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Have a basic working knowledge of accounting classifications and how they compare with one another.
Explain the difference between the “fair presentation” and “legal compliance” orientations of accounting and identify nations in which each is prevalent.
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Development
Sources of finance – who, how many, how close? Equity markets
Profits measure how well managers have run the company.
Accounting is used to assess cash flows, risks, and to value the firm.
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Political and economic ties
Accounting ideas and technologies are transferred through conquest, commerce, and other forces.
Inflation
Extensive disclosures.
Banks
Conservative earnings for creditor protection. Less extensive disclosures.
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Development (contin)
Legal system
Accounting focuses on economic substance.
Accounting rules are established by private sector professional organizations.
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Development (contin)
Explain why distinctions of accounting at the national level are becoming blurred.
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Why Study Development and Classification?
Development
Taxation
Must companies record revenues and expenses in their accounts to claim them for tax purposes?
Are financial accounting and taxation the same? Or are they different?
Helps understand a nation’s accounting. Explains the differences and similarities
in accounting around the world.
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Classification
Helps understand why and how national accounting systems differ.
International Accounting, 6/e Frederick D.S. Choi Gary K. Meek
Chapter 2: Development and Classification
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Learning Objectives
Identify and understand the importance of the eight factors that have a significant influence on accounting development.
Helps analyze whether these systems are converging or diverging.
Are a way of viewing the world.
Reveals what group members have in common, and
What distinguishes groups from each other
incorporated into national laws.
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Common law
Laws develop on a case-by-case basis.
Accounting develops from experience and judgment.
Accounting tends to be flexible, adaptive, and innovative.
Understand the four approaches to accounting development found in marketoriented Western economies and identify countries in which each approach is prevalent.
Conting tends to be prescriptive and
procedural. Accounting focuses on legal form. Accounting standards and procedures are
Inflation distorts historical cost measurements.