Annotated Bibliography: The Future of International Accounting Standards

The Future of International Accounting Standards

In the fragile state of the current U.S. economy, there may be no more important matter than investor confidence. People will invest in the stock market because they are confident in making a return on investment, something that cannot be done unless there is quality assurance in the world of accounting. Bankers, lenders, and stock brokers all rely on the information that is produced by corporations in the form of financial statements is reliable and accurate. This is not possible, without sound accounting and enforcement from agencies such as the Securities and Exchange Commission and the Financial Accounting Standards Board. But a more recent development in the world of accounting pertains to the convergence and gaining popularity of international accounting standards.

International accounting standards are proposed by the International Accounting Standards Board, which sets regulations for all non-U.S. corporations. Since more and more investors are putting money into China, India, and other foreign nations, a need has been created for the study of international accounting. The standards abroad are far less strict than U.S. accounting standards, which has led to a vast increase in investment in non-U.S. companies in the past few years. As the world becomes more globalized, there will be a need for a convergence of accounting methods. One day, there will be just accounting standards, not international or U.S., but accounting standards that govern the whole world and allow investors to invest with confidence in any market across the globe.

As is witnessed by the articles in the research databases, there is arguably no hotter topic or more current pressing issue. Major players such as the Wall Street Journal, the New York Times, and major international newspapers have been dedicating articles to the issue of international accounting. The SEC Chief Accountant, Conrad Hewitt, is taking measures to change the way U.S. companies report their financial statements, because companies based in America are not attractive to investors in the current marketplace. Since it is still in its infancy, there is a lot of money to be made in internationally-based companies. In the near future, mastery of the international accounting standards will probably be the way to riches for many savvy investors, who will be able to compare a company based in Singapore to a company based in San Diego without a problem. Currently, even the bankers and stock brokers are not able to do this. But as international accounting standards become more prevalent and are seen as a possible gold mine, there will assuredly be more investors flocking to truly study and understand the nature of international accounting. Understanding the accounting standards is the first step to investing confidently in foreign markets, which will continue to increase in the years to come. It is a brave new world out there, and plenty of money can be made from investing in the correct companies abroad, by gaining expertise in the standards of international accounting.

The purpose of the annotated bibliography is to provide a concise summary of each source and an assessment of its relevance. The resources included in this annotated bibliography extend information about international accounting standards and their importance in the increasingly global economy. Many of the resources are extremely recent, due to the fact that there are constant changes in methods of valuation in accounting for global companies. A majority of the resources come from scholarly journals related to accounting and business. The resources not provided by scholarly journals are from leading financial newspapers across the world. Several of the articles deal specifically with newly released accounting standards from the International Accounting Standards Board. When the Board mandates new accounting methods, there are often a variety of scholarly opinions on the release. These resources are great for potential use in a scholarly thesis on the topic of international accounting. Overall, the resources are relevant and reliable. Almost all of them come from leading authorities or leading scholarly journals in the field of accounting, making them all very usable for further research into the topic. In conclusion, the purpose of the annotated bibliography is to provide clear and concise information related to the topic; in this case, the topic of international accounting.

BIBLIOGRAPHY

Style of Citations: Chicago

Bedingfield, James P., and Stevan R. Holmberg. 1976. A proposal for the integration of accounting into economics' curricula. The Journal of Economic Education 7, (2) (Spring): 134-6.

The authors are arguing that accounting should be taught more rigorously at universities across America. Specifically, economics majors at many of the leading higher education learning centers across the country have no accounting background. In terms of international and domestic accounting, this is not acceptable for the students of today. Since the world is becoming more intertwined and globalized every single day, business students across America must learn basic accounting principles to succeed in the ever-changing corporate environment. The authors are persuasive in their arguments, and argue that accounting is the language of business. They may be slightly biased, though, since both are accounting professors at the University of Maryland. Clearly, accounting teachers want more students to take accounting classes, so that they can retain their jobs. While I do believe there is credence to the authors' school of thought, it must be viewed objectively, since both of them have made a profession in the world of accounting.

Buffini, Fiona. 2006. Called to account on a global scale. The Australian Financial Review, July 28, 2006, sec ABIX NEWS SUMMARIES.

As a writer for the Australian Financial Review, Buffini is credible and is current in her writing in this journal. The article concerns the fact that international accounting standards are being interpreted in a variety of different ways. For example, a Brazilian company does not interpret the IASB standards the same way an Australian company follows the laws. The International Financial Reporting Interpretations Committee has been working through problems posed by international companies pertaining to accounting guidelines. Since it is slightly biased from an Australian writer, the article concerns the issues dealing with Ruth Picker, the Australian Representative on the Committee. The author is persuasive and believes that the credibility of the IASB is at stake, as is the credibility of the entire accounting profession. Her authority and knowledge in the field, make her a very credible and persuasive writer, who is somewhat biased in only focusing on the role of Australia and their compliance with the International Accounting Standards Board.

David Reilly 2007. Profit as We Know it Could Be Lost With New Accounting Statements. Wall Street Journal, May 12, Eastern Edition.

The International Accounting Standards Board, along with the U.S. Financial Accounting Standards Board, are proposing extremely radical changes to the world of accounting. The author, Reilly, seems concerned with the fact that there could be significant changes to the way accounting has been done for years. He is current and credible, and appears to provide and unbiased and critical assessment of the IASB and FASB. Instead of having net income at the bottom of the income statement, the proposed changes will give profit figures for a variety of different areas in the business, such as investing, financing, and operating activities. The vast efforts being used currently to attempt to change the financial statements has occurred because of the end-users of these statements. In the past, savvy bankers and lenders knew every detail and could dissect the financial statements. In today's world, many rookie investors and day-traders hook up to the internet and can trade stocks themselves. It will be interesting to see if international accounting standards and U.S. accounting standards can merge to completely re-do the way the world does accounting.

Floyd Norris 2008. Loophole Lets Bank Rewrite The Calendar. New York Times, March 7, Late Edition (east Coast).

New York Times writer Floyd Norris discussed a rarely-used international accounting standard, known as the "true and fair" provision. Norris is current and authoritative, noting the reaction of other companies to Societe Generale's use of the provision. The International Accounting Standards Board (IASB) writes the rules and standards, but there is no international organization with the power to enforce the law. Societe Generale has come under a vast amount of scrutiny, because the company is using the rule unethically to disperse it's losses over two years, instead of one year. This dilutes the effect of a poor year financially, and can be considered earnings manipulation, according to the author. The accounting method employed was approved by two of the biggest accounting firms in the world, Ernst & Young and Delloite & Touche. The author is very critical and clearly has vast knowledge of the subject, concluding that investors across the world should be worried about the unethical, though currently legal, accounting practices employed by Societe Generale.

Jones, Lynn Comer, and Jennifer L. Brown. 2007. Global harmonization of taxation. The Tax Advisor. Vol. 38.

Both authors are very familiar with the topic, and seem to be credible and unbiased. The article discusses the main outline of how accounting standardshave progressed from United States GAAP to international accounting standards. The biggest catalyst for the international movement was the acceptance of International Financial Reporting Standards (IFRS) by the European Union. The authors believe that by 2009, there will complete harmonization between international accounting standards and domestic accounting. The views are credible, since the scholarly journal is a highly respected and often cited publication. The authors do believe, though, that the main issue in alligning international standards with American standards will be the complex tax guidelines. In the United States, there are a vast amount of laws regarding taxes, but in many foreign countries there are much looser rules. The authors believe that America will try to force the IASB to adopt to American tax accounting standards, since these standards are the best and safeguard against most tax loopholes.

Kara Scannell and David Reilly 2007. Foreign Affair: Is End Near For 'U.S. Only' Accounting? Wall Street Journal, June 21, Eastern Edition.

The authors detail the Securities and Exchange Commission's move towards adopting international accounting standards. Both authors are credible and seem unbiased, since they are authors for the Wall Street Journal. The authoritative tone details the proposal by the SEC to develop a roadmap for U.S. corporations to eventually change to accounting standards that are in compliance with the rest of the world. The reason for the proposal is because it is difficult for investors to compare companies to each other if they use different accounting standards. Since the U.S. has no received much foreign investment recently in wake of the economic downturn, this change in accounting standards will hopefully bring new investors to the United States. The authors are current in their views, and have a tone that implies a positive outlook for the future of accounting. The changes in regulation will make accountants even more in demand than they already currently are in America.

Katz, David M. 2007. IFRS or GAAP: Take your pick? CFO.Com. May 3.

Coming from a scholarly journal, CFO, the author is credible and current. Katz does not report on what has already happened in the world of international accounting, but what he specifically sees as the future of accounting standards for international companies. By 2009, foreign firms that trade stock in the United States, will no longer need to reconcile their financials to follow American standards, known as General Accepted Accounting Principles (GAAP). The article cites Conrad Hewitt, who is the Chief Accountant for the Securities and Exchange Commission. Hewitt is responsible for enforcing financial standards, and the author believes that Hewitt will relax the restrictions imposed on international companies in the wake of the Sarbanes-Oxley Act of 2002. Credible and authoritative, the author appears unbiased and has done considerable research before writing the article. The article truly is forward-looking, and may be a good predictor for the future of accounting in the global economy of this era.

Khin, Nande. 2007. No 'cherry-picking' of accounting standards. The Business Times Singapore, August 28, 2007.

Khin believes that it is improper and unjust for corporations to pick and choose which accounting standards they wish to follow. Khin, provding an unbiased Asian viewpoint, believes that too many companies in Singapore are choosing certain accounting standards that help boost net income and not following standards that will be detrimental to their financials. This is very unethical, and Khin believs there needs to be stronger enforcement of the standards by a governing body. The recently appointed Accountant-General of Singapore has pledged to enforce the laws, which have been overlooked by many companies based in Singapore for far too long. The AG will be assisted and advised by a board of directors appointed by the government of the nation. The author provides great insight, since he is a writer based in Singapore. The article may be slightly biased, in that he may be trying to create publicity for his publication, The Business Times Singapore.

Lynn Cowan 2008. IPO Outlook: Why Foreign Firms May Stay Overseas; Experts Have Doubts If Accounting Shift Will Lure More IPOs. Wall Street Journal, February 11, Eastern Edition.

The author discusses the issues that face many foreign-based companies that sell stock in the United States. Because of a newly adopted standard by America's Security and Exchange Commission (SEC), international companies will not be forced to adjust their books to comply with America's Financial Accounting Standards Board (FASB). The author belives this change, though, will not be enough to persuade international companies from registering Initial Public Offerings (IPOs) in America. The author, from the Wall Street Journal, is credible and current, since the change in standards was recently adopted. She has determined that despite the less strict accounting standards, the United States still has more taxes and litigation costs than other countries, which will result in international companies not wanting or needing to issue an IPO on an American Stock Exchange. The author appears to be unbiased, since the article actually is critical of the United States.

MacFadyen, Ken. 2008. Accounting for globalization : A revision to statement no . 141 has altered how companies need to account for M & A. Mergers and Acquisitions: A Dealmaker's Journal, February 1.

MacFadyen is compelling, authoritative, and credible in his writing for this scholarly journal. He provides an in-depth view of a recent revision by the Financial Accounting Standards Board was completed to account for the increasing global economy. Statement 141, states thatacquirers need to recognize and measure the goodwill acquired in a business combination. Using fair-value methodology, if the company makes a substantial gain from the acquisition, then the company cannot report the gain in the current accounting period. It must instead stretch it out over the length of the deal. The author is unbiased, and provides a great viewpoint into a very complicated field: mergers and acquisitions. A significant amount of money is spent on these deals, and the author provides analysis and makes it less complicated to understand the accounting nuances related to corporate deals. In all, the author is credible and makes a compelling case for the effect of the revision of Statement 141.

McGregor, Warren, and Donna L. Street. 2007. IASB and FASB face challenges in pursuit of joint conceptual framework. Journal of International Financial Management and Accounting 18, (1): 39-51.

The authors, who have great knowledge of the topic, make the argument that the IASB must change its policies to coincide with FASB, the accounting governing body of the United States. Since the U.S. accounting standards have been present much longer, they are much more highly respected and regarded than international accounting standards. The authors may be slightly biased, since they are Americans and believe that the U.S. standards are better than international law. The article delves into futher detail over the issue of the common financial statements that differ between America and the rest of the world. For example, the Cash Flows statement has been enforced by the SEC for almost twenty years now, while the IASB has only recently mandated that international companies present the Statement of Cash Flows on the annual reports. The authors are clear, concise, and authoritative. They both appear to have vast knowledge and expertise regarding the issues surrounding international accounting standards.

Monahan, Steven J. 2002. Discussion of the value relevance of revenue for internet firms: Does reporting grossed-up or barter revenue make a difference? Journal of Accounting Research 40, (2, Studies on Accounting, Entrepreneurship and E-Commerce) (May): 479-84.

Since this is a research journal, the author has spent considerable time studying whether earnings manipulation truly makes a difference when reporting financial statements. A professor at the University of Chicago, a highly-ranked university, the author is assuredly qualified and credible. Monahan researched the issue of grossing-up, which is pumping more product into the market right before the end of the quarter or year to make the financial statements appear more attractive to investors. The author has researched whether this can affect investors valuation of the companies, and in many cases a naive investor lost money because of improper valuation of these internet companies. This is important for international accounting, since many of these internet firms draw customers from across the globe. Since the IASB has less strict accounting standards than in the United States, there was an even greater incentive for these internet companies to falsely inflate earnings through the method of grossing-up revenues.

Rauch, James E. 2001. Business and social networks in international trade. Journal of Economic Literature 39, (4) (Dec.): 1177-203.

The author published this article in the highly used Journal of Economic Literature. The text deals with the issues concerning nations trading too much with themselves, and too little with each other. Many nations have a hard time communicating with each other, which can lead to many countries in the world relying upon themselves for all their goods. Clearly, in developed nations like the United States and much of Europe, this is not a problem. But in many developing countries around the world, breaking through the language and geographical barriers of communication can be extremely difficult. The author is obviously very credible and authoritative, since he is writing a long article in a widely used and accepted journal of economics. It is interesting to note that in the age of the internet, there are still many nations that cannot survive and succeed in the global marketplace. Rauch deals specifically with informal trade agreements, and the enforcement of laws in developing countries. The author is unbiased and very credible, writing elegantly in an extremely important publication.

Wild, Ken. 2008. Make-believe world of tax. Accountancy Age, February 28.

Wild is the author of the highly respected Accountancy Age, which is journal that is often cited and used by professionals in the world of accounting. The article discusses the International Accounting Standards Board, which is expected to issue proposals later this year to make significant amendments to the procedures regarding tax accounting. The bill, IAS12, will use a weighted-average methodology for determining uncertain future taxes. The author, who appears unbiased, is very critical of this procedure, since using the weighted-average does not actually pick the best, or most likely, outcome for the taxes to be paid by companies. The author, who is a partner at Deloitte, one of the biggest accounting firms in the world, seems to be an expert on tax accounting, since he is writing for a highly respected scholarly journal. He disagrees with the IASB so much that he picks the title "Make-believe world of tax," because he believes the IASB is allowing many companies to defer current taxes to future accounting periods.

Zhang, Sabrina, and Wang Lei. 2008. Analyzing chinese financial reporting. Beijing Review 51, (7) (02/14): 24-.

The two authors make a compelling case of the benefits of financial accounting standards in China as compared to International standards and American standards. The article examines the Chinese version of GAAP, the General Accepted Accounting Principles. The authors, writing for the scholarly journal Beijing Review, are not only credible but seem extremely competent and capable of discussing Chinese accounting standards in detail. Information is presented on the International Accounting Standards Committee and its standards regarding 501(c)(3) non-profit companies. The United States' standards differ from international regulations, because non-profit entities can follow GAAP, while there are no laws or regulations governing non-profit companies in international accounting. The authors are not biased, but just know Chinese accounting standards far better than other countries, because they both live in China and write for the Beijing Review.

See also:

http://en. .org/wiki/IASB

http://en. .org/wiki/International_Accounting_Standards

http://en. .org/wiki/International_Accounting_Standards_Committee

Databases Used:

ProQuest National Newspapers

LexisNexis

Gale PowerSearch

Academic Search Premier

WilsonWeb

Business & Company Resource Center

JSTOR

About the Author:

Daniel Siegel is an Accounting major in the Fisher School of Accounting at the University of Florida in Gainesville. He was born and raised in Fort Myers, FL and is a passionate soccer fan. He enjoys traveling, reading, and the outdoors. He plans on obtaining a Bachelors and a Masters degree in Accounting, and plans to sit for the CPA exam upon graduation. He is a passionate about the business world, and sees accounting as "the language of business." He plans on eventually starting his own company after college. He picked the topic in conjunction with his honors thesis for the Fisher School of Accounting. International accounting was chosen because of its recent surge in popularity and usefullness in the global economy.

He can be reached at: dpsiegel@ufl.edu

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