EBK FINANCIAL ACCOUNTING THEORY AND ANA
12th Edition
ISBN: 9781119299646
Author: CATHEY
Publisher: JOHN WILEY+SONS,INC.-CONSIGNMENT
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Chapter 3, Problem 3.1C
To determine
Introduction:Harmonization in accounting standard refers to the practice of setting accounting standards which will be followed by different companies in different countries. It increases comparison between the companies by limiting the variation in the standards followed.
To explain: The advantages and disadvantages of harmonizing accounting standards.
Expert Solution & Answer
Explanation of Solution
The advantages of harmonization in accounting standard is as follows:
Comparability: With the harmonization, all the companies will follow the same standards. It will help in easy comparison between the financial statements of different companies.
Reduce reporting costs: With harmonization in accounting, the parent company can prepare a combined financial statement of all its subsidiary companies. The parent company need not prepare different books of according for different country’s laws. It will reduce the reporting costs of the parent company.
International credibility: With the harmonization in accounting standards, the investors of one country can easily interpret the financial performance of other country’s companies. They can invest in different countries. It will lead to international credibility.
The disadvantages of harmonization in accounting standard is as follows:
Integration problem: Many countries have different laws for
Negative effect on small business: The small business will have to apply new standards. It will increase the cost of training of accountants and preparation of financial statements according to set standards which will increase their cost of reporting.
International sovereignty issue: The different countries have different authorities for setting accounting standards, banking laws and taxation laws. It will create a problem in harmonization of accounting standards.
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Assume that the FASB is considering revising an important accounting standard.Required:1. What constraint applies to the FASB’s consideration of whether to require companies to provide new information?2. In what Concepts Statement is that constraint discussed?3. What are some of the possible costs that could result from a revision of an accounting standard?4. What does the FASB do in order to assess possible benefits and costs of a proposed revision of an accounting standard?
Case Study: Navigating the FASB Accounting Standards Codification (ASC)**
*Introduction:*
The FASB Accounting Standards Codification (ASC) serves as the authoritative source for U.S. generally accepted accounting principles (GAAP). It is a comprehensive system designed to organize and present accounting standards in a logical and accessible manner. In this case study, we explore the components included and excluded from the FASB ASC.
*Components of FASB ASC:*
1. **AICPA Statements of Position (SOP):**
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3. **Accounting Research Bulletins (ARB):**
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Which of the following is not about harmonization?
Select one:
a. Harmonization is a process of increasing the compatibility of accounting practices.
b. Harmonization simply implies uniformity. A
c. Harmonization is tailored towards breaking the barriers of national differences.
d. Harmonization is a process of preparing financial statements.
Chapter 3 Solutions
EBK FINANCIAL ACCOUNTING THEORY AND ANA
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