chapter 4 ppt

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United States (to be continued)

Unusual features of U.S. financial reporting Rules-based GAAP versus principles-based GAAP

Principles-based Sets forth broad objectives and fundamentals Requires professional judgment for implementation More flexible May result in more divergence in practice
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United States (to be continued)


Assets valuation Revaluation permitted? R&D cost LIFO confirmative rule Marketable securities and held-to-maturity securities Financial lease
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Japan (ounting regulation and enforcement

Triangular legal system Company Law Administered by Ministry of Justice Creditor and shareholder protection the fundamental principle Securities and Exchange Law For publicly owned companies Providing information for investment decisionmaking the main objective Corporate Income Tax Law Expenses must be booked to be claimed for tax purposes
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Financial Accounting Standards Board



United States (to be continued)

Accounting regulation and enforcement

Sarbanes-Oxley Act (2002)





Expanded requirements on corporate governance, disclosure and reporting, and the regulation of the audit profession Established PCAOB Sets standards for auditors Oversees and inspects audit firms Sanctions auditors for defective work CEO and CFO must certify financial statements Management must assess internal controls Auditors express an opinion on internal controls
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Japan

Overview


Strong bureaucratic control over business, including accounting Structural reforms under way


Keiretsu business model being transformed Accounting “big bang” to improve transparency
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United States (to be continued)

Accounting regulation and enforcement

Securities and Exchange Commission


Has jurisdiction over listed companies Relies on private sector (FASB) to set accounting standards Pressures FASB on the direction of accounting standards Conceptual Framework is a significant feature of accounting standard setting Standard setting in the U.S. is both political and technical Generally accepted accounting principles (GAAP) are voluminous and detailed Committed to converging U.S. GAAP with IFRS
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Other Chapter Exhibits
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Other Chapter Exhibits (contin)
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Japan (To be continued)

Unusual features of Japanese financial reporting

Forecasts of cash flows, capital investments, and production in statutory filings
International Accounting, 6/e Frederick D.S. Choi Gary K. Meek
Chapter 4: Comparative Accounting: The Americas and Asia
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Learning Objectives


Understand how financial reporting is regulated and enforced TWO countries of the Americas and Asia: the U.S., Japan. Describe the key similarities and differences among the accounting systems of these two countries. Describe the auditor-oversight mechanisms in these two countries. Explain the difference between principles-based and rules-based accounting standards.
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Japan (To be continued)

Accounting regulation and enforcement


Accounting Standards Board of Japan Private-sector organization Responsible for developing accounting standards Modeled after FASB and IASB Convergence with IFRS a major goal Took over from the Business Accounting Council (a government agency) in 2001 Japanese Institute of Certified Public Accountants Provides guidance on conduct of audit Business Accounting Council Responsible for auditing standards
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United States (to be continued)

Overview


Public Company Accounting Oversight Board (PCAOB) Private organization overseen by the SEC Regulates audits and auditors of public companies In 2002, took over the responsibility for setting auditing standards from the American Institute of Certified Public Accountants (AICPA) Financial statements “present fairly” Compliance with GAAP is the test for fair presentation
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United States

Overview

Financial Accounting Standards Board (FASB) Private-sector organization that determines accounting standards The Securities and Exchange Commission (SEC) – a governmental agency – underpins FASB’s authority
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Japan (To be continued)

Certified Public Accountant and Auditing Oversight Board Government agency Monitors and oversees the auditing profession