comparative international - tailieu.vn

Comparative

international aCCounting

Christopher nobes and robert parker

tenth edition

Christopher Nobes is professor of accounting at royal holloway, university of london. From 1993 to 2001 he was a representative on the board of the international accounting Standards Committee.

Robert Parker is emeritus professor of accounting at the university of exeter, uK. he was formerly editor of the journal, Accounting and Business Research.

Both authors have received the american accounting association’s award of ‘outstanding international accounting educator’.

revised resources for lecturers are available to download at www.pearsoned.co.uk/nobes.

an imprint of www.pearson-books.comFront cover image: © getty images/iconica

now in its tenth edition, Comparative International Accounting by nobes and parker is renowned for its depth of discussion and comprehensive coverage of the international dimensions of financial accounting and reporting.

it uncovers the conceptual and contextual foundations of the increasingly used international Financial reporting Standards (iFrS) and contrasts them with uS generally accepted accounting principles (gaap). nobes and parker examine the key issues inherent in the subject, such as transition, harmonization and political lobbying, and the international differences that remain. they also look at the special accounting problems of multinational companies.

Comparative International Accounting has been extensively revised for the many changes in international accounting since the last edition.

New to this edition are:an additional chapter on how the practice of iFrS can vary within a country and between countries updated case studies and an increased number of real-world examples new information on pension accounting, auditing standards and iFrS 8 increased coverage of China and of small and medium enterprises (Smes) Contributions from a diverse group of international practitioners and academics, which are updated every two years to incorporate the latest developments in the field

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COMPARATIVE INTERNATIONAL ACCOUNTING

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Tenth Edition

COMPARATIVEINTERNATIONAL ACCOUNTING

Christopher Nobes

and

Robert Parker

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Pearson Education LimitedEdinburgh GateHarlowEssex CM20 2JEEngland

and Associated Companies throughout the world

Visit us on the World Wide Web at:www.pearsoned.co.uk

First edition published in Great Britain under the Philip Allan imprint 1981Second edition published 1985Third edition published under the Prentice Hall imprint 1991Fourth edition published 1995Fifth edition published under the Prentice Hall imprint 1998Sixth edition published 2000Seventh edition published 2002Eighth edition published 2004Ninth edition published 2006Tenth edition published 2008

© Prentice Hall Europe 1991, 1995, 1998© Pearson Education Limited 2000, 2002, 2004, 2006, 2008Chapter 18 © John Flower 2002, 2004, 2006, 2008

The rights of Christopher Nobes and Robert Parker to be identified as authors of this work have been asserted by them in accordance with the Copyright,Designs and Patents Act 1988.

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without either the prior written permission of the publisher or a licence permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, 6–10 Kirby Street, London EC1N 8TS.

ISBN: 978-0-273-71476-7

British Library Cataloguing-in-Publication DataA catalogue record for this book is available from the British Library

Library of Congress Cataloging-in-Publication DataComparative international accounting / [edited by] Christopher Nobes and Robert Parker. – 10th ed.

p. cm.Includes bibliographical references and index.ISBN-13: 978-0-273-71476-7 (alk. paper) 1. Comparative accounting.

I. Nobes, Christopher. II. Parker, R. H. (Robert Henry)HF5625.C74 2008657—dc22

2008007524

10 9 8 7 6 5 4 3 212 11 10 09

Typeset in 9.5/12.5pt Stone Serif by 35 Printed by Ashford Colour Press Ltd., Gosport

The publisher’s policy is to use paper manufactured from sustainable forests.

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Contributors xviPreface xviii

Part I SETTING THE SCENE

1 Introduction 32 Causes and examples of international differences 243 International classification of financial reporting 514 International harmonization 74

Part II FINANCIAL REPORTING BY LISTED GROUPS

5 The context of financial reporting by listed groups 1016 The requirements of International Financial Reporting Standards 1177 Different versions of IFRS practice 1458 Financial reporting in the United States 1579 Enforcement of Financial Reporting Standards 189

10 Political lobbying on Accounting Standards – US, UK and international experience 206

Part III HARMONIZATION AND TRANSITION IN EUROPE AND EAST ASIA

11 Harmonization and transition in Europe 23712 Harmonization and transition in East Asia 257

Part IV FINANCIAL REPORTING BY INDIVIDUAL COMPANIES

13 The context of financial reporting by individual companies 28514 Making accounting rules for non-listed business enterprises in Europe 29315 Accounting rules and practices of individual companies in Europe 314

Part V MAJOR ISSUES IN FINANCIAL REPORTING BY MNEs

16 Key financial reporting topics 343

Brief contents

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17 Consolidation 36818 Foreign currency translation 38419 Segment reporting 427

Part VI ANALYSIS AND MANAGEMENT ISSUES

20 International financial analysis 45721 International auditing 48122 International aspects of corporate income taxes 51023 Managerial accounting 531

Glossary of abbreviations 558Suggested answers to some of the end-of-chapter questions 563Author index 583Subject index 587

Supporting resourcesVisit www.pearsoned.co.uk/nobes to find valuableonline resources

For instructors� Complete, downloadable Instructor’s Manual,

including answers to the end of chapter questionsin the text, additional questions for further study and multiple choice questions(with answers).

� PowerPoint slides of the figures and tables in the book that can be downloadedand used as OHTs

For more information please contact your local Pearson Education sales representativeor visit www.pearsoned.co.uk/nobes.

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Contributors xvi

Preface xviii

Part I SETTING THE SCENE

1 Introduction 3

Contents 3Objectives 3

1.1 Differences in financial reporting 41.2 The global environment of accounting 51.3 The nature and growth of MNEs 121.4 Comparative and international aspects of accounting 151.5 Structure of this book 18

Summary 21References 21Useful websites 22Questions 22

2 Causes and examples of international differences 24


2.1 Introduction 252.2 Culture 252.3 Legal systems 282.4 Providers of finance 292.5 Taxation 332.6 Other external influences 352.7 The profession 362.8 Conclusion on the causes of international differences 372.9 Some examples of differences 38

Summary 46References 47Questions 50

Contents

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3 International classification of financial reporting 51


3.1 Introduction 523.2 The nature of classification 533.3 Classifications by social scientists 533.4 Classifications in accounting 553.5 Extrinsic classifications 563.6 Intrinsic classifications: 1970s and 1980s 603.7 Developments related to the Nobes classification 663.8 Further intrinsic classification 673.9 Is there an Anglo-Saxon group? 693.10 A taxonomy of accounting classifications 69


4 International harmonization 74


4.1 Introduction 754.2 Reasons for, obstacles to and measurement of harmonization 764.3 The International Accounting Standards Committee 784.4 Other international bodies 874.5 The International Accounting Standards Board 91


Part II FINANCIAL REPORTING BY LISTED GROUPS

5 The context of financial reporting by listed groups 101


5.1 Introduction 1015.2 IFRS in the EU 1025.3 Adoption of, and convergence with, IFRS 1055.4 Foreign listing and foreign investing 1065.5 Reconciliations from national rules to US GAAP and IFRS 1085.6 High-level IFRS/US differences 110

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5.7 Reconciliations from IFRS to US GAAP 1115.8 Convergence of IFRS and US GAAP 113


6 The requirements of International Financial Reporting Standards 117


6.1 Introduction 1186.2 The conceptual framework and some basic standards 1186.3 Assets 1256.4 Liabilities 1286.5 Group accounting 1306.6 Disclosures 131

Summary 132References 132Further reading 133Useful websites 133Questions 133Appendix 6.1 An outline of the content of International

Financial Reporting Standards 134

7 Different versions of IFRS practice 145


7.1 Introduction 1457.2 Motivations for different IFRS practice 1467.3 Scope for different IFRS practice 1487.4 Conclusion 154


8 Financial reporting in the United States 157


8.1 Introduction 1588.2 Regulatory framework 159

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8.3 Accounting standard-setters 1638.4 The conceptual framework 1668.5 Contents of annual reports 1698.6 Accounting principles 1748.7 Consolidation 1818.8 Audit 1838.9 Differences from IFRS 184

Summary 186References 186Further reading 187Useful websites 188Questions 188

9 Enforcement of Financial Reporting Standards 189


9.1 Introduction 1899.2 Modes and models of enforcement 1909.3 United States 1949.4 European Union 1959.5 Australia 201


10 Political lobbying on Accounting Standards – US, UK and international experience 206


10.1 Introduction 20710.2 Motivations for political lobbying 20810.3 Political lobbying up to 1990 21010.4 US political lobbying from 1990 22010.5 Political lobbying of the IASC/IASB 22410.6 Preparer attempts to control the accounting standard-setter 22810.7 Political lobbying of the FASB’s convergence with the IASB 22910.8 Some concluding remarks 231


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Part III HARMONIZATION AND TRANSITION IN EUROPE AND EAST ASIA

11 Harmonization and transition in Europe 237


11.1 Introduction 23811.2 Harmonization within the European Union 23811.3 Transition in Central and Eastern Europe 244


12 Harmonization and transition in East Asia 257


12.1 Introduction 25812.2 Japan 25812.3 China 272

Summary 277References 278Further reading 280Useful websites 280Questions 280Appendix 12.1 ASBE Standards 282

Part IV FINANCIAL REPORTING BY INDIVIDUAL COMPANIES

13 The context of financial reporting by individual companies 285


13.1 Introduction 28513.2 Outline of differences between national rules and

IFRS or US GAAP 28613.3 The survival of national rules 28613.4 Financial reporting, tax and distribution 28913.5 Special rules for small or unlisted companies 290

Summary 292References 292

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Useful websites 292Questions 292

14 Making accounting rules for non-listed business enterprises in Europe 293


14.1 Introduction 29314.2 Who makes accounting rules? 29414.3 Which business enterprises are subject to accounting rules? 303

Summary 307References 308Further reading 309Useful websites 310Questions 311Appendix 14.1 Contents of the Plan comptable général 312Appendix 14.2 Financial accounting chart of accounts 313

15 Accounting rules and practices of individual companies in Europe 314


15.1 Introduction 31415.2 France 31515.3 Germany 31915.4 United Kingdom 324

Summary 326References 326Further reading 327Useful websites 327Questions 327Appendix 15.1 Formats for French financial statements 328Appendix 15.2 Formats for German financial statements 333Appendix 15.3 Formats for British financial statements 336

Part V MAJOR ISSUES IN FINANCIAL REPORTING BY MNEs

16 Key financial reporting topics 343


16.1 Introduction 344

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16.2 Recognition of intangible assets 34416.3 Asset measurement 34516.4 Financial instruments 34716.5 Provisions 35016.6 Employee benefits 35416.7 Deferred tax 35816.8 Revenue recognition 36216.9 Comprehensive income 364


17 Consolidation 368


17.1 Introduction 36917.2 Rate of adoption 36917.3 The concept of a ‘group’ 37017.4 Harmonization from the 1970s onwards 37117.5 Definitions of group companies 37517.6 Publication requirements and practices 37617.7 Techniques of consolidation 377

Summary 381References 382Further reading 382Questions 382

18 Foreign currency translation 384


18.1 Introduction 38518.2 Translation of transactions 38918.3 Introduction to the translation of financial statements 39518.4 The US initiative 39818.5 The temporal method versus the closing rate method 40118.6 FAS 52 40618.7 IAS 21 40918.8 Translation of comprehensive income 41118.9 Accounting for translation gains and losses 41318.10 Research findings 41918.11 An alternative to exchange rates? 423

Summary 423References 424

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Further reading 425Questions 425

19 Segment reporting 427


19.1 What is segment reporting? 42719.2 The need for segment information 43219.3 Disclosure regulations 43319.4 Evidence on the benefits of segment reporting 443


Part VI ANALYSIS AND MANAGEMENT ISSUES

20 International financial analysis 457


20.1 Introduction 45820.2 Understanding differences in accounting 45820.3 Disclosure practices in international financial reporting 46320.4 Interpreting financial statements 47020.5 Financial analysis and the capital market 474


21 International auditing 481


21.1 Introduction 48221.2 Reasons for the internationalization of auditing 48421.3 Promulgating international standards 48921.4 The international audit process 495


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22 International aspects of corporate income taxes 510


22.1 Introduction 51122.2 Tax bases 51322.3 International tax planning 51722.4 Transfer pricing 51822.5 Tax systems 51922.6 Harmonization 525


23 Managerial accounting 531


23.1 Introduction 53223.2 The balanced scorecard as an overview tool 53323.3 Currency and control 53523.4 Variances and foreign exchange 53923.5 Culture and management accounting 54023.6 Control and performance 54923.7 Looking forward 551


Glossary of abbreviations 558

Suggested answers to some of the end-of-chapter questions 563

Author index 583

Subject index 587

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Co-editor, author of Chapters 2, 3, 4, 5, 6, 7, 8, 12, 13, 16 and 22, and co-author of Chapter 17Christopher Nobes Professor of Accounting at Royal Holloway College, Univer-sity of London. He has also taught in Australia, Italy, the Netherlands, New Zealand,Scotland, Spain and the United States. He is currently a visiting professor at theNorwegian School of Management. He was the 2002 ‘Outstanding InternationalAccounting Educator’ of the American Accounting Association. He was a memberof the Accounting Standards Committee of the United Kingdom and Ireland from1986 to 1990, and a UK representative on the Board of the International AccountingStandards Committee from 1993 to 2001. He is vice-chairman of the accountingcommittee of the Fédération des Experts Comptables Européens.

Co-editor, author of Chapters 1, 9, 11, 14 and 15, and co-author of Chapter 17Robert Parker Emeritus Professor of Accounting at the University of Exeter andformer professorial fellow of the Institute of Chartered Accountants of Scotland. He has also practised or taught in Nigeria, Australia, France and Scotland and waseditor or joint editor of Accounting and Business Research from 1975 to 1993. He wasthe British Accounting Association’s ‘Distinguished Academic of the Year’ in 1997,and the 2003 ‘Outstanding International Accounting Educator’ of the AmericanAccounting Association.

Authors of other chaptersJan Buisman IFRS Senior Technical Partner for PricewaterhouseCoopers inSweden and partner in the firm’s Global Corporate Reporting Group. He was for-merly the Netherlands representative on the International Auditing PracticesCommittee, and chairman of Royal NIVRA’s Auditing Standards Board. He is nowchairman of the Accounting Practices Committee of FAR in Sweden. (Co-author ofChapter 21)

John Flower Formerly, Director of the Centre for Research in European Account-ing (Brussels), and earlier with the Commission of the European Communities andProfessor of Accounting at the University of Bristol. He now lives in Germany.(Chapter 18)

Graham Gilmour Senior Manager in the Global Corporate Reporting Group ofPricewaterhouseCoopers. (Co-author of Chapter 21)

Stuart McLeay Professor of Treasury at the University of Wales, Bangor. Formerly,he worked as a chartered accountant in Germany, France and Italy, and was a finan-cial analyst at the European Investment Bank. Co-editor of the ICAEW EuropeanFinancial Reporting series. (Chapter 20)

Contributors

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Clare B. Roberts Professor of Accounting at the University of Aberdeen BusinessSchool. (Chapter 19)

Stephen Salter Associate Professor and Director of the Center for Global Com-petitiveness at the University of Cincinnati. Formerly, he was a partner at Ernst &Young Management Consultants. (Chapter 23)

Stephen A. Zeff Herbert S. Autrey Professor of Accounting at Rice University.(Chapter 10)

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Purpose

Comparative International Accounting is intended to be a comprehensive and coher-ent text on international financial reporting. It is primarily designed for under-graduate and postgraduate courses in comparative and international aspects ofaccounting. We believe that a proper understanding requires broad overviews (as inPart I), but that these must be supported by detailed information on real countriesand companies (as in Parts II to IV) and across-the-board comparisons of major topics (as in Parts V and VI).

This book was first published in 1981. This present edition (the tenth) is a com-plete updating of the ninth edition which constituted the most extensive revisionthat we had ever made. One chapter (7) has been added: an examination of the pos-sible motivations and opportunities for different national versions of IFRS practice.

A revised manual for teachers and lecturers is available from http://www.pearsoned.co.uk/nobes. It contains several numerical questions and a selection of multiple-choice questions. Suggested answers are provided for all of these and forthe questions in the text. In addition, there is now an extensive set of PowerPointslides.

Authors

In writing and editing this book, we have tried to gain from the experience of thosewith local knowledge. This is reflected in the nature of those we thank below foradvice and in our list of contributors. For example, the original chapter on NorthAmerica was co-authored by a Briton who had been assistant research director ofthe US Financial Accounting Standards Board; his knowledge of US accounting wasthus interpreted through and for non-US readers. The amended version is by one ofthe editors, who has taught in several US universities. This seems the most likelyway to highlight differences and to avoid missing important points through over-familiarity. The chapter on political lobbying has been written by Stephen Zeff, anAmerican who is widely acknowledged as having the best overview of historical andinternational accounting developments. Other contributors presently live or workin Germany, in Sweden and in the United States.

Structure

Part I sets the scene for a study of comparative international financial reporting.Many countries are considered simultaneously in the introductory chapter andwhen examining the causes of the major areas of difference (Chapter 2). It is then

Preface

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Preface

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possible to try to put accounting systems into groups (Chapter 3) and to take theobvious next step by discussing the purposes and progress of international harmon-ization of accounting (Chapter 4).

All this material in Part I can act as preparation for the other parts of the book.Part I can, however, be fully understood only by those who become well-informedabout the contents of the rest of the book, and readers should go back later to Part I as a summary of the whole.

Part II examines financial reporting by listed groups. In much of the world this means, at least for consolidated statements, using the rules of either theInternational Accounting Standards Board or the United States. In addition to anoverview and chapters on these two ‘systems’ of accounting, Part II also contains a chapter on whether national versions of IFRS exist, one on enforcement ofaccounting regulations, and one on political lobbying.

Part III contains two chapters that examine the processes of harmonization andtransition as applied in the EU and East Asia. Part IV concerns the financial report-ing of individual companies, where large international differences remain. Thereare three chapters: context, regulatory styles, and accounting differences.

Part V examines, broadly and comparatively, particular major financial reportingtopics: key non-consolidation issues, consolidation, foreign currency translationand segment reporting. Part VI considers four issues of international analysis andmanagement: international financial analysis, international auditing, internationalaspects of corporate income taxes, and managerial accounting.

At the end of the book, there is a glossary of abbreviations relevant to inter-national accounting, suggested answers to some chapter questions, and two indexes(by author and by subject).

Publisher’s acknowledgements

We are grateful to the following for permission to reproduce copyright material:

Table 1.4: United Nations Conference on Trade and Development (UNCTAD) (2007)World Investment Report 2007: Transnational Companies, Exractive Industries andDevelopment. Geneva, UNCTAD. Copyright © United Nations 2007; Table 1.8:United Nations Conference on Trade and Development (UNCTAD) (2007) WorldInvestment Report 2007: Transnational Companies, Exractive Industries and Develop-ment. Geneva, UNCTAD. Copyright © United Nations 2007; Table 2.3: Source ofdata: Datastream. Reproduced by kind permission of Jon Tucker and David Bence of Bristol Business School; Figure 3.1: American Accounting Association (1977)Accounting Review, Supplement to Vol. 52, 1977, p. 99. Copyright © 1977 AmericanAccounting Association. Reproduced with permission; Figure 3.2: Puxty, A.G.,Willmott, H.C., Cooper, D.J. and Lowe, A.E. (1987) ‘Modes of regulation inadvanced capitalism: locating accountancy in four countries’, Accounting,Organizations and Society, Vol. 12, No. 3, p. 283. Reproduced with permission ofElsevier; Table 3.1: Nair, R.D. and Frank, W.G. (1980) ‘The impact of disclosure and measurement practices on international accounting classifications’, AccountingReview, Vol. 55, No. 3, p. 429. Reproduced with permission of the American

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