Premium Essay

How International Differences in the Ownership and Financing of Companies Could Lead to Differences in Financial Reporting

In: Business and Management

Submitted By jialu
Words 5879
Pages 24
www.ccsenet.org/ijbm

International Journal of Business and Management

Vol. 7, No. 3; February 2012

Adoption of International Financial Reporting Standards in Developing Countries: The Case of Nigeria
Abdulkadir Madawaki College of Business, Universiti Utara Malaysia Sintok, 06010 Kedah, Malaysia E-mail: abdulkadirmadawaki@yahoo.com Received: September 16, 2011 doi:10.5539/ijbm.v7n3p152 Abstract The study focused on the adoption process of International Financial Reporting Standards (IFRS) on a developing economy, with particular reference to Nigeria. The paper is based on the data obtained from literature survey and archival sources in the context of the globalization of International Financial Reporting and the adoption of International Financial Reporting Standards (IFRS).Nigeria has embraced IFRS in order to participate in the benefits it offers, including attracting foreign direct investment, reduction of the cost of doing business, and cross border listing. In implementing IFRS Nigeria will face challenges including the development of a legal and regulatory framework, awareness campaign, and training of personnel. Recommendations were made to forestall such challenges which include strengthening education and training, establishment of an independent body to monitor and enforce accounting and auditing standards. Keywords: Financial reporting, Adoption, Accounting standard and Developing countries 1. Introduction Globalization of capital markets is an irreversible process, and there are many potential benefits to be gained from mutually recognized and respected international accounting standards. The adoption of uniform standards cut the costs of doing business across borders by reducing the need for supplementary information. They make information more comparable, thereby enhancing evaluation and analysis by users of financial statements (Adekoye,…...

Similar Documents

Premium Essay

Differences in Financial Reporting Practices

...The basic cause of international difference in financial reporting practice is the different degree of interference by governments in accounting. It is understood that “International Financial Reporting Standards (IFRS)” has been adopted in many countries around the world, as a minimum for the companies that are obliged for financial reporting. IFRS has been implemented in nearly one hundred and fifteen countries around the world, whilst phasing out the previous standard of rules of Generally Accepted Accounting Practice or more commonly known as GAAP. The United States is the only large major country to holdout and not adopt IFRS. IFRS is increasing its widespread backing from all over the world. All United States established companies are obliged to use the “Financial Accounting Standards Board FASB” (Wikipedia, 2012) many companies use these set of standards as they are “detailed and comprehensive” (Media Wiley) compared to the “International Accounting Standards Board IASB” (Wikipedia, 2012) which are more set in stone and less rule based. What the United States need is a set of high quality accounting standards improves comparability. “It is generally believed that IFRS has the best potential to provide a common platform on which companies can report and investors can compare financial information.” (Media Wiley) It is expected that if all countries adopt IFRS it will be beneficial for investors and others who use financial statements by reducing costs and......

Words: 815 - Pages: 4

Premium Essay

International Financial Reporting Standards (Ifrs): Pros and Cons for Investors

...This article was downloaded by: [Library Services City University London] On: 26 July 2013, At: 08:32 Publisher: Routledge Informa Ltd Registered in England and Wales Registered Number: 1072954 Registered office: Mortimer House, 37-41 Mortimer Street, London W1T 3JH, UK Accounting and Business Research Publication details, including instructions for authors and subscription information: http://www.tandfonline.com/loi/rabr20 International Financial Reporting Standards (IFRS): pros and cons for investors Ray Ball a a University of Chicago Published online: 28 Feb 2012. To cite this article: Ray Ball (2006) International Financial Reporting Standards (IFRS): pros and cons for investors, Accounting and Business Research, 36:sup1, 5-27, DOI: 10.1080/00014788.2006.9730040 To link to this article: http://dx.doi.org/10.1080/00014788.2006.9730040 PLEASE SCROLL DOWN FOR ARTICLE Taylor & Francis makes every effort to ensure the accuracy of all the information (the “Content”) contained in the publications on our platform. However, Taylor & Francis, our agents, and our licensors make no representations or warranties whatsoever as to the accuracy, completeness, or suitability for any purpose of the Content. Any opinions and views expressed in this publication are the opinions and views of the authors, and are not the views of or endorsed by Taylor & Francis. The accuracy of the Content should not be relied upon and should be independently verified with primary sources of......

Words: 16830 - Pages: 68

Premium Essay

Financial Reporting Quality and Corporate Governance: the Portuguese Companies Evidence

...79C FINANCIAL REPORTING QUALITY AND CORPORATE GOVERNANCE: THE PORTUGUESE COMPANIES EVIDENCE Cristina Gonçalves Góis Senior Lecture Instituto Superior de Contabilidade e Administração de Coimbra Instituto Politécnico de Coimbra Área temática: C) Dirección y Organización Palabras clave: gobierno corporativo; la calidad contable; información financiera; 1     FINANCIAL REPORTING QUALITY AND CORPORATE GOVERNANCE: THE PORTUGUESE COMPANIES EVIDENCE. ABSTRACT The main objective of this paper is to analyze the relationship between the composition and characteristics of corporate governance on the financial reporting quality of Portuguese companies. The major reference case studies on the relationship between corporate governance and the financial reporting quality are not validated by the results obtained. The results show that the board composition changes and its degree of independence do not produce any influence on the quality of the accounting information. Our study shows that although the main international guidelines relating to the rules of good governance have been followed closely by Portuguese institutions, the actual implementation of these rules did not occur. 2     1. INTRODUCTION The aim of this paper is to contribute to the study of the influence of the type of corporate governance on the financial reporting quality in countries with a tradition of continental accounting. Despite the profuse literature about this topic, adapted to......

Words: 10616 - Pages: 43

Premium Essay

How Did Financial Reporting Contribute to Financial Crisis

...How did Financial Reporting Contribute to the Financial Crisis? Mary E. Barth & Wayne R. Landsman a a b Graduate School of Business , Stanford University , Stanford, CA, USA b Kenan–Flagler Business School , University of North Carolina at Chapel Hill , Chapel Hill, NC, USA Published online: 07 Jul 2010. To cite this article: Mary E. Barth & Wayne R. Landsman (2010) How did Financial Reporting Contribute to the Financial Crisis?, European Accounting Review, 19:3, 399-423, DOI: 10.1080/09638180.2010.498619 To link to this article: http://dx.doi.org/10.1080/09638180.2010.498619 PLEASE SCROLL DOWN FOR ARTICLE Taylor & Francis makes every effort to ensure the accuracy of all the information (the “Content”) contained in the publications on our platform. However, Taylor & Francis, our agents, and our licensors make no representations or warranties whatsoever as to the accuracy, completeness, or suitability for any purpose of the Content. Any opinions and views expressed in this publication are the opinions and views of the authors, and are not the views of or endorsed by Taylor & Francis. The accuracy of the Content should not be relied upon and should be independently verified with primary sources of information. Taylor and Francis shall not be liable for any losses, actions, claims, proceedings, demands, costs, expenses, damages, and other liabilities whatsoever or howsoever caused arising directly or indirectly in connection with, in relation to or arising out of......

Words: 13452 - Pages: 54

Premium Essay

How Did Financial Reporting Contribute to the Financial Crisis?

...How did Financial Reporting Contribute to the Financial Crisis?     Mary E. Barth Graduate School of Business Stanford University Stanford, CA, 94305 mbarth@stanford.edu. Wayne R. Landsman Kenan-Flagler Business School University of North Carolina at Chapel Hill, Chapel Hill, NC 27599 wayne_landsman@unc.edu.       May 2010     Forthcoming, European Accounting Review, 2010 We appreciate comments from seminar participants at the Bank of Spain, Rob Bloomfield, Elicia Cowins, Hilary Eastman, Gavin Francis, Christian Kusi-Yeboah, Jim Leisenring, Martien Lubberink, Richard Rendleman, David Tweedie, and an anonymous reviewer. We acknowledge funding from the Center for Finance and Accounting Research at UNC-Chapel Hill and the Stanford Graduate School of Business Center for Global Business and the Economy. Electronic copy available at: http://ssrn.com/abstract=1601519 How did Financial Reporting Contribute to the Financial Crisis? Abstract We scrutinize the role financial reporting for fair values, asset securitizations, derivatives, and loan loss provisioning played in the Financial Crisis. Because banks were at the center of the Financial Crisis, we focus our discussion and analysis on the effects of financial reporting by banks. We conclude fair value accounting played little or no role in the Financial Crisis. However, transparency of information associated with asset securitizations and derivatives likely was insufficient for investors to......

Words: 12577 - Pages: 51

Premium Essay

How to Deal with Moral Differences

...How to Deal with Moral Differences The first way is to believe there are no morally right or wrong viewpoints. The moral issue is just a cultural game and neither your opinions or mine matters. Therefore there is no right or wrong. This view is called moral nihilism. Related to this idea is moral skepticism, which holds that we can’t know any moral truths, and moral subjectivism, which holds that moral views are merely inner states in a person and that they can’t be compared to the inner states of another person. However believing in the above solves no problems, if nobody is right and nobody is wrong. The second way is to believe that there is no universal truth, that each culture has its own set of rules that are valid and apply to that culture, they don’t interfere with our rules and we don’t interfere with theirs, this is called ethical relativism. This belief is viewed as an attitude of tolerance. This belief solves conflicts in the idea that whatever the majority deems to be the moral rule is the rule to follow. The third belief is that deep down in spite of all the cultures differences we call all still agree on a certain moral basics, that people everywhere have basically the same human nature but that we just adapt it into our environment, this idea is called Soft Universalism. Universalism because it perceives that there are some universal moral rules; soft because it is not as radical as hard universalism. This belief can......

Words: 552 - Pages: 3

Premium Essay

International Financial Financial Reporting Standards

...non-current assets and its related expenditure or income in the financial statements. It also defines the scope of it by stating clearly all assets falling within it. 1.1. Definition Property, plant and equipment refer to all tangible non-current assets used in the production or supply of goods and services, for administrative purpose or for rental to others. This definition emphasizes 4 important features of assets qualifying as PPE. a) They are tangible non-current assets. This creates the delineation well excluding clearly any asset that does not have physical appearance or used in the working capital cycle or to be realized just in the following year. b) Used in the production of goods and services. Also PPE are involved in the production process like machines or they are used to supply the goods after production has been made like motor vehicles. c) For administrative purpose.PPE again help businesses to carry out their official duties. For instance staff use cars of the company in their activities of the organization or this can be used as a place of conducting daily operations like building. d) Used for rental purpose.PPE are also used to earn investment income.i.e by giving it out for hiring for others to use (but excludes land and building for capital appreciation or hiring purposes) 1.2 Measurement This refers to placing a value on the transaction to qualify as an element of financial statement.1AS 16 allows two ways of measuring PPE. They......

Words: 5707 - Pages: 23

Premium Essay

Reporting Difference Under Ifrs and Usgapp

...Reporting Discuss how your company’s financial statement would differ if they reported under IFRS. Be as specific as possible and discuss any costs and benefits to the company. There are many similarities in US GAAP and IFRS. Convergence continued to be a high priority for both the US Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB). However, the convergence process is designed to address only the most significant differences. While standards will be more similar, differences will continue to exist. In general, US GAAP tends to have more specific rules while IFRS rules are more flexible and requires more interpretation. The materiality of the reporting difference to a company’s financial statements depends on a variety of factors, including the nature of the company, the details of the transactions and interpretation of rules. Discussed below are some major aspects that would change if Colgate reports under IFRS. 1. Classification of deferred tax assets and liabilities on balance sheet Under US GAAP, for deferred tax asset, current or non-current classification is required. In the perspective of IFRS reporting rules, all deferred tax asset amounts should be classified as non-current in balance sheet. Referring to the footnote on Income Taxes (page 80 of 10k), Colgate included 284 of deferred tax asset in other current asset in compliance with US GAAP, while under IFRS, the 284 current deferred tax asset should be......

Words: 1079 - Pages: 5

Premium Essay

Financial Reporting Environment

...current financial reporting environment in Sri Lanka and its impact on the companies listed on the Colombo stock exchange. Hotel SIGIRIYA PLC has been chosen to study the financial reporting requirements, cultural impacts and the political influences on the Sri Lankan listed companies. 1. Financial Reporting Environment in Sri Lanka 2.1. Current financial reporting requirements for publically listed companies in Sri Lanka. In August 2007, two stages were adopted by Sri Lankan accounting standards regulators to form the international Financial Reporting Standards (IFRS). They traversed from Stage I of IFRS Adoption to Stage III, due to the result of a “gap” between the international and national sets of standards in Sri Lanka. However, on 1 January 2012, the Institute of Chartered Accountants of Sri Lanka (ICASL) successfully adopted IFRS. (eStandards Forum, 2008, p. 5). According to the Colombo Stock Exchange (2014) a requirement for a listed entity is that it must “ensure that the annual report is issued to the Entity’s shareholders and shall not exceed five (05) months from the close of the financial year of the Listed Entity when given to the Exchange”. Furthermore, publishing of the Audited Financial Statements must be in accordance with the Sri Lanka Accounting Standards. (Colombo Stock Exchange 2014 -Listing Rules s.7.5 pg4) The Colombo Stock Exchange (2014) also requires an Interim Financial Statement prepared by the listed entity. The Financial......

Words: 2500 - Pages: 10

Premium Essay

Difference Culture in International Business

...Difference Culture In International Business Report between Saudi Arabia & U.S.A Culture in International Business Culture Culture refers to the cumulative deposit of knowledge, experiences, beliefs, values, attitudes, meanings, hierarchies, religions, nation of time, roles, spatial relations, concepts of the universe, material objects and possessions acquired by a group of people in the course of generations through individual and group striving. Culture is a fuzzy set of basic assumption and value, orientations to life, beliefs, policies, procedures and behavior and his/her interpretations of the ‘meaning’ of other people’s behavior. (Spencer- Oatey 2008:3) ‘Culture consists of patterns, explicit and implicit, of and for behavior acquired and transmitted by symbols, constituting the distinctive achievements of human groups, including their embodiment in artifacts; the essential core of culture consists of traditional (i.e. historically derived and selected) ideas and especially their attached values; culture systems may. On the other hand, be considered as products of action, on the other. As conditional elements of future action.’ (Kroeber and Kluckhohn 1952: 181; cited by Adler 1997: 14) Culture differences in International Business Doing business with others countries, the difference culture is a point that a business man should aware of. A key to being successful in business internationally is to understand the role of culture in......

Words: 3529 - Pages: 15

Premium Essay

The Effect of Culture on the Implementation of International Financial Reporting Standards

...Claremont Colleges Scholarship @ Claremont CMC Senior Theses CMC Student Scholarship 2011 The Effect of Culture on the Implementation of International Financial Reporting Standards Mitchell A. Skotarczyk Claremont McKenna College Recommended Citation Skotarczyk, Mitchell A., "The Effect of Culture on the Implementation of International Financial Reporting Standards" (2011). CMC Senior Theses. Paper 165. http://scholarship.claremont.edu/cmc_theses/165 This Open Access Senior Thesis is brought to you by Scholarship@Claremont. It has been accepted for inclusion in this collection by an authorized administrator. For more information, please contact scholarship@cuc.claremont.edu. CLAREMONT McKENNA COLLEGE THE EFFECT OF CULTURE ON THE IMPLEMENTATION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS SUBMITTED TO PROFESSOR MARC MASSOUD AND DEAN GREGORY HESS BY MITCHELL SKOTARCZYK FOR SENIOR THESIS SPRING 2011 2 Table of Contents I. Introduction…………………….……………………………………………………………….4 II. Literature Summary………………………………………...………………...….……………..5 III. IFRS……………………...……………………………………………………..……………11 IV. Carve-outs…………………………………………………………………………………....18 V. Culture and Accounting………………………………………………………………………25 VI. Conclusion………………………………………………………………...…………………30 Appendix………………………………………………………………………………………...32 Bibliography……………………………………………………………………………………..37 3 I. Introduction As globalization increases at a blistering pace,......

Words: 9884 - Pages: 40

Premium Essay

International Financial Reporting

...that economic activity has bottomed and that the worst is now being reported for corporate profits. As such, stock price gains are expected to continue, supported by improvements in corporate performance and mild-mannered inflation and interest rates.” [Abby Joseph Cohen ] Financial Analysis & Control Report on Presentation www.twelve-knights.com.nu   OPERATING AND NON-OPERATING COMPONENTS OF THE INCOME STATEMENTS A multiple-step statement distinguishes between operating and non-operating activities. This distinction provides users with more information about a company’s income performance. On the income statement, accounting standards encourage separate treatment of operating and nonoperating items. Operating items are those relating to the day-to-day management of the enterprise: sales, cost of sales, selling, general and administrative expense, research and development costs etc. Often the net of these items is presented as a subtotal, operating income. Non-operating items include investing and financing activities, which are reported separately from operating income. Non operating items include the interest, dividends and profits on investments made in the securities of other companies; interest expense; etc. Non-operating activities consist of (1) revenues and expenses from auxiliary operations and (2) gains and losses that are unrelated to the company’s operations. The results of non-operating activities are shown in two sections: “Other revenues and......

Words: 1695 - Pages: 7

Premium Essay

How International Differences in the Ownership and Financing of Companies Could Lead to Differences in Financial Reporting

...How International Differences in the Ownership and Financing of Companies Could Lead to Differences in Financial Reporting   Introduction The major objective behind the development of International Financial Reporting Standards (IFRSs) has been to achieve financial reporting across different countries, which could be easily compared. In order to achieve this kind of comparability, it is very crucial that the IFRS be used by all the countries involved in the same way, and that these standards be interpreted as well as applied in a manner that is quite consistent in these countries thus leading to consistency in terms of rules or form of application and consistency in the actual manner in which they are applied. However, there are many factors that make it hard for countries and companies to apply these rules consistently (Whittington, 2005). Differences in the ownership structure and the way these companies are financed have been singled out as leading to the differences in financial reporting of these companies. In cases where countries do come up with very drastic changes or the professional accountants also fail to clearly interpret and use these IFRS in a manner that is consistent, then there is the risk of not achieving comparability. The differences in accounting practices across countries are not obvious when it comes to all accountants. Such differences that have been widely noted have to do with the ownership and financing practices of companies, which have......

Words: 1874 - Pages: 8

Premium Essay

Difference Between Financial and Managerial Accounting

...The Difference Between Managerial Accounting and Financial Accounting ACC 560 Term Paper In this term paper the author will discuss Managerial Accounting and the components of Managerial Accounting. The author will also compare the different components of financial accounting compared to managerial accounting. According to McGraw Hill, Managerial Accounting is concerned with providing information to managers, people inside an organization who direct and control its operations.” (Garrison & Noreen) Financial Accounting according to McGraw Hill “is concerned with providing information to stockholders, creditors and others who are outside an organization.” (Garrison & Noreen) In managerial accounting a wide variety of reports are prepared. Reports in managerial accounting focus on how well managers and businesses have performed. Most of these reports provide timely, frequent updates on information regarding when orders are received, sales, order backlog, and utilization. Also, according to McGraw Hill, “financial accounting is oriented toward providing a limited set of specific annual and quarterly financial statements in accordance to the Generally Accepted Accounting Principles (GAAP).” (Garrison & Noreen) Managerial Accounting does not have too followed the Generally Accepted Accounting Principles (GAAP). For this reason, managers set aside their own rules concerning the content and form of internal reports. The......

Words: 1116 - Pages: 5

Premium Essay

International Financial Reporting Standards

...International Financial Reporting Standards The application of IFRS is spreading all over the world as a result of the development of world economy and increasing transactions among countries and nations. For many years, even now, different countries have different account standards, such as U.S. GAAP, Japan GAAP, and IFRS are mainly adopted by European countries. In recent years, many countries accepted or acknowledged standards used in other countries. In America, for example, the SEC issued that it is possible to adopt IFRS in November 2008 and SEC stated that IFRS is the high quality global accounting standards in February 2010. IFRS, short for International Financial Reporting Standards, are the principles developed by the International Accounting Standards Board (IASB). Nowadays, “it is becoming the global standard for the preparation of public company financial statements.”(Ervin Black) Parts of standards of IFRS are based on International Accounting Standards published by the Board of the International Accounting Standards Committee between 1973 and 2003. “On April 1st, 2001, the new IASB took over from the IASC the responsibility for setting International Accounting Standards. During its first meeting the new Board adopted existing IAS and SICs. The IASB has continued to develop standards calling the new standards IFRS.”(Geoffrey Whittington) U.S. GAAP, short for the Generally Accepted Accounting Principles, is more widely accepted in United......

Words: 1263 - Pages: 6