IFRS VS US GAAP

IFRS VS US GAAP - Lecture3 Dr.ElGazzar INTERNATIONAL...

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Lecture 3 Dr. El-Gazzar INTERNATIONAL ACCOUNTING
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Emerging Need for International  Accounting Standards  A. International Business Operations Foreign Operations : Buy or Sell (from and to foreign entities) - Translation into National Currency - Hedging for Currency Fluctuations Foreign Division Consolidation Accounting
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Emerging Needs…………… B. Cross-Boarder Listing of Securities ● Costs and Benefits Benefits: - Access to Capital Markets Guest company’s ability to raise capital in foreign markets, probably at lower cost of capital - Local Investors: Expanded opportunity for investing in foreign companies, leading to better allocation of resources Costs - Host Country Investors’ Information Risk - Guest Company’s cost of complying with foreign laws
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Approaches to solving the Financial  Reporting Problems 1 Company Issues One Set of Financial Statements to All Users : the market is efficient to convert and evaluate differences 2 Reconcilliate to Guest Country Reporting Standards 3 Two Sets of FS : one for the local market and one for the foreign market 4 Develop and Adopt World-wide reporting system (IFRS)
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Uniform Accounting Rules Don't  Guarantee Same Information Quality Accounting Information is an output of a system that is influenced by many indigenous and exogenous drivers: ► Accounting Measurements ► Preparer’s Qualifications and Licensing ► Presence and Level of Governance ► Legal Enforcement of Rules ► Economic System and Information Needs ► Cultural and Local Values
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Factors Influencing the Development  of Accounting Systems: Level of Education Political System Legal System Economic Development
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Influences on the Development of  Financial Reporting Type of economy Agricultural Resource Based Tourist Based Manufacturing Legal System Codified Common Law Political System Democratic Totalitarian Nature of Ownership Private Enterprise Socialist Communist
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Influences on the Development of  Financial Reporting Growth Pattern of economy Growing Stable Declining Social Climate Stability of currency Sophistication of management Sophistication of financial community Existence of accounting legislation Education System
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The International Accounting  Standards Committee The preparation of financial statements for foreign users under option #5 is being increasingly advocated IASC formed in 1973 to aid in this process currently 134 sponsoring organizations from 104 countries International Accounting Standards Board replaced IASC in 2001
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Restructuring the IASC In its early years, IASC acted mainly as a harmonizer Recently, it has begun to combine that role with the role of a catalyst Harmonizer Catalyst Coordinator of national initiatives Initiator of new work at national level
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Restructuring the IASC 2001: Responsibility for international standards- setting was transferred to the to the International Accounting Standards Board (IASB)
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IFRS VS US GAAP - Lecture3 Dr.ElGazzar INTERNATIONAL...

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