people is not worth the eradication of extreme poverty budget of only Rp66 trillion (2009) to Rp94 trillion (2010).
In 2011, Indonesia will face a food crisis and the energy world. Climate change will reduce the supply of food, especially rice on world markets. Liberalization of food and lack of role of government since the crisis proved to result in food prices increasingly hard to reach communities.
Therefore, breakthroughs are being made to encourage the performance of the state budget is not simply pushing a faster rate and higher realization. However, should the political changes in the budget so the budget is not just a collection of allocation of funds to stimulate economic growth. However, also as a political tool to maintain the level of social welfare by making changes in priorities.
4. ACCOUNTING FOR ROLE IN GLOBAL CAPITAL MARKETSIn the era of globalization, businesses and communities have become increasingly complex so requires the development of various disciplines, including accounting. Accounting plays an important role in the economic and social as any financial decisions should be based on accounting information. This situation makes accounting as a profession that is needed existence within business organizations.
The business world faster and faster and very varied. Areas that were not of the thought as the business sector is now a major sector. The development of the accounting profession to rise even more after 1985, bebarengan with the JSE. High bank interest rates encourage people to find alternatives to meet its capital requirements, increasing competition among companies to be accompanied various problems faced by companies in Indonesia. In the face of all the managers of the company was in dire need of accounting information in decision-making framework.
Accounting has developed very rapidly in line with business growth and development of securities, especially shares in the capital markets business. The American public already knows the business since 1900 (Belkaoui, 2007). In the transaction, both the investors and prospective investors have been using the company’s financial information as one of the guidelines in making predictions and for making business decisions, the investment in securities, particularly stocks. Positive developments are happening to the stock business in the U.S. capital markets also showed that companies will need capital also increased in step with market developments. This development also shows that capital markets play an important role in the economy of a country, especially the United States in that era. In addition, it also means that the needs and role of accounting information becomes increasingly important.The Role of Accounting in the Global Business SectorIndonesia’s economic downturn caused by the 1997 economic crisis mementalkan John Naisbitt predicted that Indonesia will become one of the tigers of Asia. In 2000, three years after the crisis, at a time when other countries are also affected by the crisis such as Thailand, South Korea, the Philippines and Malaysia have obtained a significant improvement of the economy, Indonesia’s economy (GDP) grew only 0.2%.
(Asian Recovery Information Center – ADB: May 2000) Tanri Abeng (1999) in Djalil (2000), states that there are six basic root of the problem that causes slow improvement in Indonesia’s economy, namely:A. It turned out that the rapid growth of Indonesia before the crisis because it encouraged more investment growth is not due to efficiency and innovation2. The majority of the market value of listed companies on the JSE was overvalued (90% of the value of publicly traded companies is determined by the growth expectation, only 10% above the real ability to earn profits; different from developed countries, 30% growth expectation, 70% of real ability)3. Company’s financial structure is not healthy (loans over 100% compared to its equity, healthy company should be below 50% of ekuitinya)4. The existence of mark-up in lending.5. Unhealthy concentrations of economic (economic pyramid, above: there are 200 private conglomerate owned by 50 families, were: almost empty.6. There is no good governance (the lowest according to McKinsey 1999)On the other hand, Indonesia faced economic challenges of the 21st century that economic globalization. Economic globalization is a process of economic activity and trade, in which countries around the world into one market power is increasingly integrated with the territorial limits of the state without a hitch.
CHALLENGES IN THE GLOBAL ERA
Globalization that has been faced by the nation of Indonesia would insist on efficiency and competitiveness in the business world. In intraregional relations concerning globalization and international competition will occur between nations. Tangible manifestation of economic globalization faced by Indonesia, among others, occur in the following forms (Damanhuri, 2003):• Financing. Global companies have access to loans or investments (whether in the form of direct or portfolio) in all countries in the world. For example, in multiplying a unit of PT Telkom telephone line, or PT Jasa Marga to expand the highway network has been utilizing the system of financing by the pattern of BOT (build-operate-transfer) with mitrausaha from abroad.• Labor. Global companies will be able to utilize the labor of the world according to its class, such as the use of professional staff drawn from workers who have had international experience and \ or workers from developing countries. With the globalization of human movement will be more easy and free.• Network information. Society of a country easily and quickly obtain information from the countries of the world due to technological advances, including through: TV, radio, print media and others. With increasingly advanced communications network that has helped to spread to different parts of the world market for the same. For example, KFC, Hoka Hoka Bento, Mac Donald, etc. hit markets everywhere. As a result, the taste of the world (both those residing in cities and villages) to the global tastes.• Trade. This is manifested in the form of tariff reduction and harmonization and elimination of non tariff barriers. Thus the activities of trade and competition is becoming increasingly stringent and fair. In fact, the transaction becomes faster because of “less papers / documents” in the trade, but can use the telecommunications networks that increasingly sophisticated technology.With the business activities of the corporation (corporate business) of the above can be said that globalization leads to increasing economic interdependence between countries through increased volume and diversity of transactions between countries (cross-border transactions) in the form of goods and services, international financial flows (international capital flows), the movement of labor labor (human movement) and the rapid spread of information technology. Global economic power led to a business corporation to conduct a review of the structure and business strategy and management bases its strategy on the basis of entrepreneurship, cost efficiency and competitive advantages. Problems of competitiveness in an increasingly open world markets is a key issue and challenge, not light. Without the capability and equipped with high competitive advantages necessarily the product of a country, including the products of Indonesia, will not be able to penetrate the international market. Even the entry of imported products could threaten the position of the domestic market. In other words, in a competitive market, competitive advantage (competitive advantage) is a very important factor in improving company performance. Many large corporations Indonesia crashing because of the crisis, as global competition, suggesting that they are not efficient.
Realizing that some big companies do not anticipate trying to be a bubble but a sustainable company company (Hasan, 2000). Good corporate governance, good corporate governance, it is believed capable of realizing that desire, because it not only aims to profit-oriented but also focus on the needs of its stakeholders. For that transparency, accountability, fairness, and responsibility is particularly important to understand both the organization and realized private organizations and public sector organizations. Accounting, as an information provider, need to realize that high quality information is the foundation of good corporate governance. Therefore accounting principals need to be aware of their responsibilities to provide information and financial statements are reliable and accurate.
Conclusion: So the difference in bringing a number of international accounting issues from the standpoint of financial analysis. Accounting to show its ability to attract public attention through the accounting and human resource measurement, reporting and audit of the social responsibility of organizations. Accounting as a profession that is needed existence within business organizations.