Comparison of IASB and FASB: Accounting Standards and Reporting - Prof. Gisbert, Apuntes de Contabilidad Financiera

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Financial Accounting Regulation

Structure of the Financial Statements

Conceptual Framework for Financial Reporting

R

. KWW, 2014 – Pg. 22 - CA.1-

◦ Some argue that having various organizations establish accounting principles is wasteful and inefficient. Rather than mandating accounting rules, each company could voluntarily disclose the type of information it considered important. In addition, if an investor wants additional investor information, the investor could contact the company and pay to receive the additional information desired.
What do you think about this??

.For many years, countries have relied on their own standard-

setting bodies.

However, as companies and investors turned more

international and globalized, there was a worldwide need for

a main worldwide standard setting body (IASB).

IASB – International Accounting Standard Board,

issues IFRS – International Financial Reporting

Standards.

Therefore, we can assert nowadays, the IASB is the

most relevant International ACCOUNTING

STANDARD SETTER that issues International

Financial Reporting (Accounting) Standards.

.However:

◦ The IFRS issued by the IASB are not applied in all countries around the world. It depends on each country’s legal accounting regulatory framework (It will depend on each country’s COMPANY LAW )

◦ In addition, the COMPANY LAW in each countries usually stablish different financial reporting requirements for listed vs. non listed firms.

◦ Financial Reporting requirements for listed firms are more stricter and demanding. Listed firms must provide much more information to users, particularly investors and creditors.

So, let´s think about the Legal Accounting

Regulatory Framework of some well-know

LISTED companies around the world, and

therefore, about their Financial Reporting

Standards that they must use to prepare

Accounting Information (Financial Statements).

As listed companies, they must prepare their (Annual,.

Quarterly, Half-Year) Financial Report and FILE this

these Reports with the corresponding Securities Market

or Legal Authority

. ◦^ As a listed Spanish Company Inditex will FILE the

Financial Statements in the CNMV - Comisión Nacional del Mercado de Valores + Registro Mercantil.

.
Sometimes, companies are listed in more

than 1 stock exchange (NYSE + Frankfurt)

◦ Listed EU Company
IFRS as endorsed in the EU. ◦ In the US, Foreign companies as Volkswagen are allowed to prepare the Financial Statements based on the IFRS Standards (The company could also decide to use US GAAP, but that would be more costly for VW). ◦ The Company will have to FILE the Financial Statement with the SEC (US) and also with the corresponding German Securities Market Authority

https://www.esma.europa.eu/about-esma/governance/board-supervisors-and-ncas

.
What happens in other countries?

◦ Hyundai is listed in the Korean Stock Exchange ◦ Since 2011, Korean Firms are required to use IFRS as adopted in Korea, knows as K-IFRS. ◦ The Company will have to FILE the Financial Statement with the corresponding securities market security in Korea.

And what about a non-listed firm (private firm)?

◦ In the EU: Private firms must prepare the Financial Accounting Information based on what it is stablished in each country national legislation.

SPAIN: non-listed firms are required to use our National GAAP, know as “Plan General de Contabilidad - PGC”, issued in 2007 (RD 1514/2007)

The PGC is prepared by the ICAC (Instituto Contabilidad y Auditoría de Cuentas), our National Accounting Standard Setting Body.

Therefore, non-listed companies as: “ El Corte Inglés ” or “ Cortefiel ” are required to prepare the Annual Financial Staments based on the PGC.

Financial Information Accounting? Identify and Measure and Communicate

Statement of Financial Position Income Statement Statement of Comprehensive Income Statement of Cash Flows Statement of Changes in Equity Note Disclosures

President’s letter Reports filed with governmental agencies Press releases Forecasts Environmental impact statements – Corporate Social Responsibility (CSR)

Economic Entity Financial Statements Additional Information

Weygandt, J.J., Kimmel, P.D. and Kieso, D.E. (2014): “Intermediate Accounting” IFRS Edition. Wiley. – Chp 1

Liquidity

Maturity

Apple, Inc.

Liquidity

Maturity

Source: SLL (2011, pg. 215)

Effect on Operating activities Cash Flows Cash received: Customers + Interest and div idends on investments + Cash paid: Suppliers - Employees - Interest on debt obligations - Income taxes - Cash Flows from Operating Activities Total Investing Activities Purchase of property, plant or equipment - Purchase of other long-term assets - Sale of property, plant or equipment + Sale of other long-term assets + Cash Flows from Investing Activities Total Financing Activities Issuance of long-term debt + Issuance of contributed capital + Dividends paid - Repurchase of long-term debt - Repurchase of contributed capital - Cash Flows from Financing Activities Total Net increase or (decrease) in cash Beginning balance in cash account Ending balance in cash account

Direct approach to preparing operating cash flows.

Direct approach to preparing operating cash flows.

Indirect approach for Indirect approach forpreparing operating cash flows.preparing operating cash flows.

754,60 $

687,30 $

Google did not meet the analysts expectations Earnings decreased from the previous year Q

◦ Accounting regulation allows managers some “discretion” (flexibility), when recording and assessing business transactions (assets, liabilities, revenues and expenditures).

◦ Theoretically, this “flexibility” allows managers to enrich the information. ◦ However, when there is so much pressure on “making the numbers”
managers use accounting to “cook” the earnings figure that users are expecting

FRAUDS