ACCOUNTING DIFFERENCES WITH OTHER INTERNATIONAL ACCOUNTING
International Accounting Differences and Financial Statement Analysis
Along with business and financial markets that have a lot towards internationalization, assessment of income and cash flow for the future of the risks and uncertainties and important ally to portfolio investors. It is important uga to the attention of enterprises with foreign direct investment (FDI) / Foreign direct investment, which involves an assessment of potential acquisition and joint venture participation or increase of capital of companies listed on foreign stock markets.
International accounting differences bring a number of problems from the standpoint of financial analysis. First, in an effort to assess foreign companies, there is a tendency to look at revenues and other financial data from the standpoint of their home country, and because of the danger of ignoring the effects of accounting differences. Unless significant difference was taken into account, possibly with some involvement of a restatement, it may have very serious consequences. Secondly, awareness of international differences suggest the need to become familiar with generally accepted accounting principles as a destination for foreign countries to know better income data in the context of measurement. Third, the issue of properties that can be compared and harmonized akuntasni is reviewed in the context of alternative investment opportunities.
Key differences in Accounting Principles Around the World
The existence of accounting differences across the world are no doubt significant enough to make the work of financial analysts is very difficult in a period of making international comparisons. If we now focus on some key measures in the selection of a few large countries like the U.S., the EU (including British, Dutch, French and German), Brazil, Switzerland, China and Japan, we can see the variation of the principles used can affect akuntansu different to the income and assets.
With respect to the basis of measurement used, the application of historical cost are generally conservative in the requirements made in the European Union, there is a tendency for a more flexible approach, particularly in the UK and the Netherlands. In two countries, the cost histors periodically revalued at market value with the modification or replacement cost and especially in the case of land and buildings and equipment.
Accounting depreciation in the U.S. and the EU, particularly in the UK is based on the concept of value to the economic life, which in other countries such as France, Germany, Switzerland and Japan, tax laws generally encourage a faster method.
Measurement of inventories is generally based on the principle of “lower of cost and market” but with some variations in the assessment of the significance of the market, it is, “net realizable value” or replacement cost. LIFO is also sometimes time is allowed for tax purposes (for example Japan and the U.S.), but more often not (eg European Union). Diakuntansikan general construction contract using the “percentage-of-completion”. But the complete contract method is used the more conservative in Switzerland, China and Germany. The cost of the research and development / Research and Development (R & D) is usually removed more quickly in the Anglo-American countries and Germany. Although I Brazil a more flexible approach has been adopted in general. Permissive approach is also adopted in general to the capitalization of borrowing costs of the asset.
The treatment of pension benefits also are generally diakuntasikan the basis of increased / or proyeks benefits to be paid to employees, in contrast to Brazil and China are using the opposite method.
The treatment of taxation is a major area of difference in measurement of accounting income to be strongly influenced by tax rules in France, Germany, Switzerland, and Brazil. The treatment of business combinations throughout the world varies depending on less or more shall the method of “pooling-of-interest” or collection of interest, this method is used as a requirement or allowed depending on certain circumstances. But it also required the purchase method in general. In Brazil, China and Japan amortization methods required and the contrast with the United States and Britain, where mertode amortization is not required but do feasibility tests.
Relating to goodwill, other things such as brands, publicity rights, and patents, which generally dikapitaslisasi, except in Switzerland, but the subject is usually amortized, if not then held the test of eligibility. Finally, matters relating to foreign currency translation is important in its aim to get the measurements to choose between the average or closing rates. Here, there is some flexibility in spertinya umu, the actual rate or average rate.
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