International differences in accounting
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As a manager, you feel it is important for the new hires to understand the reasons for the development of IFRS. Your new hires have been discussing the legal systems contribution to the accounting rules of different countries.
Explain at least 2 causes or reasons for international differences in accounting.
Compare the accounting systems in 2 countries with differing legal systems. Explain why each country's system is the way it is. Highlight the similarities and differences between the 2 countries' sets of accounting systems.
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This solution discusses some international differences in accounting
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Two Causes or Reasons for International Differences in Accounting:
Countries all over the world have clustering national accounting systems that differ across countries. Though the international Accounting Standards Board (IASB) is driving towards achievement of comparable world wide standards through its International Financial Reporting Standards (IFRS), there still exist major differences among the countries that have even adopted this. Two of the causes or reasons for the differences in accounting are the existing legal system and sources of finance.
The existing legal system: there are two types of legal systems that have developed over the past years. These are the common law system and the code law system. Common law system mainly developed from case law and in this kind of legal system, general rules are not prescribed and instead it is case by case analysis that is applied. Accounting regulations in countries applying common law is often controlled by professional organizations in the private sector. In these countries company laws are often minimized while detailed regulation is provided by the private standard regulator and setter. Code law system on the ...
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