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Example research essay topic: Accounting Standards Accounting Profession - 1,841 words

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This report discusses the accounting practices of the following countries U. K, U. S. A and China. An analysis of these different accounting systems will be conducted on issues such as the growth and background, social, economic and fiscal pressures that have led to each nations current characteristics. Concluding on the direction each nations accounting systems and practices seem to be heading towards.

Introduction The main characteristics of U. K accounting is that it is highly dominated by organised accounting profession, which only relate to limited liability companies, no other such entity. A separate fiscal accounting has been developed entirely from commercial accounting. Public sector in the U. K follows its own different rules in accounting.

U. K was one of the initial and first countries in the world to develop and have Companies acts containing provisions and also one of the first professional accounting bodies was established in the U. K. Professional accountants and company law play a key role in dominating the U. K corporate financial reporting and play a significant influence varying from external and domestic factors.

Britain's financial market is structured around a "capital financial market based financial system" where the stock market funds large scale businesses, trading securities and pricing role. The stock exchange and taxation system have very little influence in financial reporting. Having said that, the stock market has involvement in developing financial reporting standards for listed companies. Although U. K seems to have developed its own companies act and regulations, it still has received indirect foreign influence from member states of the European union through EU directives and from U. S.

A with their new accounting standards. Financial reporting and accounting in the U. S. A seems to have a large and dominant influence on accounting in the world today with its largely consistent standards promulgated by the international accounting standards committee.

However, the U. S. A accounting is very similar to U. K accounting due to the fact that us accounting was initially an export from the U. K, which is often known to be the funding fathers of US accounting. For example many of the largest accounting firms in the US such as Ernst & Young and ICPMG were expatriate Britain.

The U. S. A has taken that initial guidance and is becoming the accounting sector leaders in their accounting standards by exploring and developing rapidly in the accounting field. Standards have become largely voluminous and detailed due to the litigious-ness of American society and intense rivalry among accounting firms for business. China on the other hand compared to U. K and U.

S. A has seen large-scale impacts of influence of political and economic change on its rules and practices. Although it is one of the few communist regimes to still be intact, it is significantly the largest. The main communist party in the country has developed a "socialist market economy" which has resulted in a huge rapid economic growth. Recently there have been many western countries that are becoming interested in Chinese accounting both in academic and practical aspects. Chinese accounting over the last decade has seen proliferation of accounting regulations replacing existing uniform accounting systems therefore bringing Chinese accounting in line with internationally accepted practices.

This view can be backed up with china in joining the ISCA in 1997 in an attempt to make her accounting standards consistent with the IAS. The most up to date development and recent one in china is the development of her own accounting standards, which include the MOF (Chinese Ministry of Finance) that has revised the existing five accounting standards operated. The MOF has encouraged other enterprises to adopt the new system at an early stage with the provision that only state owned enterprises seeking to adopt early would be required to obtain approval from the relevant government authority. The three government entities in China that are involved in regulating the accounting sector include the following: MOF - Ministry of Finance CSRC - China Securities Regulation Committee CICPA - Chinese institute of certified public accountants From the above three the MOF governs the accounting law therefore one could say is the key factor that dictates the sector. The MOF has also received loans from the World Bank to reform the accounting profession and to extend the accounting statements in China.

Company Law and Standards The UK have developed and issued only a few number of accounting standards. The standards that have been introduced evolve around the set of forth-broad principles. The main current legal instrument used in the U. K to govern the accounting practices of limited liability companies is the Companies Act 1985 amended in 1989, introducing provision of the EC 7 th directive. Reporting requirements in the U. K are governed by the FRS (financial reporting standards) issued by the ASB (accounting standards board) that introduce the basic provisions contained in company law in the U.

K The companies act consists of a number of statutes which broadly govern the activities of U. K companies. These acts are frequently updated and amended therefore seem to be developing further. The major change seen in the Companies act which was consolidated in 1985 and revised in 1989, was that small and medium sized businesses needed to explain any drift seen in their accounts away from accounting standards. Another aspect that was also introduced was the true and fair concept. This related to the way companies treated their accounts and were left to their own judgement of the profession.

The companies needed to display a true and fair indicator in their financial statements of the companies true financial position. This principle is still today very difficult to define in accounting terms but clashes with the requirements of company law to the extent that additional information should be added to the accounts when needed. Although the first attempt by the UK to establish technical guidelines in accounting in 1942 disappeared from the literature of U. K accounting.

The U. K set up its own self-regulatory organisation the ASSC (Accounting Standards Steering Committee) in 1970, which was later over time known as Accounting Standards Committee (ASC) that was the first recognizable standard setter in modern terms. It was renamed again in 1990 to the Accounting standards board (ASB). Along with the 7 th directive the 8 th directive was introduced in 1989 and led to a new regulatory body called the financial reporting council (FRC). The FRC is supported by the FRRP (Financial Reporting Review Panel) and ASB. The ASB role is to provide the FRC with the funding and guidance on public concerns, also to amend or withdraw accounting standards.

In this situation The (UITF) acts as a fighting force on issues as guidance help on new technical problems that emerge. As a result of all these accounting standards committees and regulation being established since 1850 s, the accounting profession in the UK has seen a large amount of independence due to the wants of individual businesses. This is not the case no more as a more developed and regulated accountancy profession are now receiving influence from accounting standards, governmental pressures not to mention harmonisation from fellow European countries. In contrast the US system is a bit more complex than that of the UK. To understand accounting standard setting in the US, one must start with the SEC (Securities and Exchange Commission) which is a regulatory agency established in 1934 by congress. Before this no national regulations existed to govern the data flow of communication to investors.

SEC has been given the statutory authority to promulgate accounting principles. Although it consists of its own policy, it does rely on the private sector in the US to establish financial reporting standards. Its role of standard setting on financial reporting and accountancy principle guidelines is backed with its powerful influence. Another standard setting board is the FSAB with its role to develop accounting standards outside the profession by encouraging "the equality of financial statement requirements for foreign and domestic companies in their utilization of US capital markets" (Walton, Haller) Therefore the main source for accounting standards in the US internally is GAAP (Generally accepted accounting principles) which is moulded by author ative pronouncement by the FASB (Financial accounting standards board). The role of the FSAB is to establish financial accounting and reporting standards in the US.

The FSAB framework is very influential around the world today as the "IASC's framework and UK statement of principles are clearly derive from it" (Notes, Parker) The US version of UK's "true and fair" directive exist in the securities act of 1933 that required investors to be fully informed of all information to assure and prevent any malpractices and encourage fair transactions. This act involved the sale of securities, stock, bonds and certificate of interests to provide a registration statement to the SEC before sale of the asset can commence. Overall US accounting seems to be more complex and detailed than UK accounting with many guidelines relating to accounting rules and interpretations being issued. Making it difficult for new error prone situations to occur as almost every possible situation is addressed. She also is rapidly being seen as abiding with IAS On the other hand china is still undergoing change from a socialist market economy to a mature market economy. Although the Chinese accounting system was initially based on the soviet system of uniform accounting.

Economic reforms have taken place particular in the attempt to encourage foreign investors. In 1992 the ministry of finance with the given power introduced new accounting regulations. Two significant regulations are the accounting regulations of the peoples republic of china for entre prize with foreign investment and the ASBC (Accounting standards for business entreprises) that came into impact in 1933. These regulations are reasonably close and similar to US and IASC precedents but consist of errors such as failing to refer to the primary users and purpose of financial statements. The ASBE is structured on historic cost without revaluation allowed in U. K and IASC.

Nevertheless the Chinese system has now emerged to recognise the business and equity concept. The government seems to be developing towards an equity market economy with shares by the public. Where on the other hand an Anglo American system seems to suit the needs of foreign investors. The accounting society of china researches new issues and releases recommendations on accounting standards. The Chinese institute of certified public accountants (CICPA) supervises accounting practitioners. Although china is aware of other countries accounting systems, its system seems to be geared towards the directives of its social-economic objectives.

For instance current accounting practices are being reformed and changed to new developments on the economic sphere. Also theories and practices of other countries are being re-evaluated. Another significant change occurred in 1995, when new regulations required all companies whether government owned, private or the product of foreign investment to adopt new accounting standards that apply. Western accounting methods, namely the double entry method. This sweeping move to establish nationwide accounting standards is aimed at promote...


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