INTERNATIONAL ACCOUNTING STANDARDS AND QUACCESS   Term Paper ID:34092 Click to get this paper

Essay Subject: Should Quaccess move to adopt international accounting standards Considers the role of financial statements ...... More...

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Paper Abstract: Discusses wheterh or not Quaccess should move to adopt international accounting standards. Considers the role of financial statements, international implications, and concludes that American firms should wait and see before moving toward adopting international standards. Paper Introduction: International Accounting Standards and QUACCESS Introduction Accounting is sometimes referred to as the language of business Financial statements and accounting pronouncements are used by stakeholdersin organizations-shareholders employees creditors investors suppliers customers-to evaluate a company\'s performance and potential Whencompanies were based in the same country as their stakeholders followingthe accounting regulations of that country provided few problems Standards were necessary-particularly for publicly traded companies-toensure that comparisons could be made among different companies while thesame definitions were in place for the language of business Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. "Financial Management." Professional Builder 7 (Jan 2 5): 131-136.Buffini, Fiona. Given that the EU is a larger economic market than the UnitedStates, when taken as a whole, and that capital flows freely throughout theEU, being able to conduct such comparisons provides significant advantageto stakeholders. InEurope, however, different national standards have remained in place until2 5, when a single standard was imposed on European companies. "Challenges Under IFRS." Financial Executive 2 (May 2 4): 17-18.McDonnell, John. "International Financial Reporting Standards." Accountancy Ireland 35(Aug 2 3): 12-13.Netram, Christopher M. With strong confidence in thefinancial statements, companies are able to bring additional capital intothe country through investment, and are able to expand their overseasmarkets through sales. Should Governments Require International Standards? Because of American accounting standards,companies must remain consistent to the rules that they themselves chooseto set up. At this point, thecompany follows SEC and FASB regulations in the United States, but it ismonitoring the implementation of international standards. Whether governments should require a single international standard ismore problematic, however. International Accounting Standards and QUACCESS Introduction Accounting is sometimes referred to as the "language of business."Financial statements and accounting pronouncements are used by stakeholdersin organizations-shareholders, employees, creditors, investors, suppliers,customers-to evaluate a company's performance and potential. The statement of cash flow helps a company and its creditors determinewhether the company is well-positioned to meet its cash needs. The issue is likely to be greater for small and mediumcompanies rather than for large companies as it is these smallerorganizations that will have difficult adjusting due to smaller staffs andperhaps less access to the resources necessary to implement the standardssmoothly and with as little disruption as possible (McDonnell 12). If Quaccess were a large American company such as General Electric, itmight benefit more from incorporating international standards, but giventhat General Electric has opted to not move to the international standardsat this time ("2 4 1 -K Filing"), it would seem prudent for the much-smaller Quaccess to refrain from doing so, as well. As already noted, theEuropean standards are not the same as the American standards, and Quaccessis required by American law to issue American-standard financialstatements. Should Quaccess Move Toward International Standards? Others argueagainst the adoption believing that if the company must deviate frominternational standards, it would be problematic. Japan has its own set of standards. There is little doubt that there would be differences in the two setsof financial records, as well, particularly with regard to pensions andother long-term liabilities. Individual governments have imposed regulationsbased in part on their overall political agenda as well as economicconsiderations. However, there has been no single standard across thevarious nations. Similar confusion may result when numbers are adjustedfavorably, as well. The International Financial Reporting Standards (IFRS) went intoeffect in the EU on 1 January 2 5. The balance sheet is called that because the assets of a companymust equal its liabilities and equity added together ("Applying" 25). Rather thangiving the company an advantage in the investment community, this couldresult in a loss of investor confidence. Without confidence in financial statements,companies will pay more for additional capital, and this could impair theirability to expand their operations domestically. One of the key areas that will not be addressed quickly is that ofauditing financial statements under the new international regulations.Although auditors are being trained in the new standards, the differencesbetween national standards and the new international standards aresignificant enough to require considerable retraining in this area.Auditors will be trained in the new regulations, but there is some doubt asto how effective audits will be during the first months of theimplementation. "Managing International Financial Reporting Standards." CMA Management 78(Nov 2 4): 9."EU Regulations: Accounting Standards." The Economist Country ViewsWire (Dec 1, 2 4): n.p."FASB, IASB Form Performance Reporting Working Group." California CPA 73(Jan-Feb 2 5): 8.Heffes, Ellen M. While differences tended to be subtle, they couldnonetheless result in material differences in reporting depending on whichstandard was used. However, the transition to international accounting standards will notbe easy, and American companies in particular should refrain from eagerlyembracing the new standards. To move away from this to an international standard mightcause some governments hesitation; certainly there are those who chargethat the international standards developed for the European Union have beenunfairly influenced by political goals, not just economic and financialconcerns (Buffini n.p.). For some companies,this could result in an initial shock as they seek to realign theirfinancial statements with the new regulations ("EU Regulations" n.p.). Quaccess might also gain favorable publicity in theinternational media by being an American company eager to embrace theEuropean standards; this might help it obtain financing in the future, aswell. Like companies based in the United States,companies with headquarters in EU nations have long prepared financialstatements-including balance sheets and profit/loss statements-for theirshareholders. This concern has been most acute amonglarge companies with operations in different countries whose subsidiarieshad to follow multiple standards, but the concern was also felt by smallercompanies seeking information about competitors and customers in variousEuropean markets. If the company moves to adopt international standards, it willneed to prepare two sets of financial statements, and this will lead toadditional cost. Various stakeholders are eager to see a unified set of standards inplace. International Standards For many years, companies within the European Union have sought asingle set of accounting standards rather than the multiple standardsrequired by different nations. Previously, thegoal of some European companies was to provide smooth earnings over a longperiod of time. There are, however, significant drawbacks to the implementation of theEuropean standards in an American company, however. In addition,investors and other stakeholders will need to determine if a company'srestated financial statements make the company more or less attractive evenif the numbers are adjusted downward, or whether the adjustment isimmaterial. This could result in a loss-not a gain-in investorconfidence. In addition, companies with operations in more than oneEU nation will only need to prepare one set of financial statements, whichwill mean significant savings (). This has been achieved by changing the waythat property, pensions and acquisitions are reported. As an American company, Quaccess is under no obligation to adopt theinternational standards. Governments have an interest in their companies issuing financialstatements that are trusted by stakeholders. Possible reasons for doing so include putting thecompany in the same category as its international competitors, and raisingthe profile of Quaccess as it adopts standards used by much largerorganizations. The key difference between the new IFRS and previous standards is inthe overall goal that the various methods seek to achieve. Implementinginternational standards increases the complexity that Quaccess faces inpreparing its financial statements, and poses the very real risk thatinvestors will be confused as they attempt to reconcile the two sets ofinformation. Fundamentally,the income statement shows the amount of revenue received, the cost ofgenerating that revenue, operating expenses, and the resulting profit.Revenues from non-operational functions (such as investments) are notincluded on the income statement (Benshoof 132). Such expansion mayencourage job growth and economic growth, and so governments are inclinedto want the international community to have confidence in the financialstatements issued by companies. However, it wouldappear that companies are already moving toward meeting one of thestandards already in place without coercion from government. These standards were brought about asthe European Union sought to standardize different national approaches tokey financial statements. "European Organization Release Guidance on Int'l Accounting Rules." Australasian Business Intelligence (May 2 , 2 5): n.p. "Companies Warn MPs on Global Accounting Rules." Australasian Business Intelligence (Jan 3 , 2 5): n.p.Colman, Robert. Thus a company which decides to use an accrual method ofaccounting (recognizing revenue and liability at the time of transactionrather than at the time of payment) must do so for all of its transactions;it cannot use the cash basis for some items and accrual for others.Similarly, once a company chooses a method of inventory valuation (such asfirst-in-first-out), it must have good reason for changing to a differentsystem. The introduction of a single currency-the euro-made iteasier for capital to flow across international boundaries in Europe, andthe need for financial statements that would also be standardized increased("EU Regulations" n.p.). A recent survey showed that a majority of Europeancompanies believed that international standards would result in greatertransparency, and that international standards would help make financialstatements more reliable (Heffes 17). As a result, some analysts expect that financialstatements-even audited financial statements-may be viewed with suspicionuntil greater confidence develops in the audit process under the newstandards (Colman 9). As theglobal economy continues to become more and more intertwined among nations,a single set of accounting standards may well emerge. The balance sheet is a "snapshot" of a company at a particular pointin time. Balance sheets identify what the company is worth (the company'sassets minus its liabilities), where those assets are located (in capitalgoods or in short-term assets), how the company finances its operations(through short-term or long-term debt), and who has claims against theassets. Whencompanies were based in the same country as their stakeholders, followingthe accounting regulations of that country provided few problems.Standards were necessary-particularly for publicly traded companies-toensure that comparisons could be made among different companies while thesame "definitions" were in place for the "language" of business regardlessof who prepared financial statements. These statements are used both by internal andexternal audiences in order to evaluate the company's current position anddetermine its potential for future success. This could cause confusion rather thanconfidence among investors as they seek to determine which set of financialstatements yields a more "accurate" portrayal of the company. Conclusion International accounting standards have arisen from the increasedglobalization of the world's economies. A companymay have soaring revenue and be highly profitable, but if it does not havea strong cash flow, it could find itself in trouble (and may need toimprove its collection procedures, or extend less trade credit as aresult). Whilegovernments in developing nations may want to impose requirements thateither the European or American standard be used in order to give theircompanies greater credibility and easier access to capital, governments indeveloped countries may want to refrain from such mandates. Thisresearch considers the importance of financial statements in general, theinternational standards imposed by the European Union, whether Quaccessshould adopt these international standards, and whether governments shouldbe involved in the imposition of accounting standards. In thisway, a German company can be compared to a French company or a Dutchcompany without concern that there might be significant differences intheir financial information based on different national accountingstandards. Inexperienced managers may also assume that some items on thebalance sheet (such as depreciation) represent a source of cash when,however, they do not. Inaddition, when there is conflict between the two standards, Americancompanies will be forced to use the American standard because of theirlegal requirements. Indeed, public companies regularlyhave their financial records audited by independent auditors; the goal ofthese auditors is not to verify whether the information presented on thestatements is true or false, but rather than generally accepted accountingprinciples (GAAP) and accounting regulations (FARs) have been followed inthe preparation of the statements (Benshoof 132). At this point, there are two significant markets in the world thathave established two different accounting standards-the American standardand the European standard. Works Cited2 4 1 -K Filing, General Electric Company. Fairfield, CT: General Electric, Co., 2 5. The United States hasgeneral accepted accounting principles that apply to its publicly-tradedcompanies; because of the size and complexity of the American market, thesestandards have also been implemented in other countries, as well. This will enable stakeholders-creditors, investors, suppliers,employees-to compare companies across Europe without regard to the nationalstandards to which these companies might have otherwise reported. Because American accountingprinciples demand that similar assumptions are made regardless of thecompany preparing the statements, individuals who analyze these statementscan be confident that cross-company or cross-industry comparisons will bebased on similar types of information. This risk potential coupled with the resources required tomake the transition to the international standards and the very realpossibility that there would be conflicts with the American standardssuggest that the company should refrain from international standardsimplementation at this time. International investors who are considering Quaccess forinvestment would be able to compare the company more easily to otherEuropean companies on an equivalent basis and without consideration as towhether the company's financial statements were materially misstated underFASB regulations. The company uses international sources offinancing, and has operations in six different markets. Retrieved 29 May 2 5 from: <>."Applying IFRS." Finance Week (Apr 2 , 2 5): 25.Benshoof, Mike. The income statement indicates whether a company has been profitable,and the degree to which the company has enjoyed a profit. Under the new standards, the goal is to report the fairmarket value of the company. Internationalaccounting standards bring transparency and clarity to the variousstakeholders associated with these companies. Quaccess is an American company that has a large-6 percent-international client base. Investors are likely to see more volatility during the first yearsthat the IFRS are implemented, and may be more confused rather than lessconfused as they seek to compare one company with another. Thus the statement of cash flow can help identifyproblems before they become unmanageable (Netram n.p.). Some within theorganization are eager to adopt these standards believing that it will givethe company more credibility in the international market. Financial Statements American companies regularly produce two financial statements whichare of particular interest, the balance sheet and income statement. Inaddition, ancillary financial statements, such as the statement of cashflow, may be prepared. However, American accounting principles do not require that allcompanies use the same methods, or even that all companies in the sameindustry use the same method (although companies will often follow thisexample), only that companies remain true to the standards they choose, andthat recognized principles are invoked ("FASB, IASB" 8). Instead, the American companies should seekto remain in compliance with the FASB standards that govern theirreporting, and wait to see how international standards evolve. Companies-even small companies-mayhave operations in several countries, and sell to many more. Each of these financial statements is prepared using informationprovided by the company. As business has become increasinglyglobal, however, the differences in standards among various countries hasbecome more obvious and, in some cases, troublesome. If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.

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