International Accounting

1

• International Accounting
• and Financial Reporting
• Winter 2007
• William F. OBrien, MBA, CPA

2
Session V

• Comparative Approaches II

3
Session III Objectives

• Regional Developing GAAP Comparisons
• Developing Anglo-American
• Developing Latin
• Developing Asian
• Developing Eastern European

4
Developing Region Similarities

• Lower GDP
• Lower Economic Performance
• Emerging Stock Exchange Listings
• Gradual Acceptance of IFRS
• Consider Strategic Decision Point on pg. 80

5
Developing Anglo-American

• India
• Malaysia

6
India

• Investor focus less conservatism more
  transparency
• Growing economy
• British heritage
• ICAI (1949)IFAC membership
• Bias towards Full and fair disclosure
• ASB formulates standards
• Attempts to incorporate IFRS

7
Malaysia

• Investor focus less conservatism more
  transparency
• Rapidly growing economy over the past 30 years
• British heritage
• MIA (1967)IFAC membership
• Bias towards Full and fair disclosure
• Independent MASB (1997) formulates standards
• Converging towards full acceptance of IFRS

8
Developing Latin

• Brazil
• Argentina
• Mexico

9
Brazil

• More conservative and secretive
• Focus on creditors and tax authorities
• Growing number of investors
• Influence still minor
• Bias towards US GAAP
• Portuguese heritage
• CVM (SEC) sets accounting standards
• Accounting profession not as mature as US
• IBRACON essentially proposes standards

10
Argentina

• More conservative and secretive
• Focus on creditors and tax authorities
• Confusing GAAP hierarchy
• Standards set by council driven FACPCE
• Process leads to lack of harmonization within the
  country
• Confusion also exists over statutory accounting
  standards (i.e. inflation accounting)
• Moving towards IFRS but country believes
  differences should exist

11
Mexico

• More conservative and secretive
• Focus on creditors and tax authorities
• Post NAFTA strong economic growth
• Investor participation growing
• Bias towards US GAAP
• Also considers IFRS
• French and Spanish heritage
• IMCP oversees the profession (CPE and ethics)
• CINIF sets the standards (2004)
• Converging towards IFRS

12
Developing Asian

• China
• Indonesia
• Thailand

13
China

• Mixed system
• Transitioning from Government driven to
  investors, creditors and managers
• Tension between macro and micro control
• Growing world-wide economy since 1978
• Mixed heritage
• Western prior to 1940
• Communist since 1949
• MOF sets standardsFARR (1999)NEW ERA
• Attempts to incorporate IFRS
• CICPA (1988) IFRS (2006)

14
Indonesia

• Investor focus
• Growing economy in the past decade but serious
  decline in recent years
• US - Dutch heritage
• IAI (1959), US driven
• FASB sets standards (1994)
• Harmonizing with IFRS

15
Thailand

• Investor focus more transparency
• Sustained growth since 1997
• No colonial heritage
• ICAAT (1948)
• Thai Securities Exchange Commission
• Requires audits regulates auditors
• Attempts to incorporate IFRS
• 21 IFRS adopted

16
Developing Eastern European

• Poland
• Russia
• Czech Republic

17
Poland

• Mixed economy situation like China
• Transition to market economy via Shock Therapy
  in 1990
• Bias towards True Fair view
• The Accounting Act of 1994
• Admitted to EU in 2004
• Adopted IFRS in 2005

18
Russia

• Mixed economy situation like China
• Unique problems
• Low of new businesses
• Many Soviet style businesses remain
• Many unreformed monopolies
• Government still controls the accounting
  profession
• IFRS mandated in 2004 compliance questioned
• RAS still may be used for tax purposes

19
Czech Republic

• Mixed economy situation like China
• Transition to market economy via Shock Therapy
  in 1993
• New tax and accounting system in 1993
• Accounting Act of 2002
• Allows IFRS over Czech rules
• Admitted to EU in 2004
• Adopted IFRS in 2005

20
Six Levels of Foreign Reporting

• Do-Nothing
• Convenience translation (Japan)
• Currency restatement
• GAAP disclosure
• Partial restatement
• Full restatement

21
Key Points-Session V

• Note the alignment with Developed Region GAAP
• Note the geographic and historical similarities
• Note the alignment with MGMs regional/economic
  models (i.e. BAD, etc.)
• Note the challenges that remain