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Accounting practices in different countries differ from the Generally Accepted Accounting Principles. In this paper, accounting aspects from one country in Asia, South America and Europe are compared. The chosen countries are Japan, Brazil and the United Kingdom.
In Brazil, Accounting principles are contained in the Brazilian corporate law and the Brazilian institute of independent auditors provides the interpretations. Rules and regulations for companies are issued by the Brazilian securities commission (CVM). The Brazilian economy has been greatly improving globally over the last few years.
This move has called for measures to be undertaken to transform the local accounting standards to converge with the internationally accepted standards that are comprehensive and defined by clear principles (Pricewaterhouse 1991).
The accounting practices adopted in Brazil differ from the IFRS standards in a number of ways. The Brazilian standard is silent on the derecognizing of financial statements while the IFRS contains specific rules that are based on the concept of transferring risks and rewards. The IFRS requires that financial instruments must be split into debt and equity components whereas this closure is not contained in the BR GAAP.
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The disclosure of financial assets is also different. The BR GAAP is also silent on the impairment of financial assets and embedded derivatives closure (Ernest & Young 2009).
Japan has made an effort to comply with the IFRS standards and that significant differences will have been eliminated by the end of 2011. This was concluded by the `Tokyo Agreement’ of August 2007. The following accounting principles are adopted in Japan; the cost, the revenue, objectivity, matching and consistency principles.
The significant differences that exist between the JGAAP and IFRS can be evidenced in the accounting periods of presentations whereby JGAAP requires that consolidated financial statements for the prior period and current period must be presented comparatively.
The IFRS requires that all extraordinary items should not be presented in the profit and loss statements while JGAAP requires that the items be presented within their categories.
The changes in accounting policies and accounting estimates are also different in the two bodies. The rule of departure from a requirement for the purpose of giving fair representation does not exist in the JGAAP. There are also no specific rules for depreciation of non-current assets on sale and presentation of discontinued operations in the JGAAP (Ernest &Young 2008).
In the UK, companies are required to prepare their financial statements in accordance with the UK generally accepted accounting practice (UK GAAP) and must disclose these assumptions under accounting policies of their company accounts. The following accounting principles must be adopted; the going on concern that assumes that businesses will continue to trade in future, consistency in preparation of statements, the prudence principle must also be followed, the accruals concept, netting off of items, departure from accounting principles and adhering to the professional ethics principle.
The rules and regulations governing the UK GAAP are contained in the Companies act of 2006 and it incorporates the requirements of the European law. There are notable differences between the IFRS Standards and the UK GAAP. Dividends are recognized in the period they relate in the profit and loss account according to the UK GAAP. The IFRS recognizes dividends as a liability and must therefore be deducted from equity. Lease incentives are only recognized to profit and loss period while the IFRS recognizes it over the entire duration of the lease. Differences also exist in the following closures; changes in accounting policies, operating profit, deferred tax and related party transactions (Accountancy students 2010).
References
Accountancy students online community (2010). Financial reporting: UK GAAP v IFRS.
Retrieved on May 5, 2010 from http://www.accountancystudents.co.uk/news/read/uk_gaap_v_ifrs/
Goddard, A. (2002). Development of the accounting profession and practices in the public sector. London: MCB UP Ltd
Pricewaterhouse (United States) (1991). Accounting principles and practices in Brazil and the USA. New York: Pricewaterehouse
Ernest & Young (2008). IFRS-GAAP comparisons. London: Ernest &Young.
Accounting Standards In The World. (2020, Jun 01). Retrieved from https://studymoose.com/accounting-standards-in-the-world-new-essay
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