CHAPTER 3 COMPARATIVE ACCOUNTING

Accounting standards are the regulations or rules (including also the laws and statutes) that govern the preparation of financial statements. Standard setting is the process of formulating or formulation of accounting standards. Standards are the result of standard setting. However, actual practice differs from the prescribed standard. That is because the 4 things: in most countries the penalty for noncompliance with the provisions of the official accounting tends to be weak and ineffective voluntary infomasi company may report more than required; some countries allow companies to ignore the accounting standards if by doing operations and financial position will tersajikan better results, and in some countries, the standard only applies to the separate financial statements, and not for the consolidated report.

Accounting standard setting involve a combination of private sector group that includes the accounting profession, users and compilers of financial statements, the employees and the public which includes agencies such as the tax authorities, ministries in charge of commercial law and capital market commission. Stock exchanges are private or public sector (depending on country) also affect the process. In common law countries, the private sector is more influential and auditing profession tends to regulate itself and to better be able to attest to the consideration of the fair presentation of financial statements. In code law countries, public sector and influence over the accounting profession tend to be more regulated by the State. This is why different accounting standards around the world.

SIX NATIONAL ACCOUNTING SYSTEM
FRANCE

Accountancy in France is strongly associated with the code so it is possible to overlook the fact that the legislation of commercial law (Code de Commerce) and the actual tax laws determine many accounting practices and financial reporting in France. The primary basis of accounting rules is the Accounting Law 1983 and Decree 1983 which includes accounting Compatible General Plan shall be used by all companies. Every company should have a manual accounting. The special feature is the presence of accounting in France dichotomy between the separate financial statements of companies with a consolidated group reports. French law allows French companies to follow International Financial Reporting Standards (International Financial Reporting Standards-IFRS). The reason, many multinational companies from France who recorded their shares abroad.

Five major organizations involved in standard-setting process in France:

a. Counseil National de la Comptabilite or CNC (National Accounting Board)
b. Comite de la Reglementation Comptable or CRC (Accounting Regulation Committee)
c. Autorite des Marches financiers or AMF (Financial Markets Authority)
d. Ordre des Experts-Comptables or OEC (Institute of Certified Public Accountants)
e. Compagnie Nationale des Comptes Commisaires aux or CNCC (Association of National Compliance Auditor)

French company reported a balance sheet, income statement, notes to financial statements, directors report and auditors report. There are no provisions regarding the statement of changes in financial position or cash flows although CNCC recommends to him. To give you an actual and reasonable (fidele image), the financial statements have been prepared in accordance with the regulations (regularite) and with good intentions (sincerite).

In the measurement of accounting, fixed assets are generally depreciated according to the tax provision in a straight line or multiple balances. Inventories should be valued at the lower of cost or net realizable value using FIFO or weighted average method. Research costs are not amortized over 5 years. Many risks and uncertainties can be reserved, such as those associated with litigation, restructuring, and self-insurance and this allows the emergence of opportunities for income smoothing.

GERMANY

German accounting environment changes continuously and the results are remarkable since the end of World War I. Commercial law specifically calls for the principles of orderly bookkeeping and audit independently barely left after the war. Corporate law in 1965 changed the reporting system led to keunagan German American English ideas, but only for large companies. In the early 1970s, began to issue a directive of the European Union harmonization, which should be adopted by Member States into national law. EU directive fourth, seventh, and eighth all the way into German law through the Comprehensive Accounting Act which came into force on December 19, 1985. Two new laws were enacted in 1998, the first one to add a new paragraph in the third book of the German Commercial Law that allows the company to issue shares / debt on an organized capital market to use the principles of internationally accepted accounting in the consolidated financial statements made . Second, allow the establishment of private sector organizations to establish accounting standards for consolidated financial statements. Tax law largely determines the commercial accounting. The principle of determination (Massgeblichkeitsprinzip) determines that the taxable income is determined by what is recorded in the company’s financial records.

Law on control and transparency in 1998 introduced a requirement for the Ministry of Justice to recognize a private entity that sets national standards to meet the following objectives:

A. Develop recommendations regarding the application of accounting standards in the consolidated financial statements

2. Provide advice to the Ministry of Justice for a new accounting legislation

3. Represents Germany in international accounting organizations such as the IASB

Accounting Act in 1985 specifically define the terms of accounting, auditing, and financial reporting varies according to firm size, rather than according to the form orgasisasi. Accounting Act 1985 specifically determine the content and form of financial statements that include balance sheets, income statements, notes to financial statements, management reports and auditor’s report.

Based on commercial law (HGB), the method of purchase / acquisition is the primary method of consolidation, although pooling can also be applied in limited conditions. Two forms of the purchase method allowed is the book value method and revaluation method. HGB does not regulate the translation of foreign currencies and companies in Germany using a number of methods. Translation differences are treated in several ways, as a result special attention should be paid to the notes of financial statements in which the foreign currency translation method must be explained.

JAPAN

Accounting and financial reporting in Japan reflects a combination of domestic and international influences. To understand accounting in Japan, one must understand the culture, business practices, and history of Japan. Japan is a traditional community with cultural and religious roots are strong. Japanese companies have equity shares each to each other, and together often have other companies. These investments are interlocked industrial conglomerate that produces meraksasa called keiretsu. Keiretsu venture capital is in line with refomasi structural changes in the Japanese to overcome the economic stagnation that began in the 1990s.

The national government still has the most significant influence on accounting in Japan. Accounting regulation is based on three laws, namely the commercial law, capital market law, tax law and corporate income. Commercial law is governed by the Ministry of Justice (MOJ). The law is at the core of accounting regulation in Japan and most have a major influence. Public-owned enterprises shall further comply with the Laws of capital markets (Securities and Exchange Law-SEL) is regulated by the Ministry of Finance. The main purpose of SEL is to provide information in making investment decisions.

Company incorporated under commercial law are required to menyususn reports required to be approved in the annual meeting of shareholders which contains balance sheet, income statement, business reports, proposals for the use (appropriation) retained earnings, supporting schedules. Companies that list their stocks should also prepare financial statements in accordance with the laws of capital markets in general require the same basic financial statements of the commercial law ditamabha the cash flow statement.

Commercial law requires large firms to prepare consolidated reports. Consolidated subsidiary if the parent company directly and indirectly control the financial and operational policies. Goodwill is measured on the basis of the fair value of net assets acquired and is amortized over a maximum of 20 years. Inventories can be valued at cost which is the lower of cost or market price, but cost the most widely used.

NETHERLANDS

Accounting in the Netherlands has some interesting paradox. The Netherlands has the provision of accounting and financial reporting are relatively permissive, but the professional practice standards are very high. The Netherlands is the country code of law, but accounting-oriented penjayian reasonable. In the Netherlands, accounting is considered as a branch of the business economy. As a result, many economic thought devoted to the topics of accounting and in particular to the accounting measurement.

Regulation in the Netherlands remained until 1970 when liberal laws enacted annual financial statements. Among the major provisions of the law in 1970 are as follows:

A. The annual financial statements must demonstrate a reasonable picture of the financial position and results for one year

2. Keuangn report should be prepared in accordance with good business practices

3. Basic presentation of assets and liabilities and determination of operating results should be disclosed

4. The financial statements have been prepared in accordance with a consistent base material and the effect of changes in accounting principles should be disclosed to taste

5. Noted that financial comparative information for prior periods should be disclosed in the financial statements and accompanying footnotes

The quality of the Dutch financial statements are very uniform. The financial statements shall be prepared in Dutch but in English, French, and German can be accepted. The financial statements must contain the following: balance sheets, income statements, records, reports of directors, and other information are recommended. The annual financial statements must be presented either by the parent company only and consolidated. Groups of companies for the purpose of consolidation of the companies that make up the economic unit under the control of the same.

Although the pooling method for business combinations may be used under certain conditions, such methods are rarely used in the Netherlands. Goodwill is the difference between acquisition cost and fair value of purchased assets and liabilities. Dutch flexibility in accounting measurements can be seen with the permissibility of the use of present value for intangible assets such as inventory and assets are depreciated. Because the Dutch companies have flexibility in applying the rules of measurement, can be presumed that there is a chance to melakakukan earnings smoothing. Certain items can ignore the statements of income and adjusted directly against reserves in shareholders’ equity. It includes:

A. Catastrophic losses are not possible or is not common for the uninsured

2. Similar losses due to nationalization or other confiscation

3. Consequences of the financial restructuring

ENGLISH

Accounting in the UK to grow as an independent branch of science and pragmatically address the needs and business practices. UK accounting for the world heritage is very important. Britain was the first country in the world to develop the accounting profession as we know it. The concept of presenting the results and financial position of the fair is also from England.

The two main sources of financial accounting standards in the UK is the company’s legal and accounting professions. Activities of a company incorporated in England is widely regulated by the assets of the so-called law firm. Firm laws adapted, expanded, and consolidated throughout the year.

Here are six UK accounting bodies in dealing with the consultative committee of accounting bodies that stood in 1970:

1. Institute officially licensed Accountants in England and in Wales (The Institute of Chartered Accountants in England and Wales, ICAEW)
2. Institute officially licensed Accountants in Ireland (The Institute of Chartered Accountants in Ireland, ICAI)
3. Institute officially licensed Accountants in Scotland (The Institute of Chartered Accountants in Scotland, ICAS)
4. Accounting Association officially licensed and certified (The Association of Chartered Certified Accountants, ACCA)
5. Institute of Management Accountants officially licensed (The Chartered Institute of Management Accountants-CIMA)
6. Institute of Public Finance and Accountancy officially licensed (The Chartered Institute of Public Finance and Accountancy, CIPFA)

UK financial reporting, including the most comprehensive in the world. The financial statements generally includes directors reports, income statements and balance sheets, cash flow statement, statement of total recognized gains and losses, statement of accounting policies, notes to the references in the financial statements and auditor’s report. Directors report discusses the major business activities, our discussion of the operation and the possibility of development, significant events after balance sheet date, dividends are following after, the names of board members, and the amount of stock ownership, as well as political and charitable kontibusi done.

Britain to allow both methods of recording the acquisition and merger accounting for business combinations. However, the conditions of the merger method of use is so tight that almost no use. Based on the method of acquisition, goodwill is calculated as the difference between the fair value of the submission made and the fair value of acquired assets.

UNITED STATES

Accounting in the United States regulated by the private sector (Financial Accounting Standards Board, Accounting Standards Board or Fincancial-FASB), but a government agency (Capital Market Supervisory Commission or the Securities Exchange Commission-SEC) also has the power to set its own standards.

The U.S. system has no general legal provisions regarding the issuance of audited financial statements periodically. U.S. companies formed under state law, not federal hum. Although it has the legal power to determine the accounting and reporting standards for public companies, SEC continue to rely on the private sector that sets the standard stretcher. SEC and FASB to work together to provide pressure when viewing the FASB moving too slowly or in the wrong direction.

Annual financial report should be made by a major U.S. company that includes the following components:

1. Management reports
2. Independent auditor’s report
3. Primary financial statements (income statement, balance sheet, statement of cash flows, comprehensive income, stockholders’ equity and statements)
4. Management discussion and analysis of operating results and financial condition
5. Disclosure of accounting policies with the most important influence on the financial statements
6. Notes to the financial statements
7. Comparison of certain financial data for 5 or 10 years
8. Selected quarterly data

U.S. accounting measurement rules assume that a business entity will continue to carry out its business. Accrual basis of measurements with a very broad and the recognition of transactions and events are highly dependent on the matching concept. Business combination should be recorded as a purchase. Goodwill is capitalized as the difference between the fair value of the gifts given in exchange and the fair value of net assets acquired. Goodwill must be reviewed for impairment annually and written off and charged in the profit if the book value exceeds fair value.

¬†Similarities and differences in accounting systems in developed countries’
Convergence of accounting standards is essentially equating the language of business. Each state has a regulatory agency financial reporting standards. Indonesia Indonesian Institute of Accountants has issued Statement of Financial Accounting Standards as the only standard that is accepted as ‘business language’ companies in Indonesia. United States has a Generally Accepted Accounting Principles (GAAP), which was released by the Financial Accounting Standards Board (FASB). The European Union has the International Accounting Standard (IAS) issued by International Accounting Standard Board (IASB). And so, each country using a standard reporting-reporting standards that are likely to diverge from one another. There is no assurance that the financial statements are presented in different countries can be read with the same language. Difference in the end of this standard will also hamper international business people in business decisions.
By far the leading to the reference standard is the International Financial Reporting Standards (IFRS) issued by International Accounting Standard Board (IASB). IASB standards are the governing body of International Accounting Standards Committee Foundation, an independent international non-profit institutions engaged in financial reporting is based in the UK.
Today, more than 100 countries require or allow the application has IFRS, and is expected to be more and more countries around the world use IFRS. In fact, 10 countries have global capital markets has made convergence to IFRS as Japan, Britain, France, Canada, Germany, Hong Kong, Spain, Switzerland, Australia, including the superpower United States has said it will make the convergence to IFRS. As can be seen on the map, the blue states are the countries that have require or permit the application of IFRS. While the gray are the countries that are in the process of convergence with IFRS.

For Indonesia, as a first step the Financial Accounting Standards Board Indonesia Institute of Accountants (DSAK-IAI) will mengonvergensikan GAAP with IFRS fully through three stages, namely stages of adoption, the final preparation phase and implementation phase. Stages of adoption made in the period 2008-2011 includes activities throughout the IFRS to GAAP adoption, infrastructure preparation, and evaluation of IAS regulations.
Of course not easy to reconcile IAS 62 standard which is owned by owned 37 IFRS standards. There are still considerable gaps between GAAP with IFRS, there are even 20 or 32% IAS standards that can not be compared. When compared with the IFRS, there are still significant differences include financial instruments, investment property, business combination, property, plan and equipment, intangible assets, service concession agreement, the presentation of financial statements, leases, insurance contracts, accounting for banking to be removed , exploration and evaluation of mineral assets, agriculture, and accounting for reporting currencies, and other major differences.
“IFRS convergence targets that have been launched IAI in 2012 is revised IAS that are materially in accordance with IFRS version of January 1, 2009 which became effective in 2011/2012,” said the Chairman of IAI Rosita DSAK Uli Sinaga Public Hearing on the exposure draft of IAS 1 (Revised 2009) of the Financial Statements, in Jakarta last Thursday, August 20, 2009. For the twenty-ninth of Financial Accounting Standards (GAAP) included in the IFRS convergence program launched by IAI DSAK 2009 and 2010. The number of standards to be implemented in the convergence program is a tough challenge for the period 2009-2012 DSAK IAI. If the experience of the implementation of SFAS 50 and 55 concerning financial instruments that have been published in 2008, but it gets the strong pressure of the unpreparedness of the financial industry that have delayed its implementation, then you can imagine how powerful enact dozens of standards in such a short time.
In addition to the readiness of the companies, the implementation of this program also requires the readiness of practitioners of management accountants, public accountants, academics, regulators and other support professionals such as actuaries and appraisers. Public accountants are expected to immediately update their knowledge in relation to changes in GAAP, SPAP update and adjust the IFRS-based audit approach. Management Accountant / Company can anticipate immediately formed a team of successful convergence of IFRS Accountant in charge of updating the knowledge of management, conduct gap analysis and prepare road map for IFRS convergence and coordination with other projects for the optimization of resources. Accounting Academics / University are expected to form a successful team of IFRS convergence to update the knowledge of academics, revising the curriculum and syllabus as well as perform a variety of related research and provide input / comments on the ED and the Discussion Papers published by the IASB DSAK well.
Regulators need to make adjustments to regulations related to financial reporting and taxation and make efforts toward professional development and supervision associated with the reporting keuanganseperti appraisers and actuaries. Industry associations are expected to develop Guidelines for Industrial Accounting in accordance with GAAP developments, and create a forum that is intensively discussed various issues with respect to the impact of the application of GAAP and proactively provide input / comments to DSAK IAI.
SIMILARITIES AND DIFFERENCES IN ACCOUNTING SYSTEM DEVELOPED COUNTRIES

DEVELOPMENT

Accounting standards and practices in each country is the result of complex interactions among economic, historical, and cultural institutions. Can be expected to be the difference between countries. Factors that influence the development of national accounting can also help explain differences in accounting between nations.

We believe that the following eight factors that influence the development of accounting seignifikan. Seven main factors of economic, social history, and / or institutional and merupaka factor that is often mentioned by the authors of accounting. Lately, the relationship between culture (following eight factors) and the development of accounting began explored further.

1. Funding system

In countries with strong equity markets, such as the United States and Britain, accounting has a focus or how well management runs the company (profitability) and is designed to help investors analyze the cash flow risk associated depandan. Full disclosure is made to comply with extensive public ownership. Instead, the credit-based system in which the bank is the main source of funding, accounting has focused on the protection of creditors through conservative accounting pengukurang minimize dividend payments and maintain adequate funding in the framework of protection for borrowers. Because financial institutions have the direct access to what information is desired, an extensive public disclosure deemed unnecessary. Examples are Japan and Switzerland.

2. The legal system

Legal system to determine how individuals and institutions interact. The western world has two basic orientations: the codification of law (civil) and common law (case). Mainly drawn from the legal codification of Roman law and because ode Napoleon. In countries which adhere to the legal system is Latin-codification of Roman law is a complete group that includes the provisions and procedures. Codification of accounting standards and procedures are fair and appropriate thing in there. Thus, in countries that adhere to the codification of law, accounting rules are incorporated in national law and tend to be very comprehensive and covers many of the procedures. In contrast, common law developed on a case by case basis without any attempt to cover all cases in the complete code. Of course, there is a fundamental law, but tended to be less detailed and more flexible when compared with the general codification system. This encourages businesses to try and allow the application of judgment. Common law derived from English case law. In most common law countries, the accounting rules established by private sector professional organizations. This allows accounting rules become more adaptive and innovative. Except for the provisions of a broad base, most of the accounting rules are not incorporated directly into the basic law. Codification of the law (legal code) tend to stare at the payload (contents) of its economy. For example, the lease under the common law rule is usually not capitalized. Instead, the lease under the general law can basically be capitalized if it becomes part of the property buyer.

3. Taxation

In most countries, tax legislation effectively determines accounting standards because the company should record revenue and expenses in their accounts to claim the tax purposes. In other words, financial and tax accounting tax is the same. In this case, as an example is the case in Germany and Sweden. In other countries like the Netherlands, different financial accounting and tax: taxable income is basically the accounting profit adjusted for differences in tax law. Of course, when the separate financial accounting and tax, tax rules sometimes require the application of certain accounting principles. Inventory valuation according Last Sign In First Out (last-in, first-out, LIFO) in the United States is an example.

4. Economic and political ties

Accounting ideas and technologies transferred through conquest, trade and similar forces. Recording system in pairs (double-entry) that began in Italy in the 1400’s is slowly spreading in Europe along with the ideas of reform (rannaissance) others. British colonialism and export accountant accounting concepts throughout the British dominions. German occupation during World War II caused the French to implement Plan Comptable. The United States forced the U.S. style of accounting regulatory regimes in Japan after the end of World War II. Many developing countries use accounting system that was developed elsewhere, either because it imposed on these countries (like India) or because of their own choice (such as Eastern European countries are now imitating the accounting system according to the rules of the European Union (EU).

5. Inflation

Obscure the historical cost accounting inflation through excessive reduction terhadapnilai asset values and related expenses, while on the other hand to an increase in excess of revenues. Countries with high inflation often requires companies to perform a variety of price changes in their financial calculations. Mexico and several South American countries using the common accounting because of their experience with hyperinflation.

About Yohanes Novrianto Simangunsong

MY NAME IS YOHANES
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