Week 5 International Accounting

Question 1

What does IASB stand for?

Answer 1

International Accounting Standards Board

Question 2

Who is the IASB

Answer 2

An independent group of experts in setting accounting standards, in preparing, auditing, or using financial reports, and in accounting education.

Question 3

What is the AASB

Answer 3

The Australian Accounting Standards Board

Question 4

Who enforces accounting standards in Australia?

Answer 4

The Australian Securities and Investment Commission (ASIC)

Question 5

Australian accounting standards are identical to their international equivalents, except for what two exceptions?

Answer 5

AASBs have info on not-for-profit entities

AASBs with not international equivelant may add or reduce requirements

Question 6

The lack of a unified set of accounting standards in all countries can cause firms operating in multiple countries face high what?

Answer 6

Compliance conversion costs

Question 7

The lack of a unified set of accounting standards in all countries can cause firms wishing to raise capital on international financial markets to face what?

Answer 7

Significantly higher costs

Question 8

The lack of a unified set of accounting standards in all countries can cause Stock Markets and regulatory bodies struggle with what?

Answer 8

To compete to be attractive to firms and investors

Question 9

The lack of a unified set of accounting standards in all countries can cause investors to be unable to easily do what?

Answer 9

Access and assess companies listed in different capital markets

Question 10

The lack of a unified set of accounting standards in all countries can cause countries seeking to develop their markets struggle with what?

Answer 10

Choose which standards to adopt.

Question 11

The benefits of standardisation are aimed at solving the problems of no standardisation. How does it respond to the fact that firms operating in multiple countries face high compliance conversion costs?

Answer 11

Lower compliance costs for international firms leads to lower cost of capital.

Question 12

The benefits of standardisation are aimed at solving the problems of no standardisation. How does it respond to the fact that firms wishing to raise capital on international financial markets have significantly higher costs?

Answer 12

Raising capital on international financial markets is helped by international comparability, resulting in lower cost of capital.

Question 13

The benefits of standardisation are aimed at solving the problems of no standardisation. How does it respond to the fact that Stock Markets and regulatory bodies struggle to compete to be attractive to firms and investors?

Answer 13

Raising capital on international financial markets is helped by international comparability, resulting in more efficient competition in global capital markets.

Question 14

The benefits of standardisation are aimed at solving the problems of no standardisation. How does it respond to the fact that investors are not able to easily access and assess companies listed in different capital markets?

Answer 14

International comparability eliminates barriers to cross-border investment which reduces firms cost of capital.

Question 15

The benefits of standardisation are aimed at solving the problems of no standardisation. How does it respond to the fact that countries seeking to develop their markets are unsure what standards to adopt?

Answer 15

Improved quality of reporting and transparency of accounting information due to improved comparability therefore lower cost of capital.

Question 16

What are the obstacles to comparability?

Answer 16

Taxation system
Implementation and enforcement
National Modifications
Political systems
Culture

Question 17

In terms of modification to standards, what is one reason international differences will continue to exist despite the introduction of the IFRS?

Answer 17

The IASB has no ability to enforce the application of its accounting standards in countries that have made the decision to adopt IFRS.

Question 18

Why can accounting not be thought of as independent of culture?

Answer 18

Because as a social institution, accounting has integrated certain cultural customs.

Question 19

What are Hofstede’s Cultural Dimensions?

Answer 19

Individualism
Power Distance
Uncertainty Avoidance
Masculinity

Question 20

In regards to Hofstede’s Cultural Dimensions, what is individualism?

Answer 20

The degree of interdependence a society maintains among individuals.

Question 21

In regards to Hofstede’s Cultural Dimensions, what is power distance?

Answer 21

Power Distance is the extent to which members of a society accept that power in institutions and organisations is distributed unequally.

Question 22

In regards to power distance in Hofstede’s Cultural Dimensions, what is a large power distance society?

Answer 22

A society that accepts a hierarchical order in which everyone has a place.

Question 23

In regards to power distance in Hofstede’s Cultural Dimensions, what is a small power distance society?

Answer 23

A society that strives for power equalisation.

Question 24

In regards to Hofstede’s Cultural Dimensions, what is uncertainty avoidance?

Answer 24

The degree to which the members of a society feel uncomfortable with uncertainty and ambiguity.

Question 25

In regards to uncertainty avoidance in Hofstede’s Cultural Dimensions, what is a strong uncertainty avoidance society?

Answer 25

A society that maintains rigid codes of belief and behaviour.

Question 26

In regards to uncertainty avoidance in Hofstede’s Cultural Dimensions, what is a weak uncertainty avoidance society?

Answer 26

A society that maintains a more relaxed atmosphere where practice counts more than principles.

Question 27

In regards to Hofstede’s Cultural Dimensions, what is masculinity?

Answer 27

Addresses the way in which a society allocates social roles.

Question 28

Gray (1988) applied Hofstede’s cultural values in an accounting context and identified what four accounting values and four hypotheses?

Answer 28

Professionalism versus statutory control
Uniformity versus flexibility
Conservatism versus optimism
Secrecy versus transparency

Question 29

It seems likely that although important economic benefits can be gained by adopting IFRS, the extent of the benefits actually achieved in any one country depends upon many things. They include:

Answer 29

the nature of the standards used before the change to IFRS;

Question 30

What are the two main models of financial accounting adopted internationally?

Answer 30

Anglo-American model

Continental European Model

Question 31

What are the features of the Anglo-American model?

Answer 31

Strongly influenced by professional accounting bodies rather than government
Emphasises importance of capital markets
Emphasises true and fair
Considerations of economic substance over legal form

Question 32

What are the features of the Continental European Model?

Answer 32

Relatively small input from accounting profession
Little reliance on qualitative true and fair
Strong reliance on government

Question 33

How is the business and finance culture an obstacle to standardisation?

Answer 33

Transactions such as leasing, executive pay and pensions may be structured differently to other countries in order to gain tax benefits.

Question 34

How is the accounting and auditing culture an obstacle to standardisation?

Answer 34

Must convince to move from rules to principles

Costly transition

Question 35

How is the regulatory culture an obstacle of standardisation?

Answer 35

Must train regulators to deal with ambiguity better.

Question 36

Who issues standards consistent with International Financial Reporting Standards (IFRS)?

Answer 36

The Australian Accounting Standards Board (AASB).

Question 37

Who enforces the standards issued in Australia?

Answer 37

The Australia Securities and Investment Commission (ASIC).