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Title: International Accounting, 6/e Author: tom yu Last modified by: ureilbr Created Date: 2/24/2004 12:27:45 PM Document presentation format: On-screen Show – PowerPoint PPT presentation

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Title: International%20Accounting,%207/e

International Accounting, 7/e
  • Frederick D.S. Choi
  • Gary K. Meek

Chapter 3 Comparative
Accounting Europe
Learning Objectives
  • Understand how financial reporting is regulated
    and enforced in five European countries France,
    Germany, the Czech Republic, the Netherlands, and
    the U.K.
  • Describe the key similarities and differences
    between the accounting systems of these five
  • Identify the use of International Financial
    Reporting Standards at the levels of the
    individual company and the consolidated financial
    statements in these five countries.
  • Describe the audit-oversight mechanisms in these
    five countries.

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IFRS in the European Union
  • Starting in 2005, all EU-listed companies must
    follow IFRS in their consolidated financial
  • Generally, IFRS consolidated statements are
    permitted for non-listed companies.
  • Requirements for individual company financial
    statements vary IFRS may be required, allowed,
    or prohibited.

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IFRS (contin)
  • IFRS are based on fair presentation principles
  • IFRS may be overridden in rare circumstances to
    achieve fair presentation
  • Accounting measurements
  • Business combinations purchase accounting
  • Goodwill annual impairments test
  • Investments in associates equity method
  • Translation of financial statements of foreign
    operations functional currency concept
  • Assets valued at historical cost or fair value
  • Research costs expensed development costs
  • LIFO not allowed
  • Finance leases capitalized operating leases
  • Provisions recognized when probable and
  • Deferred taxes recognized in full, using the
    liability method, for temporary differences
    between the carrying amount and tax base

  • Overview
  • The Plan national uniform chart of accounts
    (national accounting code)
  • Objectives and principles of financial reporting
  • Definitions of elements
  • Recognition and valuation rules
  • Standardized chart of accounts
  • Model financial statements
  • Other influences on French accounting rules
  • Commercial legislation (Code de Commerce)
  • Tax laws

France (contin)
  • Accounting regulation and enforcement
  • CNC National Accounting Board
  • Keeps plan current
  • Makes rulings and recommendations on accounting
  • CRC Accounting Regulation Committee
  • Converts CNC rulings and recommendations into
    binding regulations
  • ANC National Accounting Authority
  • Will replace CNC and CRC as the national standard
  • AMF Financial Markets Authority
  • Supervises securities markets
  • OEC Institute of Public Accountants
  • Represents the accounting profession
  • Members prepare financial statements, and provide
    tax, information systems, and management advisory
  • CNCC National Institute of Statutory Auditors
  • Members audit and give an opinion on financial
  • Must report criminal acts to the High Council of
    External Auditors
  • Substantial overlap in OEC and CNCC membership
  • Statutory auditors not allowed to provide
    accounting services to the same client
  • AMF oversees audits of listed companies, but
    relies on a committee of the CNCC to conduct
    audit-quality reviews

France (contin)
  • Unusual features of French financial reporting
  • Must report results of environmental activities
  • Reports aimed at preventing bankruptcies
  • Social report

  • Overview
  • Creditor protection
  • Conservative balance sheet valuations
  • Reserves as protection against unforeseen risks
    and insolvency
  • Accounting is designed to compute a prudent
    income amount that leaves creditors unharmed
    after distributions are made to owners
  • Influence of tax law
  • Determination principle taxable income is
    determined by what is booked in a companys
    financial records
  • Reliance on statutes and court decisions

Germany (contin)
  • Accounting regulation and enforcement
  • German Commercial Code (HGB)
  • Applies to all business entities
  • German Accounting Standards Board
  • Develops recommendations for consolidated
    financial statements
  • Financial Reporting Enforcement Panel
  • Enforces compliance with German financial
    reporting requirements and IFRS by listed
  • Chamber of Accountants
  • Oversees WPs (enterprise examiners)
  • Unusual features of German financial reporting
  • Auditors private report to board of directors
    and supervisory board on companys future

Czech Republic
  • Overview
  • Accounting changed directions several times in
    20th century, reflecting the countrys political
  • Until end of World War II German influences
  • After World War II Soviet influences
  • After 1989 EU influences (market orientation)
  • Accounting regulation and enforcement
  • Ministry of Finance
  • Oversees Commercial Code (modeled on German
    commercial law)
  • Oversees Accountancy Act (based on EU directives)
  • Chamber of Auditors
  • Oversees auditors
  • Unusual features of Czech financial reporting
  • Form over substance still applies in some cases
  • Still implementing accounting practices
    consistent with EU directives and IFRS

The Netherlands
  • Overview
  • Accounting paradoxes
  • Permissive requirements, but high professional
    practice standards
  • Code law country whose accounting is oriented
    toward fair presentation
  • Fair presentation orientation developed without a
    strong stock market
  • Other influences on Dutch accounting
  • U.K. and U.S. as much as continental European
  • Accounting profession
  • Business economics (microeconomics approach)
  • IASB

The Netherlands (contin)
  • Accounting regulation and enforcement
  • Company law Act on Annual Financial Statements
  • Dutch Accounting Standards Board
  • Develops guidelines on generally acceptable
    accounting standards
  • Netherlands Authority for the Financial Markets
  • Supervises operations of securities markets
  • Oversees financial reporting and auditing of
    listed companies
  • Enterprise Chamber
  • Enforces compliance with accounting requirements
  • NIvRA
  • Oversees auditing profession
  • Unusual features of Dutch financial reporting
  • Financial statements may be in Dutch, French,
    German, or English
  • Other than consolidated financial statements of
    Dutch listed companies, financial statements may
    be based on Dutch guidelines, IFRS, or a
  • Flexible accounting measurements
  • Current values are permitted for tangible assets
  • Opportunities for income smoothing

United Kingdom
  • Overview
  • Legacy of British accounting
  • First country to develop an accountancy
  • Fair presentation (true and fair view)
  • Exported British accounting around the world

United Kingdom (contin)
  • Accounting regulation and enforcement
  • Companies Act
  • Broad financial reporting framework
  • Financial Reporting Council oversees
  • Accounting Standards Board
  • Issues Financial Reporting Standards (FRSs)
  • UITF clarifies FRSs
  • Auditing Practices Board
  • Issues auditing standards
  • Financial Reporting Review Panel
  • Enforces compliance with FRSs
  • Professional Oversight Board
  • Oversees auditing profession
  • Audit Inspection Unit
  • Monitors the audit of listed companies
  • Accountancy Investigation and Discipline Board
  • Investigates and disciplines accountants for
    professional misconduct
  • Unusual features of British accounting
  • True and fair override

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Other Chapter Exhibits
Other Chapter Exhibits (contin)
Other Chapter Exhibits (contin)