Matakuliah
Tahun
: F0142/Akuntansi Internasional
: September 2006
Session 04
Comparative Accounting II
1
Introduction
• The four countries examined are Czech Republic, People’s
Republic of China, Republic of China (Taiwan), and Mexico.
• The reasons for choosing these four countries are :
– People’s Republic of China is the most populous country in
the world.
– Accounting development in Czech Republic are
representative of the former member of the Soviet block.
– Taiwan is also called “Asian Tiger” one of several Asian
countries experiencing rapid growth in Gross Domestic
Product in recent years.
– Free market reforms accelerated in the 1990s throughout
most of Latin America. The 1994 NAFTA created much new
interest in Mexican Accounting in Canada and the United
States.
2
Four National Financial Accounting
Systems
Czech Republic
• The Accountancy Act that sets out the
requirements for accounting was passed in 1991
and became effective on January 1, 1993, based
on the EU Fourth and Seventh Directives.
• Financial statements must be comparative,
consisting of :
• Balance sheet
• Profit and loss account (income statement)
• Notes
3
Four National Financial Accounting
Systems
Czech Republic
• Consolidated financial statements are required
for group meeting at least two of the following
criteria :
• Asset of CzK 350 million
• Revenues of CzK 700 million or
• 500 employees
• Czech companies have the option of using
IAS/FRS or Czech accounting standards in
preparing their consolidated financial
statements.
4
Four National Financial Accounting
Systems
People’s Republic of China
• The principal characteristics of accounting in China today date
from the founding of the People’s Republic of China in 1949.
• China installed a highly centralized planned economy,
reflecting Marxist principles and patterned after that of the
Soviet Union.
• China’s economy today is best described as a hybrid economy
in which state controls strategic commodities and industries,
while other industries as well as the commercial and private
sectors, are governed by a market oriented system.
• The Accounting Law, last amended in 2000, covers all
enterprises and organizations including those not owned or
controlled by the state.
• In the 1992 the Ministry of Finance issued Accounting
Standards for Business Enterprise (ASBE), a conceptual
framework designed to guide the development of new
accounting standards
5
Four National Financial Accounting
Systems
People’s Republic of China
• Until 1995, China had two professional accounting
organizations
• The China Institute of Certified Public Accountants (CICPA)
• The Chinese Association of Certified Public Auditors (CACPA)
• The accounting period is required to be calendar year.
Financial statements consist of :
•
•
•
•
•
Balance sheet
Income statement
Cash flow statement
Notes
Explanation of financial condition
6
Four National Financial Accounting
Systems
Republic of China (Taiwan)
• Taiwan have a credit based financial system along
the lines of Germany and Japan rather than a capital
market based system.
• The commercial accounting law, as amended in
1987, regulates accounting records and financial
statements in Taiwan.
• Accounting standards are set by the Financial
Accounting Standards Committee (FASC) of the
Accounting Research and Development Foundation
(ARDF).
• Accounting and auditing standards are based on
national requirements, with reference to both USA
GAAP and IAS/IFRS.
• The ARDF has now committed Taiwan to
convergence with IAS/IFRS
7
Four National Financial Accounting
Systems
Republic of China (Taiwan)
• The commercial accounting law requires the following financial
statements :
•
•
•
•
•
Balance sheet
Income statement
Statement of changes in owners’ equity
Statement of cash flows
Notes
• The Notes must disclose the following information :
•
•
•
•
•
•
•
•
Summary of significant accounting policies
Reasons for changes in accounting policies
Creditors’ rights to specific assets
Material commitments and contingent liabilities
Limitations on the distribution of profits
Significant events relating to owners’ equity
Significant subsequent events
Other items that require explanation to avoid misleading impressions
8
Four National Financial Accounting
Systems
Mexico
• The most important agreement for Mexico is the North
American Free Trade Agreement (NAFTA) signed with Canada
and the United States.
• Disclosure practices of Mexican companies are increasingly
influenced by the expectations of the US market.
• Another significant feature of Mexican accounting is the use of
comprehensive general price level accounting as a
measurement basis.
• The Mexican Institute of Public Accountants (Instituto
Mexicano de Contadores Publicos) issues accounting and
auditing standards in Mexico.
• Accounting standards are developed by the Institute’s
Accounting Principles Commision.
• Auditing standards are the responsibility of its Accounting
Standards and Procedures Commission.
9
Four National Financial Accounting
Systems
Mexico
• The fiscal year of Mexican companies must coincide with the calendar
year. Comparative consolidated financial statements must be
prepared, consisting of :
• Balance sheet
• Income statement
• Statement of changes in stockholders’ equity
• Statement of changes in financial position
• Notes
• Financial statement must be adjusted for inflation.
• Notes are an integral part of the financial statements and include :
• Accounting policies of the company
• Material contingencies
• Commitments for substantial purchases of assets
• Details of long term debt and foreign currency exposure
• Limitations on dividends
• Guarantees
• Employees’ pension plans
• Transaction with related parties
10
• Income taxes
Summary of Significant Accounting
Practices
Items
Consolidated Financial
Statements
Required
People's Republic
of China
Required
Statement of Cash Flows
In Notes
Required
Required
Required
Purchase
Purchase
Purchase
Both
Business Combination,
Purchase or Pooling
Goodwill
Czech Republic
Immediate Write Off
Capitalize &
or Capitalize &
Amortize 10 year
Amortize 15 year
Maximum
Maximum
Republic of China
(Taiwan)
Required
Mexico
Required
Capitalize &
Capitalize &
Amortize 20 year Amortize 20 year
Maximum
Maximum
20% to 50% Owned Affiliates
Equity Method
Equity Method
Equity Method
Equity Method
Asset Valuation
Historical Cost
Historical Cost
Revaluation
Allowed
Constant
Purchasing
Power
Economic Based
Economic Based
Economic Based
Economic
Based
Not Used
Acceptable
Acceptable
Acceptable
Finance Leases
Not Capitalized
Capitalized
Capitalized
Capitalized
Deferred Taxes
Accrued
Optional Accrual
Accrued
Accrued
Depreciation
LIFO Inventory Valuation
11