Its GDP (in absolute terms and per capita) and stock market capitalization are higher than those of the other countries. 12Section 404 is seen by many observers as the most burdensome (and costly) provision of the law. Board members are appointed by the SEC after consultation with the Chairman of the Federal Reserve Board and the Secretary of the Treasury.
Financial statements are supposed to "present fairly" the company's financial position and the results of its operations "in accordance with generally accepted accounting principles." Compliance with GAAP is the test for fair presentation. Goodwill is capitalized as the difference between the fair value of the consideration at the time of the exchange and the fair value of the underlying net assets acquired (including other intangible assets). 18 The FASB discusses the definitions of the elements of the financial statements in its joint conceptual framework project with the International Accounting Standards Board.
As a founding member of the International Accounting Standards Committee (now the International Accounting Standards Board), Mexico is also committed to convergence with IFRS. Goodwill is the excess of the purchase price over the present value of the net assets acquired. In the first half of the 20th century, accounting thought reflected German influences; in the second half, the U.S.
It took over the administration of the SEL from the Ministry of Finance when it was established in 2000. Share ownership in subsidiaries and the number of shares of the company's stock held by subsidiaries. 38 The law requiring an internal control assessment and certification of the financial statements is based on the U.S.
It outlines the general accounting principles and defines the role of government and the conditions that require accounting procedures. Goodwill is the difference between the acquisition price and the fair value of the acquired assets and liabilities. 50 This requirement corresponds to Section 404 of the Sarbanes-Oxley Act, discussed in the section on the United States.
Goodwill is the difference between the consideration given and the existing book value of the assets and liabilities acquired. The translation of the financial statements of a foreign operation depends on whether it is integral or non-integral of the reporting entity's (parent) operations. Finance leases are capitalized at fair market value and amortized over the life of the lease.
Contingent losses are anticipated when they are probable (probable) and a reasonable estimate of the amount can be made.
Discussion Questions
Exercises
The term Anglo-American accounting is sometimes used to denote their accounting styles because of the similarities in orientation, purpose and approach. Identify the major differences between UK accounting discussed in Chapter 3 and this chapter. Subsidiaries are consolidated if a parent directly or indirectly owns more than 50 percent of the shares.
Goodwill is valued on the basis of the carrying amount of the net assets acquired, and not on the basis of fair market value as is customary in most other countries. The equity method is used in consolidated statements for investments in unconsolidated subsidiaries and affiliates that are 20 to 50 percent owned, but the cost method is used in individual statements of operations. The equity method is also used to account for joint ventures; proportional consolidation is not permitted.
Stocks may be valued at cost or at the lower of cost or market; The price is most often used. Tax regulations limit the possibility of deducting employee pensions and severance payments to 40 percent of the amount, so they are usually only accumulated up to this amount. Each year, the company must allocate an amount equal to at least 10 percent of cash dividends and bonuses paid to directors and statutory auditors until statutory reserves reach 25 percent of share capital.
Required: Identify the main changes that have occurred in Japanese accounting since the Big Bang. Financial statements consist of a balance sheet, a profit and loss statement, a statement of changes in financial position (or cash flow statement), explanations and supporting schedules. When accounting for business combinations, the purchase method must be used, and goodwill is amortized over the period in which it is used.
Contingent losses are not recorded; however, emergency funds can be set up as credits from retained earnings. Required: Complete a matrix indicating whether each of these groups has a significant influence on the setting of accounting standards in the five countries discussed in this chapter. Discuss how the accounting practices identified in Exhibit 4.5 would affect your comparisons for each of the six ratios listed.
CASES
What is the difference between rules-based and principles-based accounting standards, and what are the advantages and disadvantages of each. The first is the boss who flirts with his secretary and ends up her husband. And the third is the bettor who plays the stock market and finds himself a shareholder.
Trading, not ownership," is the approach of China's investors, said Anthony Neoh, a former head of Hong Kong's Securities and Futures Commission who is now the chief outside adviser to China's regulatory body. Until now, Beijing has focused almost entirely on the "supply side" of the bond market. In January [2001], the government's official audit body admitted that more than two-thirds of the 1,300 largest state-owned enterprises were cooking their books.
And without truly independent directors chairing an audit committee, that won't change.65 Even China's mostly hapless stock investor base (officially 66 million) had something to cheer about this month, after the country's highest court said shareholders could bring individual or collective lawsuits against companies that lie about their accounts. The decade-old stock market is dominated by state-owned companies listed for political rather than economic reasons. About two-thirds of the market capitalization is not traded, so the state retains full control.
There is no corporate bond market to speak of.66 [A]ll is not what it seems in China's capital markets. For starters, the growth of the domestic stock market has outstripped the efforts—game as it is—of regulators and the legal system to monitor it. The real problem is the quality of the listed companies themselves, says a financial official.
Even some of the more reputable ones indulge in all sorts of market abuse, such as lending money on the stock market to the parent company instead of investing it, or speculating on the stock market for their own account. Their profitability is usually abysmal, their level of disclosure poor and - with the state owning around two-thirds of the shares in companies listed in Shanghai and Shenzhen - their treatment of minority shareholders appalling.67. A 2002 investigation by the China Securities Regulatory Commission (CSRC), the top regulator, found that one in ten listed companies had read its books, and the Ministry of Finance reported in January that companies it had investigated had misrepresented their profits with a total of 2.9 billion yuan.
