Abstract This paper discusses whether or not Quaccess should move to adopt international accountingstandards. It considers the role of financial statements and international implications. The author concludes that American firms should wait and see before moving toward adopting international standards.
From the Paper "Accounting is sometimes referred to as the language of business. Financial statements and accounting pronouncements are used by stakeholders in organizations-shareholders employees creditors ..."
Tags: Quaccess, accountingstandards, international accountingstandards, financial statements, balance sheet, income statement, IAS, IFRS, FAR, international financial reporting standards
Abstract The paper shows that the increased globalization of companies has led to a dilemma for investors because accountingstandards in various capital markets are not always reliable. It shows too that in an effort to increase the reliability of financial information in capital markets the SEC seeks to maintain the high quality of financial reporting in the U.S., while working towards establishing a high quality financial reporting structure worldwide. This paper summarizes the issues presented in the SEC's concept release on International AccountingStandards. These issues include: the five elements of global financial reporting; exceptions to rules for foreign private issuers using accountingstandards that differ from GAAP; and the three criteria for assessing the International AccountingStandards Committee.
From the Paper "Rigorously interpreted and applied: The development of high standards does not ensure that the standards will be upheld. In order for the standards to be practiced consistently accountants have to understand the responsibility they have in applying these standards consistently and in a manner that is needed to ensure high quality. This understanding only comes when regulators including auditors, rigorously interpret and apply these standards to accounting standards around the globe. The SEC contends that IASC standards are not used in many capital markets, which makes it impossible for them to be interpreted or applied. In addition countries that do utilize IASC standards have yet to incorporate the new changes created by the IASC."
Abstract The paper discusses the many advantages of having one global set of accountingstandards that would improve the quality of financial reports and investment decisions. The paper looks at the IAS or International AccountingStandards proposal that will determine one set of accountingstandards. The paper concludes that if the United States were to impose a broad and ill-defined system of accountingstandards, companies would challenge every standard, trying to define the system in their favor.
Outline:
Pros And Cons Of Having One Global AccountingStandard Preparers, Users and Regulators of the International AccountingStandards Types of Companies; Listed vs. Unlisted, Large v. Medium v. small, Domestic v. International, Public v. Private
Political Process of Standard Setting; Rules Based, Principal Based
Examples of Three Different Countries; Compare Their Accounting Practices
Conclusion
From the Paper "The new electronic interdependence recreates the world in the image of a global village." (McLuhan (1962 (1996, p. 31). There are many advantages of having one global set of accounting standards that will provide society with a crucial service not only in the United States, but in other countries as well. In recent years there has been shameful accounting methods used in which billions of dollars in retirement wealth and investments have had great financial losses. Because of these slanderous actions, the integrity and the ability to survive these accounting services have been questioned. Globalizing international trade by using a set of global accounting standards has had a tremendous effect in the way business is conducted. (Pagiavlas 1)"
Abstract This paper gives a background of the purpose and history of the Financial AccountingStandard Board, or the FASB. The FASB was founded with the primary goal of devising the Generally Accepted Accounting Principles in United States. The paper also defines the roles of the various organizations that fall under the umbrella of the FASB, such as the SEC and the PCAOB. The paper focuses additionally of the role of ethics in accounting, especially in relation to the Standards creating by the FASB.
Explain the FASB, SEC and PCAOB
Discuss the Relationship among the FASB, SEC, and PCAOB
Explain Basic Accounting Theories, Assumptions, and Principles
Evaluate the Role of Ethics in Accounting
From the Paper "To cater to the basic objectives the financial statement is required to be relevant, to be reliable, being comparable as well as being consistent. So as to accomplish its basic objectives the GAAP is required to base on four hypotheses such as Economic Entity Assumption-that assumes the isolation of business from its owners or other businesses; Going Concern Assumption-that assumes the long term operation of business; Monetary Unit Assumption that assumes a stable currency as the unit of record; Periodicity Assumption that assumes the periodical record-ability of the business operations enabling comparison between present and past performances. "
Abstract The paper discusses the international movement towards common accountingstandards for all countries, and how, as a major economic power, the United States has an important role to play in the matter. The paper further examines the standards that have been developed by the International AccountingStandards Board (IASB). The paper concludes with an analysis of America's current practices, focusing on the four Statements of Federal Financial Accounting Concepts abd addressing the main objectives behind federal financial reporting. It looks at the identification of the organization doing the reporting and presents a discussion of issues that are related to the preparation of management's discussion. The paper also presents an analysis of the financial statements.
Table of Contents:
Introduction
Analysis
Conclusion
End Notes
References
From the Paper "The present system is to capitalize the asset as per international accounting standards. The expenses that are being talked about are under in process research and development. Apart from this FASB has decided that capitalization of IPR&D will only apply to business combinations. When assets are purchased, and they are not viewed as businesses under GAAP in US, would continue to have IPR&D as expenses."
Abstract This paper names and describes the many bodies that influence Generally Accepted Accounting Principles (GAAP) and Generally Accepted AccountingStandards (GAAS) in the United States. Included in this paper are regulatory boards such as the the Financial AccountingStandards Board (FASB), the Securities Exchange Commission (SEC), the American Institute of Certified Public Accountants (AICPA) and the Public Company Accounting Oversight Board (PCAOB). The author describes the role of each of these regulatory bodies as well as defines their functions and influence on each other.
From the Paper "The SEC is ultimately responsible for the enforcement of securities law. As a result, they are the main body through which investigations into accounting fraud are conducted. One of the tools they use are comment letters, which are sent to companies suspected of impropriety requesting comment from the company. The comment letters can precede the initiation of legal proceedings."
Abstract This paper discusses the purpose of the Financial AccountingStandards Board (FASB), which is to constantly monitor the condition of the financial accountingstandards for their relevance to current market developments in order to foresee any probable problem areas and deliver secure functioning of companies, big and small investors and government as a whole. Specifically, the paper provides an explanation of FASB 128 and gives examples of its application.
Table of Contents:
Introduction
Explanation of FASB 128 and Examples of Application
From the Paper "Thus, the financial accounting standard 128 requires the company to clearly state all the facts they include in the arriving at the earnings per share and diluted earnings per share ratio which is further on must be reported in the company income statement and thus reveal relevant information to the investors probable and those already holding the company stock. In order to avoid any misunderstanding on the actual company financial information as the number of financial derivatives has increased greatly during the recent past, the standard requires the derivatives such as options, warrants, contingently issuable shares or employee performance measures which can be convertible into common stock, to be accounted for as common stock at the most profitable price for the investors, or the market value for the conversion."
Abstract This paper is about FASB 125 and 140. Statement of Financial AccountingStandards 125 and Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, issued in 1996, were replaced by FASB Statement 140 and Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, in 2000. The former Statement needed clearer language. Statement 140 also resolved certain implementation issues about the transfers of financial assets and carried forward most of the provisions of Statement.
Abstract This paper discusses the Enron case and what it says about how certain accountingstandards were violated. The paper notes how the case involved unethical accounting practices which inflated earnings and spent other people's money, because while the accounting profession is governed by a set of rules to assure ethical conduct, many of these rules were ignored or broken outright by Enron and its accountants.
From the Paper "The Enron scandal involved a company that inflated its earnings and so fooled investors, but the scandal also saw executives making a profit while the pensions of employees were dissipated until they were worthless. Examples of unethical behavior in this scandal are many. The issue was made all the more important because of other, similar lapses around the same time as several large companies went bankrupt and left investors stranded. At the heart of these scandals stood unethical accounting practices which inflated earnings and spent other people's money. The accounting profession is governed by a set of rules to assure ethical conduct. Many of these rules were ignored or broken outright by Enron and its accountants. The Enron scandal broke in 2001 when the company made a routine announcement about of $0.43 recurring third-quarter earnings per share."
Abstract This paper deals with the harmonization of the international accountingstandards into the European Union as well as other countries around the world. It has several historical components.
From the Paper "What began as a method to unify industries, specifically coal and steel, between France and a few western European countries in 1951, has today grown into a 25-country conglomerate. However in its humble beginning it was comprised of only 6 members and those countries were: Belgium, West Germany, Luxembourg, France, Italy and the Netherlands. At the time the only concern was to improve their industries especially in the years following World War II ("History of the E.U."). Today the E.U. is comprised of several countries, 25 in total. They are listed below: Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, United Kingdom (Scott 71). "
A theoretical analysis of recent developments on accountingstandards for stock options and a practical application to Cisco Systems, Inc. as an illustration.
Abstract This paper analyzes developments in the accounting field for stock options regulating standards. The writer shows how the accounting technique caused huge controversy among regulators and academics with respect to the treatment of stock options in the financial statements because the primary objective of decision usefulness of financial reporting as well as net income depends on whether or not the company recognises stock options as expenses on a fair value based method in the income statements. It argues that although the recent developments of the accountingstandards proceed in the right direction, there are still issues that must be addressed. It shows that in order to solve the remaining issues, it is necessary to improve the qualitative aspects of financial information, such as relevance, reliability and comparability which directly relate to the primary objective of financial reporting.
1 Introduction
2 Historical Developments on Accounting for Stock Options
2.1 APB 25: Intrinsic Value
2.2 SFAS 123: Introduction of Fair Value Based Method
2.3 SFAS 148: More Timely and More Prominent Disclosure
3 Theoretical Analysis
3.1 Fundamentals of Financial Reporting
3.1.1 Objective of Financial Reporting
3.1.2 Qualitative Characteristics of Accounting Information
3.2 Recognition of Expense
3.2.1 What Is an Expense?
3.2.2 Assets under SFAC 6
3.2.3 Liabilities under SFAC
3.2.4 Assets under Exit Value Accounting 3.2.5 Liabilities under Exit Value Accounting 3.2.6 Comparison of the Recognitions
3.3 Measurement
3.3.1 Fair Value Method
3.3.2 Intrinsic Value Method
3.4 Summary of Theoretical Analysis
4 Practical Analysis - Cisco Systems, Inc.
4.1 About Cisco Systems, Inc.
4.2 Applications to the AccountingStandards 4.3 Pro Forma Disclosure in the Profit and Loss Statement
4.4 Market Share Price and Employees Stock Option Incentives
4.5 A Need for Change
5 Conclusion
6 Bibliography
Appendix
From the Paper "High-tech companies such as Cisco Systems have developed as major global business players during the last decade. One of the devices that many of these companies often applied in the process of their economic growth was a stock-based compensation plan. Such small venture businesses, which were normally deficient in cash in their initial stages, provided employees with the right to purchase their own stocks instead of cash. As a result, stock options could enormously reduce the amount of cash and wage expenses at the same time. Further, entrepreneurs could effectively retain talented staffs by granting them stock options, and could elevate motivation among the employees. However, the series of frauds and corporate crisis over the past year raised the question of accounting treatment for stock options whether the present standards achieve the principal objective of decision usefulness of financial reporting."
Abstract This paper explains that the objectives of the FASB's conceptual framework are to identify the goals and purposes of financial reporting and their underlying fundamentals; however, it is more than two decades old and has fallen behind the times especially in the area of currency and scope. The author points out that, despite the best attempts by the FASB to provide frameworks and standards to regulate accounting practices, unethical management always seems to discover loopholes to make their accounting statements say whatever they want them to say. The paper states that principle-based standards help management work with auditors to exercise professional judgment in determining appropriate accounting; nonetheless, rules-based accounting does more to promote consistency and adherence to guidelines.
Table of Contents:
The Conceptual Framework Developed by the FASB
The Role and Ethical Considerations
Principles-Based Accounting vs. Rules-Based Accounting
From the Paper "Some believe the solution for preventing unethical accounting conduct is to regulate as many accounting translations as possible. While closing loopholes should certainly be an objective of standards setting bodies such as FASB, unethical people will always find a new and better way to behave unethically if their corporate culture allows or encourages unethical behavior or if people behaving unethically simply believe they will not be punished for their conduct. Increasingly, accountants need to be trained in ethics in addition to improving financial skills."
Tags: enron, loopholes, out-dated, guidelines, training
Abstract This paper describes the increased difficulties in understanding the financial statements of insurance companies that will occur as a result of Financial AccountingStandard 115 (FAS 115) adopted by the Financial AccountingStandards Board. The paper explains that FAS 115 will create wide variations between companies in the carrying values used for debt securities which will necessitate even more analysis to determine a company's financial condition as well as make it impossible to compare companies' financial positions without restating each company's debt-security portfolio values to a common basis.
From the Paper "Higher equity levels created by having debt securities carried at market will be misleading to financial statement users. Hardly anyone believes that a company can fully retain the security gains that currently exist in their portfolios. To do so would require curtailing crediting rates to those available based on current rates on new money. Competitive pressures won't allow companies to do this and retain their policyholder funds. To reflect such gains as equity of the company in the financials is just plain misleading."
Abstract This paper examines how the FASB (Financial AccountingStandards Board) in the recent years has revised many accountingstandards and policies to effectively govern corporations for the benefit of the public. In particular, it looks at how, in its attempt to curtail unaccounted for incomes and earnings, the FASB issued the FASB No.115 section in which it states that companies reporting their financials can determine their investment securities as held-to-maturity, available-for-sale, or trading. It discusses the author's opinion that Section 115 is not only impractical, but it is also not feasible for companies who practice it.
From the Paper "First of all companies that have held to maturity securities are often indebted but because of their credit worthiness, the face value of their securities remains high. At the time of sale of assets and settling of liabilities, these companies can bargain with the buyers of the fair price value of the securities. This is usually the case when there is a high demand for the securities in the market or that the industry is undergoing some changes. The mandate that the securities be sold at amortized cost and the securities? unrealized gains or loss be part of the equity often result in debt for the buyers as they are still considered to be liabilities for the company unless the securities mature."
Abstract The Financial AccountingStandards Board released an Exposure Draft on July 14, 2005, entitled "Accounting for Uncertain Tax Positions, An Interpretation of FASB 109, Accounting for Income Taxes". This draft was released for comment before its implementation as part of the Generally Accepted Accounting Principles for entities to use in preparation of their financial reports. This paper shows that the purpose of the Exposure Draft is to resolve widespread diversity in accounting for income taxes by requiring firms to recognize in their financial statements the best estimate of the impact of a tax position. The paper shows that the ED also contains guidance for measuring the benefit that is recognized for an uncertain tax position and when that position should no longer be recognized. The paper examines comments by critics who feel that the Exposure Draft is complex, may be difficult to implement and could result in significant overstatements of firms' tax liabilities.
Paper Outline:
Abstract
Introduction
Background
Financial Reporting vs. Tax Reporting
Purpose of FASB 109, Accounting for Income Taxes
Findings
Purpose of the FASB's Exposure Draft
Discussion
Conclusion
References
From the Paper "The temporary differences between the U.S. income tax rules and the GAAP requirements for financial reporting result in some income tax expense being recorded long before it is paid creating a deferred income tax liability (Horngren, et al., p. 340). These temporary or timing differences arise because some revenue and expense items are recognized at different times for tax purposes than for financial reporting purposes. Timing differences may accumulate over more than one year and create variations between the tax basis of an asset or liability and its reported amount in financial statements. These temporary variances usually become taxable or deductible when the related asset is recovered or the related liability is settled. A deferred tax liability or asset represents the increase or decrease in taxes payable or refundable in future years as a result of temporary differences and carry forwards at the end of the current year (FASB, 1992)."
