The Importance of International Accounting Differences in the Theory and Practice

Lidija Romic

doi:doi:10.11648/j.eco.20170603.11

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The Importance of International Accounting Differences in the Theory and Practice

Lidija Romic

Published in Economics (Volume 6, Issue 3)

Received: 19 January 2017 Accepted: 10 February 2017 Published: 23 June 2017

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Abstract

In this paper we will focus on why accounting and financial reporting systems developed differently in different countries. At the end we will pay attention to research approaches which try to explain, with the help of this national characteristics, the differences in the degree of accounting quality observed between various countries, even after these countries switched to mandatory compliance with IFRS for listed groups The limits mentioned are set by standard setters in different countries or international standard setters such as the IASB, which promulgate the methods of recognition and measurement, consolidation presentation and disclosure that the company must comply with. Some standard setters allow many options with regard to those issues. Other standard setters are strict and prescribe, for example one specific measurement method for a specific asset. Companies located in countries where standard setters allow many choices with regard to recognition and measurement issues have much more accounting flexibility in the presentation and valuation of this assets, liabilities, earnings and financial position. As a result, users of financial statements of companies located in countries with accounting flexibility will face more problems comparing the performance of different companies with one another than users of annual accounts of companies located in countries with very little accounting flexibility. Harmonization increases the comparability of financial information and creates more transparency for the users of financial information. As a result, the information asymmetry between stakeholders and the companies decreases. This will lead to a lower cost of capital for companies [see for example Leuz and Verrecchia, 2000, Botosan and Plumblee, 2002] and the increase in the market liquidity [Lambert et al. 2007, Daske et al. 2008]. Today the comparability of financial information published by listed groups might have improved, but the situation for the large majority of non listed companies [often SMEs] has not improved yet.

Published in	Economics (Volume 6, Issue 3)
DOI	10.11648/j.eco.20170603.11
Page(s)	30-37
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2017. Published by Science Publishing Group

Keywords

Financial Statements, Accounting Standards, Capital Market, Culture

References

[1]	Alexander, D. and Nobes C. [2004] financial accounting; An International Introduction 2 edn, Harlow, Pearson Education.
[2]	Armstrong C, Barth M, Jagolinzer A, and Riedl E [2010] Market reaction to the adoption of IFRS in Europe, Accounting Review.
[3]	Bughstahler, D. C Hail, L. and Leuz C. [2006] the importance of reporting incentives; earnings management in European private and public firms, Accounting Review 81.
[4]	Daske, H, HailL, Leuz C and Verdi R. [2008] Mandatory IFRS reporting around the world; early evidence on the economic consequences, Journal of Accounting Research 46.
[5]	Lambrt, R, Leuz, C and Verrecchia R [2007] Accounting information, disclosure and the cost of capital. Journal of Accounting Research 45.
[6]	Maijor, S and Vanstraclen, A [2006] Earnings management within Europe; the effects of member state audit environment, audit firm quality and international capital markets, Accounting and Business Research 36.
[7]	Ordelheide, D and KPMG [2001] Transnational Accounting 7.
[8]	Schipper, K [2000] Accounting research and the potential use of international accounting standards for cross border securities listings, British Accounting Review 32.
[9]	Schamalenbach E [1927] Der Kontenrahmen, Zeitshrift fur btriebswirtschafliche Forshung 21.
[10]	Seidler Lj, [1967] International accounting the ultimate theory course, Accounting review 42.

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APA Style

Lidija Romic. (2017). The Importance of International Accounting Differences in the Theory and Practice. Economics, 6(3), 30-37. https://doi.org/10.11648/j.eco.20170603.11

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ACS Style

Lidija Romic. The Importance of International Accounting Differences in the Theory and Practice. Economics. 2017, 6(3), 30-37. doi: 10.11648/j.eco.20170603.11

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AMA Style

Lidija Romic. The Importance of International Accounting Differences in the Theory and Practice. Economics. 2017;6(3):30-37. doi: 10.11648/j.eco.20170603.11

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@article{10.11648/j.eco.20170603.11,
  author = {Lidija Romic},
  title = {The Importance of International Accounting Differences in the Theory and Practice},
  journal = {Economics},
  volume = {6},
  number = {3},
  pages = {30-37},
  doi = {10.11648/j.eco.20170603.11},
  url = {https://doi.org/10.11648/j.eco.20170603.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.eco.20170603.11},
  abstract = {In this paper we will focus on why accounting and financial reporting systems developed differently in different countries. At the end we will pay attention to research approaches which try to explain, with the help of this national characteristics, the differences in the degree of accounting quality observed between various countries, even after these countries switched to mandatory compliance with IFRS for listed groups The limits mentioned are set by standard setters in different countries or international standard setters such as the IASB, which promulgate the methods of recognition and measurement, consolidation presentation and disclosure that the company must comply with. Some standard setters allow many options with regard to those issues. Other standard setters are strict and prescribe, for example one specific measurement method for a specific asset. Companies located in countries where standard setters allow many choices with regard to recognition and measurement issues have much more accounting flexibility in the presentation and valuation of this assets, liabilities, earnings and financial position. As a result, users of financial statements of companies located in countries with accounting flexibility will face more problems comparing the performance of different companies with one another than users of annual accounts of companies located in countries with very little accounting flexibility. Harmonization increases the comparability of financial information and creates more transparency for the users of financial information. As a result, the information asymmetry between stakeholders and the companies decreases. This will lead to a lower cost of capital for companies [see for example Leuz and Verrecchia, 2000, Botosan and Plumblee, 2002] and the increase in the market liquidity [Lambert et al. 2007, Daske et al. 2008]. Today the comparability of financial information published by listed groups might have improved, but the situation for the large majority of non listed companies [often SMEs] has not improved yet.},
 year = {2017}
}

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TY  - JOUR
T1  - The Importance of International Accounting Differences in the Theory and Practice
AU  - Lidija Romic
Y1  - 2017/06/23
PY  - 2017
N1  - https://doi.org/10.11648/j.eco.20170603.11
DO  - 10.11648/j.eco.20170603.11
T2  - Economics
JF  - Economics
JO  - Economics
SP  - 30
EP  - 37
PB  - Science Publishing Group
SN  - 2376-6603
UR  - https://doi.org/10.11648/j.eco.20170603.11
AB  - In this paper we will focus on why accounting and financial reporting systems developed differently in different countries. At the end we will pay attention to research approaches which try to explain, with the help of this national characteristics, the differences in the degree of accounting quality observed between various countries, even after these countries switched to mandatory compliance with IFRS for listed groups The limits mentioned are set by standard setters in different countries or international standard setters such as the IASB, which promulgate the methods of recognition and measurement, consolidation presentation and disclosure that the company must comply with. Some standard setters allow many options with regard to those issues. Other standard setters are strict and prescribe, for example one specific measurement method for a specific asset. Companies located in countries where standard setters allow many choices with regard to recognition and measurement issues have much more accounting flexibility in the presentation and valuation of this assets, liabilities, earnings and financial position. As a result, users of financial statements of companies located in countries with accounting flexibility will face more problems comparing the performance of different companies with one another than users of annual accounts of companies located in countries with very little accounting flexibility. Harmonization increases the comparability of financial information and creates more transparency for the users of financial information. As a result, the information asymmetry between stakeholders and the companies decreases. This will lead to a lower cost of capital for companies [see for example Leuz and Verrecchia, 2000, Botosan and Plumblee, 2002] and the increase in the market liquidity [Lambert et al. 2007, Daske et al. 2008]. Today the comparability of financial information published by listed groups might have improved, but the situation for the large majority of non listed companies [often SMEs] has not improved yet.
VL  - 6
IS  - 3
ER  -

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Author Information

Lidija Romic

Faculty of Economic Sciences Subotica, Department of Accounting and Finance, University of Novi Sad, Novi Sad, Serbia

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Plain Text BibTeX RIS

APA Style

Lidija Romic. (2017). The Importance of International Accounting Differences in the Theory and Practice. Economics, 6(3), 30-37. https://doi.org/10.11648/j.eco.20170603.11

Copy | Download

ACS Style

Lidija Romic. The Importance of International Accounting Differences in the Theory and Practice. Economics. 2017, 6(3), 30-37. doi: 10.11648/j.eco.20170603.11

Copy | Download

AMA Style

Lidija Romic. The Importance of International Accounting Differences in the Theory and Practice. Economics. 2017;6(3):30-37. doi: 10.11648/j.eco.20170603.11

Copy | Download

@article{10.11648/j.eco.20170603.11,
  author = {Lidija Romic},
  title = {The Importance of International Accounting Differences in the Theory and Practice},
  journal = {Economics},
  volume = {6},
  number = {3},
  pages = {30-37},
  doi = {10.11648/j.eco.20170603.11},
  url = {https://doi.org/10.11648/j.eco.20170603.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.eco.20170603.11},
  abstract = {In this paper we will focus on why accounting and financial reporting systems developed differently in different countries. At the end we will pay attention to research approaches which try to explain, with the help of this national characteristics, the differences in the degree of accounting quality observed between various countries, even after these countries switched to mandatory compliance with IFRS for listed groups The limits mentioned are set by standard setters in different countries or international standard setters such as the IASB, which promulgate the methods of recognition and measurement, consolidation presentation and disclosure that the company must comply with. Some standard setters allow many options with regard to those issues. Other standard setters are strict and prescribe, for example one specific measurement method for a specific asset. Companies located in countries where standard setters allow many choices with regard to recognition and measurement issues have much more accounting flexibility in the presentation and valuation of this assets, liabilities, earnings and financial position. As a result, users of financial statements of companies located in countries with accounting flexibility will face more problems comparing the performance of different companies with one another than users of annual accounts of companies located in countries with very little accounting flexibility. Harmonization increases the comparability of financial information and creates more transparency for the users of financial information. As a result, the information asymmetry between stakeholders and the companies decreases. This will lead to a lower cost of capital for companies [see for example Leuz and Verrecchia, 2000, Botosan and Plumblee, 2002] and the increase in the market liquidity [Lambert et al. 2007, Daske et al. 2008]. Today the comparability of financial information published by listed groups might have improved, but the situation for the large majority of non listed companies [often SMEs] has not improved yet.},
 year = {2017}
}

Copy | Download

TY  - JOUR
T1  - The Importance of International Accounting Differences in the Theory and Practice
AU  - Lidija Romic
Y1  - 2017/06/23
PY  - 2017
N1  - https://doi.org/10.11648/j.eco.20170603.11
DO  - 10.11648/j.eco.20170603.11
T2  - Economics
JF  - Economics
JO  - Economics
SP  - 30
EP  - 37
PB  - Science Publishing Group
SN  - 2376-6603
UR  - https://doi.org/10.11648/j.eco.20170603.11
AB  - In this paper we will focus on why accounting and financial reporting systems developed differently in different countries. At the end we will pay attention to research approaches which try to explain, with the help of this national characteristics, the differences in the degree of accounting quality observed between various countries, even after these countries switched to mandatory compliance with IFRS for listed groups The limits mentioned are set by standard setters in different countries or international standard setters such as the IASB, which promulgate the methods of recognition and measurement, consolidation presentation and disclosure that the company must comply with. Some standard setters allow many options with regard to those issues. Other standard setters are strict and prescribe, for example one specific measurement method for a specific asset. Companies located in countries where standard setters allow many choices with regard to recognition and measurement issues have much more accounting flexibility in the presentation and valuation of this assets, liabilities, earnings and financial position. As a result, users of financial statements of companies located in countries with accounting flexibility will face more problems comparing the performance of different companies with one another than users of annual accounts of companies located in countries with very little accounting flexibility. Harmonization increases the comparability of financial information and creates more transparency for the users of financial information. As a result, the information asymmetry between stakeholders and the companies decreases. This will lead to a lower cost of capital for companies [see for example Leuz and Verrecchia, 2000, Botosan and Plumblee, 2002] and the increase in the market liquidity [Lambert et al. 2007, Daske et al. 2008]. Today the comparability of financial information published by listed groups might have improved, but the situation for the large majority of non listed companies [often SMEs] has not improved yet.
VL  - 6
IS  - 3
ER  -

Copy | Download