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Accounting Systems of Different Countries

1. Why do the accounting systems of different countries differ? Why do these differences matter?

2. Why are transactions among members of a corporate family not included in consolidated financial statements?

3. How can the finance function of an international business improve the competitive position of the firm in the global market place?

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1. Why do the accounting systems of different countries differ? Why do these differences matter?

Accounting systems of different countries differ due to differences in accounting practices, principles and reports. As per goliath "Accounting diversity across national borders probably is the result of numerous factors including differences in accounting measurement and disclosure rules (GAAP differences), differences in management behavior, and the degree of alignment between financial and tax accounting."

For example there are differences in the principles of inventory valuation, depreciation, taxation, and disclosures etc which lead to differences in accounting systems.

Another reason of difference can be difference in management attitude in different countries. As per goliath, "For example, prior studies show that the information asymmetry problem is more severe in the U.S. than in Japan due to the close ties between Japanese market participants and the companies in which they invest. As a result, Japanese market ...

Solution Summary

Response explains the reasons of difference in accounting systems of different countries

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