global accoubting standards

global accoubting standards - International Accounting, 6/e...

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Choi/Meek, 6/e 1 International Accounting, 6/e Frederick D.S. Choi Gary K. Meek Chapter 8: Global Accounting and Auditing Standards
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Choi/Meek, 6/e 2 Learning Objectives Define and understand the distinction between “harmonization” and “convergence” as they apply to accounting standards. State the pros and cons of adopting international accounting standards. Understand what is meant by “reconciliation” and “mutual recognition” of different sets of accounting standards. Understand the major provisions of the U.S. Sarbanes-Oxley Act and why similar legislation is being enacted in other countries.
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Choi/Meek, 6/e 3 Standardization, Harmonization, and Convergence Standardization Rigid, narrow set of rules One-size-fits-all approach Less flexible than harmonization or convergence Not the current thinking Harmonization Standards that are compatible – no logical conflicts Means the elimination of differences among existing accounting standards Convergence Means the gradual elimination of differences in accounting standards But might also involve a new accounting treatment not in any current standard Involves cooperative efforts of IASB and national standard-setters Now the preferred term over harmonization
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Choi/Meek, 6/e 4 A Survey of International Convergence Advantages of international convergence Investor understanding and confidence is improved. Investor decision making is improved. Capital is allocated more efficiently around the world. Financial risk and cost of capital are reduced. Strategic decision making in mergers and acquisition is improved. Criticisms of international standards Solution is too simple for such a complex problem. Strips accounting of its flexibility to adapt to different situations. Challenges national sovereignty. A tactic of large accounting firms to expand their market share. May create standards overload.
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Choi/Meek, 6/e 5 A Survey of International Convergence (contin) Reconciliation and mutual recognition Reconciliation Financial statements based on home GAAP, but net income and stockholders’ equity reconciled to another GAAP. This is the SEC requirement for foreign filers.
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This note was uploaded on 09/11/2011 for the course ACCT 210 taught by Professor All during the Spring '10 term at American University of Beirut.

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global accoubting standards - International Accounting, 6/e...

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