1INTERNATIONAL ACCOUNTING Executive Summary The assignment aims at the accounting policies followed by the South Korean economy and the evaluation of the IFRS in the current accounting standards. It is important that the accounting standards of the company or the organisations should be such that helps the investors in easy interpretation of the financial results and the same has been taken actively into account for the analysis and evaluation of the assignment. The reason for having a global financial reporting framework or the harmonization of the accounting standards of companies was discussed. Various factors that will directly affect and influence the operations of the company was analysed. The success and failure of the harmonization of the accounting standards by the Korean Accounting Standard Board and adoption of the same by key company like Lotte Corporation was analysed.
2INTERNATIONAL ACCOUNTING Table of Contents Introduction......................................................................................................................................3 Discussion........................................................................................................................................3 Reasons for Harmonisations........................................................................................................3 Issues for Harmonisation.............................................................................................................5 Success and Failure of Harmonisation........................................................................................7 Conclusion and Recommendations..................................................................................................8 Reference.......................................................................................................................................10 Appendix........................................................................................................................................12
3INTERNATIONAL ACCOUNTING Introduction Various organisation and companies for the purpose of following and reporting of the accounting data and informations have applied a variety of accounting standards. Primarily, there have been four accounting standards that were followed from different areas on a global basis like in United Kingdom, Continental Europe, Latin America and United States. Financial informations and data presented by the companies and organisation is an important source of assessing the growth and performance of the company(Kang & Kim, 2016). It is important that the accounting standards of the company or the organisations should be such that helps the investors in easy interpretation of the financial results and so that the same can be applied in the evaluation of the financial position of the company. Comparability and verifiability are some of the key qualitative characteristics of the company that helps the investors in verifying and comparing the performance of the company among various companies operating in the same industry. Harmonisation of the accounting policies followed by the South Korean economy from the Korean Accounting Standards to the International Financial Reporting Standards has been critically evaluated and taken into consideration(Karakaya & Kaynak, 2018). The adoption of the IFRS by the South Korean economy was done in the year 2011 where the entities and financial instructions have adopted the IFRS for the purpose of presentation of financial report. Harmonisation of the accounting policies thereby forming a common ground for the preparation of the financial report will bring the International Accounting Standards into some sort of agreements. The difference in the treatments of the accounting transactions and belief regarding the treatmentof classifying the same hasbeen the key issuesbehind the issuesin the harmonisation of accounting standards. The financial statements from the various companies in accordancetothecommonaccountingprincipleswillhavenecessarydisclosuresand
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4INTERNATIONAL ACCOUNTING measurement method applied for the valuation of the various assets of the company(Mulyany & Ariffin, 2018). Discussion Reasons for Harmonisations Harmonisation of the accounting policies for the company will help the investors in assessing the important financial data of the company and comparing the same with other competitors. Every accounting standards has its own set of assumptions regarding the accounting policiesandthetreatmentofthevariousaccountingtransactions.Harmonisationofthe accounting standards aims at reducing the financial difference between the companies and financial instructions in the financial reporting of the data and informations about the company. The harmonisation of the accounting policy by the South Korean economy will allow the financial users in easy comparison of the financial data(Olesen & Cheng, 2017). Harmonisation of Accounting Standards will help the company in getting improved access to the financial markets and would also improve the evaluation and assessment of the financial data by the company. Uniformity in the accounting policies and the reporting standards in the South Korean economy will be the key benefit of harmonisation of the accounting standards. Harmonisation of the accounting standards will also be helping the tax authorities in evaluating the profit or loss of the company on a global basis(Newberry, 2014). The financial users and the stakeholders of the company such as shareholders, creditors, investors, suppliers and regulatory bodies will be able to get a consistent and a comparable report thereby assessing the financial performance of the company.GlobalisationintheSouthKoreaneconomyhasbeenthekeyreasonfor the harmonisation of the accounting standard. Faster economic decision process making and having a unified global accounting policies for the companies and institution will be the benefit of the
5INTERNATIONAL ACCOUNTING harmonisation of the accounting standards. The accounting policies followed by the South Korean Economy was the Korean Accounting Standards Boards and the economy has adopted the IFRS in the year 2011. Enhanced comparability, relevance, reliability, quality and economic substance of the accounting information presented will be the highlights of harmonisation of the accounting policies. The economy mandates that all listed companies should present their financial information in accordance with the International financial Reporting Standards. The treatment of the various transactions and accounts of the company and the treatment of the same should be well in accordance with the global reporting framework so that the management of the company are well guided in the treatment of the transactions and the accounting of the various data of the company. Reporting of the various accounts of the company at the historical values and the fair value has been the key issues in comparing the accounts and informations of the company. On the one hand, side the fair value accounting according to the IFRS in contrast to the financial assets and instruments are some of the key requirement. The Korean Accounting Standard is evaluating the impact on the financial statements of the company with the application of the IFRS in financial reporting.With the changing world and the rising economy, it is important for the companies and organisation for having a stable and common financial reporting framework. The financial report presented by the Lotte Corporation Ltd has been in accordance with the IFRS, which is guided by the International Accounting Standard Board helping the investors in assessing the financial information. Disclosures of various accounting related informations by the company and classification of various accounts of the company has been the key and primary benefit of following a uniform accounting standards. Investors, stakeholders and financial report users will be able to better evaluate the performance of the companies. The
6INTERNATIONAL ACCOUNTING financial information and report presented by the Lotte Corporation will be helping the investors in classifying the financial data and informations about the company. Issues for Harmonisation Cost and benefit of every changes and policy, transactions and events should be analysed and evaluated well under the various accounting policies of the company. The adoption of the global accounting standard is significantly dependent on the convergence of the accounting standards and the acceptance of the same by the respective accounting standard board for having a common accounting policy(Ji, 2017). The accounts of the company and the transactions of the company should be in accordance to the accounting standards policy as stated by the IFRS where assumptions used by the management of the company for the purpose of reclassification and reinstatements of accounts. The valuation of the company is done in accordance with the accounting policies followed by the company and the respective valuation of the assets and liabilities of the company(Sedláček, 2016). The classification and reinstatement of the accounts of the company should be based on the policies followed by the company. The management of the company should be reporting the financial data and informations in accordance with the accounting policy, which helps the company in the recognition of the income and expenses of the company. Cost and Benefit:Thecost and benefit of the adoption of the accounting standard that will be adopted by the company for the harmonisation of the accounting standards should be well evaluated by the company. The evaluation of the change in the accounting standards would be based on the cost incurred by the company in the transformation and reinstatement of the financial statements of the company(Koen, 2015). The benefit of the adoption of the common accounting standard will be proper classification and availability of the financial information and
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7INTERNATIONAL ACCOUNTING data about the company in respect to the accounts of the company. The shareholders of the company who are the key stakeholders of the company evaluate the financial position and performance of the company. The need for having a common accounting standard and policy will be helping the company in providing better access to data and informations about the company(La Torre et al. 2018). Political Lobbying:Many institutions and organisation influence the workings and operations of the accounting standard board for the implementation of common accounting standards. The harmonisation of the accounting standards has not been done well by the economies because of the several influence done by some of the companies and intuitions, who have been protesting the application of common accounting standards(Brusca and MartĂnez, 2016). Variation in Economic and Social Environment:Harmonization of the accounting policy is influenced by various social and economic factors where the accounting plays a crucial role. Different countries have different aspects and belief regarding the financial reporting framework. US considers the investment made by the investors and the disclosures of the financial reporting to be of primary concern for the financial reporting. The difference in the treatments of the accounting transactions and belief regarding the treatment of classifying the same has been the key issues behind the issues in the harmonisationof accounting standards(Mussari and Sorrentino, 2017). Diverse Accounting Practise:There is a wide difference in the various accounting policy followed by the company and the difference in the treatment and recording of the financial informations can materially affect the financial results of companies. The divergence in the accounting standards and policies is been well taken into consideration which affects the role of harmonisation of accounts(Hopper, Lassou and Soobaroyen, 2017). The financial statements of
8INTERNATIONAL ACCOUNTING the company should be such that it reflects the fairness and usefulness of the financial statements of the company(Ahmed and Ali, 2015). Gaps between Developed and Developing Countries:The policies and accounting transaction of the companies and instructions varies on a large-scale basis from country to country. The developing countries had a little chance for the evolving accounting standards, which would reflect the need and circumstances of the accounting policies. The financial reporting of the companies is in accordance with the accounting standards followed by the company. Critics in relation to the harmonization of the accounting policy is primarily made by private organisation andcompaniesinthedevelopingcountrieswhichcreatesasignificantinfluenceonthe accounting standards board. Success and Failure of Harmonisation The Lotte Corporation Ltd present the annual report of the company in accordance with the International Financial Regulatory Standards. The accounting policy of the company has been in well accordance with the IFRS where the classification of the company in relation to the various accounts of the company(Crawford et al. 2014). The Korean Accounting Standards had initially followed their own accounting standards for the purpose of accounting and classification of the various accounting and financial information and data. The success and the failure of the harmonisation of the various accounting standard can be well assessed with the help of the acceptance of the accounting principles by the economy(Van der Wal, 2014). The Korean economy adopted the IFRS in the year 2011 and has reviewed the accounting policies and adopted the various principles associated with the IFRS. Companies listed in the stock exchange is mandatory required by the South Korean Economy for the reporting of the financial reporting as per the IFRS(Rossi et al. 2016). The Harmonisation of the accounting standards has been
9INTERNATIONAL ACCOUNTING successful in the South Korean economy. The Korean Accounting Standards follows the aspect of providing correct and factual information of the financial data by the companies so that the same can be helped in the investment decision process. The financial disclosures made by the company in contrast to the various accounting policy of the company will help the financial users of the company in proper inspections about the financial performance of the company. With the absence of the common reporting standards and policies the company will be not be able to follow the qualitative characteristics of the financial reporting(Daniela, Marioara & Daniel, 2014). The general purpose of the harmonisation of the accounting standards is to guide the management of the company in the recording of the transactions of companies and giving material financial informations and data about the company. On a global frontier basis majority of the economies have adopted and harmonised the accounting standards. The success of the harmonisation of the accounting standards is being well done by the Korean Accounting Standard where the Board has been entering into agreements and talks for having a more broad based accounting policy and standards. The accounting standards followed by the companies and financial instructions helps the investor’s in interpreting the financial positions of the company. The mandate requirement by the Korean Accounting standards for all the listed companies for performing and including the financial reporting as per the IFRS. From company level to country wise the adoption of the common accounting standards has been well shown by various companies and organisations. Conclusion and Recommendations The harmonisation of the accounting standards and following a similar accounting policy followed by the company will be helping the investors and various other stakeholders of the
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10INTERNATIONAL ACCOUNTING company in the financial comparison of the various data and reports of the company. There have been various accounting policies followed by different companies and institutions, which have a varied accounting standards used by the companies for the purpose of financial, reporting.It is important that the accounting standards of the company or the organisations should be such that helps the investors in easy interpretation of the financial results and so that the same can be applied in the evaluation of the financial position of the company. The key reason for the harmonisation of the accounting standards is that the global expansion of companies and access to financial market requires that companies should have a common accounting standard. The common accounting policy for the companies will be helping getting necessary and important financial decisions about the company. The issues for having a global financial reporting framework is the political and economic social factors for the company. The evaluation of the change in the accounting standards was taken as the cost incurred by the company in the transformation and reinstatement of the financial statements of the company. The difference in the treatments of the accounting transactions and belief regarding the treatment of classifying the same has been the key issues behind the issues in the harmonisation of accounting standards. The Korean Accounting Standard have adopted the IFRS for the purpose of the global financial reporting standard. The success and the failure of the harmonisation of the various accounting standard can be well assessed with the help of the acceptance of the accounting principles by the economy. The key recommendation for the companiesand the economiesin respect to the harmonisation of the accounting policies would be that having a global financial reporting will be helping the investors and the stakeholders in better assessment of the performance of the company. Uniformity and Comparability are some of the common aspect of having a qualitative
11INTERNATIONAL ACCOUNTING financial reporting framework for the company. Disclosures of the various informations and accounts in contrast to the operational and financial data about the company should be well given according to the given accounting standards and policies. Proper disclosures of information and accounting of the same for the purpose of the investment related decision has been the key long- term objectives of the shareholders of the company.
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13INTERNATIONAL ACCOUNTING Koen, R. (2015).Evaluating the impact of changes in accounting standards: the South African case(Doctoraldissertation,North-WestUniversity(SouthAfrica),Potchefstroom Campus). La Torre, M., Sabelfeld, S., Blomkvist, M., Tarquinio, L., & Dumay, J. (2018). Harmonising non-financial reporting regulation in Europe: Practical forces and projections for future research.Meditari Accountancy Research. Legenzova,R.(2016).Aconceptofaccountingqualityfromaccountingharmonisation perspective.Economics and Business,28(1), 33-37. Mulyany,R.,&Ariffin,N.M.(2018).IslamicFinanceandtheConvergencetowards International Financial Reporting Standards (IFRS): The State of Research Development. Journal of Accounting Research, Organization and Economics,1(1), 85-97. Mussari, R., & Sorrentino, D. (2017). Italian Public Sector Accounting Reform: A Step Towards European Public Sector Accounting Harmonisation.Accounting, Economics, and Law: A Convivium,7(2), 137-153.. Newberry, S. (2014). The use of accrual accounting in New Zealand’s central government: Second thoughts.Accounting, Economics and Law,4(3), 283-297. Olesen, K., & Cheng, F. (2017). Convergence of accounting standards does not always lead to convergence of accounting practices: The case of China.Asian Journal of Business and Accounting,4(1).
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15INTERNATIONAL ACCOUNTING Appendix 1)Application of IFRS.