US GAAP Research Articles

The effect of the FASB-IASB convergence project on the rules- and principles-based nature of US GAAP and IFRS

The effect of the FASB-IASB convergence project on the rules- and principles-based nature of US GAAP and IFRS

SAP FICO for US GAAP and IFRS Compliance

SAP FICO for US GAAP and IFRS Compliance

The Measurement and Recognition in the Financial Reporting Disclosures

This research aims to examine the importance of completing annual reports properly. It also tries to understand the causes of complexities the business faces while creating reports. It has been identified that there are different types of intangibles and there is no particular method to measure them. This creates complexity while creating reports. Accounting measurements are relevant for preparing financial statements, and these statements are cornerstones for decision-making by the various stakeholders in any economy. This research analyses lessons that can be learned from different aspects involving accounting measurements in financial reporting, with significant reference to intangibles, leasing, goodwill, and pensions. It considers the relevance of these items, their influence on the balance sheets alongside profit, and secondary issues related to them. Hence, the essay leverages previously published or existing studies, amply demonstrating how these aspects of accounting are entwined. With the help of this analysis, the future perspective of the accounting measurements concerning examples like IFRS and US GAAP is explored along with the recapitulation of the thesis statement.

ADRs and Audit Pricing: Influence of disclosure and legal environment regime

AbstractCross‐listed firms natively operate in countries where regulations are less enforced, disclosure requirements and the legal environment are laxer than in the US. Thus, cross‐listed firms typically pay lower audit fees than US peer groups. Based on reported audit data of the cross‐listed firms in the US, this study explores how their home country's regulatory environment affects audit fees when they cross‐list on US stock exchanges. The empirical results indicate that the cross‐listed firms pay lower audit fees than their US counterparts. However, other regulatory environments in the home country, like disclosure requirements or anti‐director dictatorship, may require more audit efforts. Further, the cross‐listed firms that prepare reconciliation to US GAAP pay lower audit fees than other ADR firms that are using IFRS or US GAAP. However, still most of ADR firms pay lower audit fees than US counterpart firms.

On the Ethics of Fair Value Accounting: Distributive Effects, Distributive Injustice, and Implications for Social Peace

Fair value accounting is at the heart of arguably the world’s most prominent accounting standards, particularly US GAAP and IFRS. Fair value measurement has been the subject of intense debate. Among other things, it has been analyzed from an ethical perspective. However, this discussion has mainly been limited to the judgment involved in fair value measurement and the ethics of fair value in its ability to provide decision-useful information to interested parties. This study pushes the boundaries by adding a new dimension to the discussion of the ethics of fair value accounting by examining its ethics from a more systemic and societal perspective. Drawing on Austrian business cycle theory, it argues that fair value accounting facilitates certain distributive effects in inflationary monetary environments, thereby contributing to distributive injustice and potentially to social discord. In this respect, fair value accounting—in contrast to historical cost accounting—should not be considered fair or just, but unethical instead.

SAP FICO in Financial Consolidation: SEM-BCS and EC-CS Integration

In the dynamic landscape of financial management, organizations face increasing challenges in consolidating financial statements across various subsidiaries and entities. SAP FICO (Financial Accounting and Controlling) plays a pivotal role in enabling accurate and efficient financial consolidation. Two of the most widely used SAP solutions for this purpose are SAP SEM-BCS (Strategic Enterprise Management - Business Consolidation System) and EC-CS (Enterprise Controlling - Consolidation System). The integration of SEM-BCS and EC-CS within the SAP FICO environment offers a robust framework for achieving streamlined financial consolidation, compliance with global accounting standards, and enhanced financial reporting. SEM-BCS is designed to support comprehensive financial consolidation processes, enabling organizations to collect, process, and present financial data in a consistent manner. It is particularly adept at handling complex consolidation requirements, including intercompany eliminations, minority interest calculations, and currency translations. SEM-BCS also supports various consolidation scenarios, such as legal, management, and ownership-based consolidations, making it a versatile tool for multinational corporations. On the other hand, EC-CS serves as a flexible consolidation system within the SAP landscape, offering capabilities for consolidating financial data across multiple organizational units. EC-CS is known for its ease of use and its integration with other SAP modules, such as SAP FICO and SAP BW (Business Warehouse). It provides essential features like automated data collection, intercompany reconciliation, and consolidation adjustments, ensuring that financial statements are accurate and compliant with standards such as IFRS and US GAAP.

Russian Practice of Applying Hedge Accounting

Currently there are no comprehensive empirical studies in the scientific literature regarding hedge accounting in non-financial organizations of the Russian Federation for the period from 2010 to 2021, which does not allow us to identify trends, problematic aspects and potential directions for the development of accounting technology in close connection with real practice. The purpose of the study is to analyze the results of scientific work carried out on this topic. The author of the article substantiates the need to analyze Russian practice in the field of hedge accounting, and also studies the experience of its application, including analysis in the context of separate companies. The theoretical basis of the study was the provisions of IFRS and US GAAP in terms of derivatives and hedge accounting, literature sources on the topic and the empirical basis — is the annual consolidated financial statements of 22 Russian companies for the period from 2010 to 2021. It has been revealed that the main thing in non-financial organizations is cash flow hedge accounting. It has been established that there is a gap between the facts of risk reduction or mitigation based on derivatives and the application of hedge accounting to them, which is evidence of the conscious refusal of some companies to apply this accounting methodology. The analysis of the identified cases of hedge accounting shows the examples of using exchange differences for hedging (rather than derivatives); also, the adaptation of fair value hedging to the practice of non-financial organizations is considered. The results of the study will be useful for non-financial organizations that have not applied, but consider hedging and related accounting features as a promising area of activity; researchers and consultants in the field of futures and derivatives market development and risk management.

How do auditors’ use of industry norms differentially impact management evaluations of audit quality under principles-based and rules-based accounting standards?

Interactions between auditors and client management affect audit quality on an engagement because those interactions influence and incentivize auditor behavior and decision-making. I perform an experiment using 191 management participants to investigate (1) whether an auditor’s use of professional judgment or industry norms to justify proposed adjustments increases management’s evaluation of audit quality, and (2) whether these evaluations differ under principles-based or rules-based standards. I find that, although management views industry norms to be more credible, they disregard an auditor’s justification method and evaluate audit quality based on underlying accounting attributes when reporting under a more rules-based standard, such as US GAAP. However, when an accounting standard is more principles-based, such as IFRS, using industry norms positively influences perceptions of audit quality. Thus, when standards are less precise, auditors are incentivized to engage in herding behavior by defaulting to industry norms when determining appropriate accounting treatments. This study increases our understanding of the incentives and motivations faced by auditors in their interactions with client management under both rules-based and principle-based accounting standards.

Major Changes in IFRS and Comparison with US GAAP

The evolution of International Financial Reporting Standards (IFRS) reflects the needs of the global business environment and the pursuit of higher quality financial reporting. This paper discusses and explores major changes implemented in IFRS, specifically in the areas of revenue recognition, lease accounting, and the treatment of intangible assets. The shortcomings of the past application of IFRS standards in these aspects are presented in this paper, as well as changes and benefits after IFRS made corresponding modifications. By reviewing materials and literature, the study conducts a comparison between IFRS and the United States Generally Accepted Accounting Principles (US GAAP). These two major accounting frameworks have adopted unique methods and standards. Still, both the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) work hard together to realize international harmonization. The outcomes of this research make it clear that ongoing refinements to IFRS have significantly improved the clarity, consistency, and comparability in how financial activities are reported. Such changes have been pivotal in diminishing uncertainties and bolstering the trustworthiness of financial disclosures. Being influenced by the continuous developments in IFRS, greater transparency and accountability in financial reporting will be achieved. This has made a great contribution to helping investors in sound economic decision-making and enhancing investor confidence.

The comparison of revenue recognition under IFRS 15, ASC 606, PSAK 72 and its implementation on revenue recognition of PT Telkom Indonesia Tbk

The convergence of International Accounting Standards achieved through the full adoption of IFRS by DSAK is PSAK 72 Revenue from Contracts with Customers, which came into effect on January 1, 2020. Based on this, the author examines whether there are differences between IFRS and US GAAP and PSAK. This article discusses only the differences between IFRS, US-GAAP and PSAK in revenue recognition, specifically the differences between IFRS, US-GAAP and PSAK in presentation, recognition, measurement and disclosure.

КОМПЛЕМЕНТАРНІ АКТИВИ ІННОВАЦІЙНОЇ ДІЯЛЬНОСТІ В СИСТЕМІ ОБЛІКУ

Complementary assets ensure the emergence of a synergistic effect due to the formation of such combinations of innovative resources that contribute to the construction of the most effective chain of value creation and the maximization of economic benefits by increasing the level of marginal return from the separate use of such resources. The main reasons for the insufficient use of the concept of complementary assets in accounting have been analyzed. The directions for using the concept of asset complementarity in US GAAP and IAS/IFRS have been grounded. The main characteristics of complementary assets have been disclosed and analyzed. The basic provisions of the methodology of accounting for complementary assets according to GAAP US and IAS/IFRS have been analyzed. Two main approaches have been proposed for the development of the accounting system of complementary innovative assets of the enterprise: 1) accounting of complementary assets as a single asset (comprehensive assessment of one asset at fair value, in particular in cases of accounting for intangible assets during a merger of enterprises, accounting for minerals or oil and gas property for enterprises engaged in extractive activities, etc.); 2) parallel analytical accounting of complementary assets (improved assessment of the basic asset at fair value). Development directions for the evaluation of complementary innovative assets of the enterprise at fair value have been formed. The dependence of the amount of information on complementary assets to be disclosed and the level of protection of the enterprise's innovative capital is substantiated. The expediency of forming a comprehensive report on complementary innovative assets, which will reveal information about basic innovative assets (elements of the enterprise's innovative capital) and complementary tangible and intangible assets, is substantiated. Because different types of complementary assets play different roles in ensuring the effectiveness of the creation and use of basic innovation assets. Therefore, information about different types of complementary assets of innovative activity will have different relevance for users. The proposed report for the enterprise is an information basis for decision-making in the innovation management system.

The effect of IFRS 16 on the attitude of sophisticated and unsophisticated lenders towards loan contracting

This research describes the effect of IFRS 16 on the attitude of sophisticated lenders towards loan contracting. The goal of IFRS 16 was to enhance reporting quality and provide a more faithful representation of the financial statements. Data from 3,955 firms using IFRS and 1,433 using US GAAP were analyzed. Firms reporting under IFRS obtained larger loan sizes, although the difference with firms reporting under US GAAP is insignificant. They also received lower borrowing rates, and shorter maturities. IFRS 16 has a reinforcing effect towards loan contracting for sophisticated lenders, defined as banks, for the borrowing rate and maturities. For loan size, IFRS 16 has a reinforcing effect for unsophisticated lenders, defined as trade creditors.

СООТНОСИМОСТЬ РОССИЙСКОГО ПОДХОДА К СТАНДАРТИЗАЦИИ УЧЕТНО-ХОЗЯЙСТВЕННОГО ПРОЦЕССА И ЕГО ЗАРУБЕЖНЫХ АНАЛОГОВ (МСФО И USGAAP)

The article examines the process of development of the modern Russian system of accounting and economic activity in the context of the influence of Western (primarily North American - US GAAP and international – IFRS) accounting practices on it; substantiates the expediency of a deeper perception of the ideas of accounting correlation with the managerial nature contained in the concept of IFRS. The author states the existence of structural problems in the process of reforming accounting in Russia in connection with the chosen course of convergence of federal accounting standards (FSB) with international ones and indicates ways of possible solutions to these problems, including through the creation of a system of domestic standards (by analogy with the FSB) in the field of management accounting

The Evolution of Generally Accepted Accounting Principles: A Focused Look into the International Financial Reporting Standards

Financial reporting has long been an essential lens through which shareholders assess the managements operation of companies and through which external users such as potential investors evaluate how companies are structured and perform financially for economic decision-making. For this reason, the truth and fairness of financial statements is emphasized in financial accounting to reflect the economic substance over the legal form. As cross-border trades and investments grew by leaps and bounds after the World War II, a call for a globally uniform and consistent set of accounting standards thrived in full swing. Hence, the genesis of IAS and subsequently IFRS for better quality, comparability, understandability, and transparency of financial statements. Over recent years, the trend in accounting harmonization with gradual convergence between IFRS and US GAAP has also become prominent. However, accounting standards are never perfect in presenting economic reality upon their inception. Blatant financial scandals play an indispensable role in shaping accounting standards for improvements. This paper takes a focused look into IFRS to examine how the generally accepted accounting principles evolve in reaction to scandals and loopholes criticized, with a detailed analysis of the standards for leases and revenue recognition. A generic discussion on the difference and convergence between IFRS and US GAAP concludes this paper.

ASSIGNED ASSET VALUE AND INVESTMENT TAX DEDUCTION: DEFERRED TAX ACCOUNTING PROBLEMS

The paper deals with methodological and theoretical aspects of accounting for investment tax deduction and assigned value of the asset in terms of rules and regulations of international standards and national standards of the United States (US GAAP). The problem of imperfection of IAS 12 «Income Taxes» in the part of accounting of deferred taxes at initial recognition of the asset is raised. The peculiarities of valuation at fair value when tax effects are included in the amortized value of the asset are disclosed. The calculation of the assigned value of the asset and deferred tax for investment tax deduction, as well as their accounting on accounting accounts is substantiated. The results of the work can be useful in improving national accounting standards and developing corporate accounting policies, as well as in the framework of related theoretical research. As promising directions in the field of the research topic can be highlighted a comparative analysis of the Russian investment tax deduction with the American investment tax credit; and methodological approaches to accounting for the latter in the U.S. in the 1960s.

Religiosity, financial distress and R&D accounting treatment in US context

PurposePrior research shows that religiosity affects the degree of managers' risk aversion. As a result, religious firms are less likely to invest in R&D activities. Moreover, US GAAP treats these investments as expenses. For this reason, religious firms have fewer expenses in their earnings and are less likely to be in financial distress.Design/methodology/approachData are collected from Worldscope and the Churches and Church Membership files of the American Religion Data Archive website from 1985 to 2018. With 18,199 observations in US context, the authors used the marginal effect to test the mediating effect of R&D accounting treatment.FindingsThe authors find that the marginal effect of religiosity on financial distress with US GAAP is higher than the marginal effect of religiosity on financial distress with capitalization of R&D costs, which means that accounting treatment can explain the relation between religiosity and financial distress in the US context.Research limitations/implicationsThe authors used linear interpolation and linear extrapolation data to be able to conduct this research over a period of 1985–2018. For future researches, the authors propose to test other factors which can explain the relationship between religiosity and financial distress based on the ethics element.Practical implicationsThese results should be of interest to regulators because treating R&D activities as expenses can destroy the accounting performance of firms that prefer investing in risky projects. This favoritism prevents the comparison between two firms in the same industry with different risk-taking behaviors. This problem is more prevalent if the authors have two firms with different ratios of religiosity. This paper suffers from a major limitation related to data availability.Originality/valueThis may be the first study that investigates why religious firms are less likely to be in financial distress. This paper notes that religious firms are less likely to be in financial distress because their conservative behavior towards R&D activities coincides with the conservative R&D accounting treatment. In fact, the mismatch between expenses and revenues from R&D activities can cause financial distress.

METHODS OF VALUATION OF ITEMS OF FINANCIAL REPORTING OF UKRAINIAN ENTERPRISES: UNIFICATION OF NATIONAL AND INTERNATIONAL STANDARDS

The purpose of the paper is to unify the methods of valuation of items of financial reporting of Ukrainian enterprises on the basis of national and international standards. Methodology. The theoretical aspects of the study are based on international accounting and financial reporting standards, as well as national accounting regulations (standards). The applied aspects consist in specifying the methods of valuation of certain objects of accounting (assets, liabilities, income, expenses) and their reflection in the financial statements. The results of the paper made it possible to determine the conditions for the implementation of international accounting and financial reporting standards in Ukraine. It was shown that their implementation began in 2007 and was completed in 2012 by public joint stock companies due to the requirements for placement of securities on stock markets. The impact on the implementation of international accounting and financial reporting standards by Ukrainian enterprises in connection with the signing by Ukraine of the Association Agreement with the European Union was determined. The characteristics of the Anglo-American and continental accounting models, their regulatory standards, existing differences between US GAAP and IFRS/IAS, work on their harmonization with a view to creating an international accounting model were presented. The methods of valuation of items of financial reporting were systematized: historical cost, present value, net selling price, fair value or amount of expected compensation. Their advantages, disadvantages and scope of application were determined. The cost approach to the valuation of financial reporting items and the prospects for its use were examined in more detail. It was shown that enterprise value is characterized by indicators reflected in balance sheet, off-balance sheet and financial statements. The information model for determining the value of an enterprise on the basis of financial statements was proposed. The methods of value determination depending on the organizational and legal form of an enterprise were differentiated. The sources of formation of its market and fundamental value have been clarified. The informational capacity of the items of the financial statements of an enterprise was estimated. The practical implications include the creation of an information model for determining the value of the company according to financial reporting, the substantiation of recommendations for regrouping its items for the needs of management accounting, and the creation of additional reporting forms – a value statement and a value-added statement. Value/originality. The methodological recommendations for the harmonization of the systems of financial and management accounting of added value were substantiated in terms of: recognition of income generated by fully depreciated assets; capitalization of financial costs; use of 8-class accounts; off-balance sheet accounting to reflect non-financial information about capital and integrated added value of a company; simplification of the tax system by introducing a single value added tax, which will absorb income tax and lead to further harmonization of financial and tax accounting.

The Procyclicality of Impairment Accounting: Comparing Expected Losses Under IFRS 9 and US GAAP

The Procyclicality of Impairment Accounting: Comparing Expected Losses Under IFRS 9 and US GAAP

POLITICAL INFLUENCES ON ACCOUNTING STANDARDS: A DISCUSSION OF GAAP & IFRS

Accounting standards, as expressions of public policy, are not constantly impartial in that they inflict benefits on some individuals in society to the disadvantage of others. This has been as a result of the power play between the US GAAP and the proponents of IFRS. This paper presents the political factors affecting the accounting standard setting. The paper discusses the debate between the adoption of accounting principles (IFRS) or accounting rules (GAAP). It presents the convergence of accounting standards and the future of IFRS.

Theoretical Aspects of Hedge Accounting in Non-Financial Institutions: Problematic Field and Potential Effects

The paper contains the results of a study of problematic aspects and potential effects associated with the use of hedge accounting by non- financial institutions. The relevance of the study is because hedge accounting allows to ensure that income and expenses for the object and hedging instrument match but its use is the choice of the organization. Therefore, the works’s aim is to conduct a comprehensive study of the effects and problems associated with the use of hedge accounting and develop recommendations for assessing the need for usage in non-financial organizations. The author identified the following tasks for this goal achievement: studying the practice of applying hedge accounting by Russian companies; analysis of potential effects from the use of this toolkit; consideration of problematic aspects related to the application of hedge accounting; method development for determining the need for its use in non-fi institutions. The theoretical and methodological basis of the study are the provisions of IFRS and US GAAP in terms of accounting for derivatives and hedging, fair value assessment and disclosure, literature on their practical application, as well as reporting by Russian companies compiled in conformity with IFRS. In the work’s course, the author revealed that only half of the hedger companies from the considered sample apply hedge accounting. For understanding motives of organizations to use this toolkit or abandon it, the author identified the potential positive effects associated with it and problematic aspects. Also, they proposed a methodology for determining the need for its use, which would be useful for consulting companies when they provide services in risk hedging.