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Financial reporting can be viewed as a part of communication process ,it can also be seen as a medium through which information is transferred by a sender to a receiver. Accounting principles has differed among countries this is because every country has different characteristics ,standard setters and different accounting bodies choose different alternatives for recognition and presentation of assets and liabilities etc
CONSOLIDATION OF ACCOUNTS
Consolidation is the process that transforms individual financial statements for a group of entities into a single financial statement. In the United States, this process creates a consolidated financial statement based on US Generally Accepted Accounting Principles (GAAP), the standard that applies to external, or statutory, financial reporting. To create a consolidated financial report, companies that own all or part of other companies must create financial reports to meet both internal and external reporting requirements.
A Consolidation rule performs the account transformations that are required to consolidate data in a multi-company scenario. The types of consolidation that are performed depend on the ownership relationship between the companies that are involved.
Rule
ICE for Investment
Description
Eliminates investments that a holding company has in subsidiaries.
Eliminates equity that a holding company has in subsidiaries, and creates a minority interest equity amount.
Eliminates intercompany transactions, and creates minority interest in net profit and loss.
Financial consolidation and reporting applications allow users to analyze information about the business and help to plan for change, a process collectively known as management reporting. Financial consolidation and reporting applications perform functions that are ad hoc, involve creativity, and address what if scenarios. They allow companies to: Analyze unique events such as modeling a new corporate structure, revising the existing corporate structure, starting a new division, and planning tax and treasu ry strategies for acquisitions and divestitures
Evaluate profitability by produ ct, brand, and customer segment Determine compensation for a sales or management team based on any factor of performance; for example, financial consolidation and reporting appl ications can support reporting for companies that compensate salespeople based on the sales they booked during a period, rather than the revenue they generated for that period Collect and consolidate the environmental and social metrics often included in sustainability reporting, as well as other nonfinancial information that is required for internal and external reporting. This is an increasing trend according to the recent Accenture and Oracle Study
LO 5 Identify the major policy-setting bodies and their role in the standard-setting process.
Encouraged private standard-setting body. SEC requires public companies to adhere to GAAP. SEC Oversight. Enforcement Authority.
LO 5 Identify the major policy-setting bodies and their role in the standard-setting process.
1939 to 1959 Issued 51 Accounting Research Bulletins (ARBs) Problem-by-problem approach failed
1959 to 1973 Issued 31 Accounting Principle Board Opinions (APBOs) Wheat Committee recommendations adopted in 1973
LO 5
Selects members of the FASB. Funds their activities. Exercises general oversight. Mission to establish and improve standards of financial accounting and reporting.
Smaller Membership. Full-time, Remunerated Membership. Greater Autonomy. Increased Independence. Broader Representation.
http://www.fasb.org/
LO 5 Identify the major policy-setting bodies and their role in the standard-setting process.
b. c.
d.
AICPA and AcSEC no longer issues authoritative accounting guidance for public companies. PCAOB oversees the development of auditing standards.
LO 5 Identify the major policy-setting bodies and their role in the standard-setting process.
When the business relationship between the companies involves ownership shares, consolidation is performed in a way that eliminates transactions such as intercompany investments and equity. In this situation, consolidation includes tasks such as calculation of minority interest. When the parent company fully owns all the subsidiary companies, no share calculations are necessary.
Legal System
1. 2. 3. 4. 5. 6. Rules are more flexible. They(outsiders) dont ask for extra information and theyve to rely on public information. Funds are provided by shareholders. Companies rely more on equity for financing their activities. Financial statement have an investor/shareholder orientation. Accounting shows a market function, so rules need to be seperated from taxation. Therere 2 accounting rules: one for financial reporting and one for the calculation of taxable income. They(outsiders) dont have access to internal information, they are interested in comparing one company with another, so, because of these reasons, theres more need to auditors.
7.
What is IFRS?
IFRS is a set of accounting principles that is rapidly gaining acceptance on a worldwide basis. These standards are: published by the London-based International Accounting Standards Board (IASB) more focused on objectives and principles and less reliant on detailed rules than U.S. GAAP Since 2002, efforts have been under way to converge IFRS and U.S. GAAP