1InternationalAccounting,6/eFrederickD.S.ChoiGaryK.MeekChapter4:ComparativeAccounting:TheAmericasandAsia2LearningObjectivesUnderstandhowfinancialreportingisregulatedandenforcedinfivecountriesoftheAmericasandAsia:theU.S.,Mexico,Japan,China,andIndia.Describethekeysimilaritiesanddifferencesamongtheaccountingsystemsofthesefivecountries.Describetheauditor-oversightmechanismsinthesefivecountries.Explainthedifferencebetweenprinciples-basedandrules-basedaccountingstandards.

3LearningObjectives4UnitedStatesOverviewFinancialAccountingStandardsBoard(FASB)Private-sectororganizationthatdeterminesaccountingstandardsTheSecuritiesandExchangeCommission(SEC)–agovernmentalagency–underpinsFASB’sauthorityPublicCompanyAccountingOversightBoard(PCAOB)PrivateorganizationoverseenbytheSECRegulatesauditsandauditorsofpubliccompaniesIn2002,tookovertheresponsibilityforsettingauditingstandardsfromtheAmericanInstituteofCertifiedPublicAccountants(AICPA)Financialstatements“presentfairly”CompliancewithGAAPisthetestforfairpresentation5UnitedStates(contin)AccountingregulationandenforcementSecuritiesandExchangeCommissionHasjurisdictionoverlistedcompaniesReliesonprivatesector(FASB)tosetaccountingstandardsPressuresFASBonthedirectionofaccountingstandardsFinancialAccountingStandardsBoardConceptualFrameworkisasignificantfeatureofaccountingstandardsettingStandardsettingintheU.S.isbothpoliticalandtechnicalGenerallyacceptedaccountingprinciples(GAAP)arevoluminousanddetailedCommittedtoconvergingU.S.GAAPwithIFRS6UnitedStates(contin)AccountingregulationandenforcementSarbanes-OxleyAct(2002)Expandedrequirementsoncorporategovernance,disclosureandreporting,andtheregulationoftheauditprofessionEstablishedPCAOBSetsstandardsforauditorsOverseesandinspectsauditfirmsSanctionsauditorsfordefectiveworkCEOandCFOmustcertifyfinancialstatementsManagementmustassessinternalcontrolsAuditorsexpressanopiniononinternalcontrols7UnitedStates(contin)UnusualfeaturesofU.S.financialreportingNofederallawforpreparingfinancialstatementsorhavingthemaudited,exceptforlistedcompaniesLIFORules-basedGAAPversusprinciples-basedGAAPRules-basedMorespecificrequirementsMoredetailedimplementationguidanceMayresultinmorecomparabilityMayfoster“check-the-box”mentalityPrinciples-basedSetsforthbroadobjectivesandfundamentalsRequiresprofessionaljudgmentforimplementationMoreflexibleMayresultinmoredivergenceinpractice8MexicoOverviewAccountingisorientedtowardfairpresentationdespitecodelawlegalsystemGeneralprice-levelaccounting(inflation-adjustedfinancialstatements)areafundamentalfeatureAccountingprofessioniswell-developedandinfluentialinsettingaccountingandauditingstandardsAccountingregulationandenforcementCouncilforResearchandDevelopmentofFinancialInformationStandards(CINIF)Independentpublic/private-sectorpartnershippatternedafterFASBandIASBDeterminesMexicanGAAPAim–alignMexicanGAAPwithIFRSMexicanInstituteofPublicAccountingIssuesauditingstandardsthroughitsAuditingStandardsandProceduresCommissionUnusualfeaturesofMexicanfinancialreportingFinancialstatementsareadjustedforinflation9JapanOverviewStrongbureaucraticcontroloverbusiness,includingaccountingStructuralreformsunderwayKeiretsubusinessmodelbeingtransformedAccounting“bigbang”toimprovetransparencyAccountingregulationandenforcementTriangularlegalsystemCompanyLawAdministeredbyMinistryofJusticeCreditorandshareholderprotectionthefundamentalprincipleCorporateIncomeTaxLawExpensesmustbebookedtobeclaimedfortaxpurposes10JapanTriangularlegalsystemSecuritiesandExchangeLawForpubliclyownedcompaniesProvidinginformationforinvestmentdecision-makingthemainobjectiveAccountingStandardsBoardofJapanPrivate-sectororganizationResponsiblefordevelopingaccountingstandardsModeledafterFASBandIASBConvergencewithIFRSamajorgoalTookoverfromtheBusinessAccountingCouncil(agovernmentagency)in2001JapaneseInstituteofCertifiedPublicAccountantsProvidesguidanceonconductofauditBusinessAccountingCouncilResponsibleforauditingstandards11Japan(contin)CertifiedPublicAccountantandAuditingOversightBoardGovernmentagencyMonitorsandoverseestheauditingprofessionUnusualfeaturesofJapanesefinancialreportingForecastsofcashflows,capitalinvestments,andproductioninstatutoryfilings12ChinaOverviewEmbracingIFRSaspartofstructuralmarketreformsMinistryofFinanceresponsibleforallaspectsofaccountingandauditingAccountingregulationandenforcementChineseAccountingStandardsCommitteeUndertheMinistryofFinanceResponsiblefordevelopingaccountingstandardsChineseInstituteofCertifiedPublicAccountantsUndertheMinistryofFinanceResponsiblefordevelopingauditingstandardsandcodeofprofessionalethicsChinaSecuritiesRegulatoryCommissionUnderMinistryofFinanceRegulatesChina’stwostockexchanges13China(contin)AccountingregulationandenforcementAccountingStandardsforBusinessEnterprises(ASBE)ComprehensiveframeworkforaccountingandfinancialreportingIncludesdetailedimplementationguidanceonaccountingissuesLargelyinlinewithIFRSFirstintroducedin1992byMinistryofFinanceandrevisedseveraltimessinceUnusualfeaturesofChinesefinancialreportingStartlingchangessinceoriginalASBEin199214IndiaOverviewBritishinfluenceonaccountingandauditingForexample:TrueandfairviewIndependentaccountingprofessionAccountingregulationandenforcementCompaniesActBroadframeworkforaccountingandauditingInstituteofCharteredAccountantsofIndia