A survey of the relevant literature has identified the following five items as being commonly accepted as factors influencing a country’s financial reporting practices: legal system, taxation, providers of financing, inflation, and political and economic ties.
What are the main causes for global accounting diversity?
Reasons for Accounting Diversity- Other Issues Taxation Financial statements are the basis for taxation in some countries. Others adjust financial statements for tax purposes, and submit separate reports to stockholders’. Inflation High inflation tends to render historical cost useless.
What differences exist in international financial reporting?
Key Differences. The primary difference between the two systems is that GAAP is rules-based and IFRS is principles-based. Consequently, the theoretical framework and principles of the IFRS leave more room for interpretation and may often require lengthy disclosures on financial statements.
How many international financial reporting standards are there?
The following is the list of IFRS and IAS issued by the International Accounting Standard Board (IASB) in 2019. In 2019, there are 16 IFRS and 29 IAS.
Why are international differences in financial reporting a problem?
These two issues are closely linked because of the underlying forces that have caused the long-running accounting differences between countries. International differences in financial reporting create problems because many users (eg investment analysts acting for investors in equity or debt) assess companies on a comparative basis internationally.
What causes different accounting practices in different countries?
Therefore, while there are a number of studies that assess international differences in financial reporting, these studies are limited in scope. There is lack of both theoretical and empirical research that collectively provides a more complete framework of factors that cause country-level differences in accounting practices.
How does the legal system affect financial reporting?
Legal system as a reason for international differences in Financial Reporting. Probably there are no any other factor that causes more diversity in accounting than the legal system a country has, as it does not only shape the behaviour of its citizens, but it also prescribes accounting rules and regulates accounting and financial reporting.
What makes a country different from other countries in IFRS?
The differences between countries can be divided into two main types: (i) the degree to which IFRS has been mandated or allowed for particular companies or types of reporting, and (ii) the degree to which the practice of IFRS differs along national lines.
