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If accounting standards differ by country – and some do – whatare your thoughts about how the phrase could still be true?

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Nestor Rutherford
Nestor RutherfordLv2
28 Sep 2019

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Given the process involved in developing standards – whichinvolves asking constituents to make submissions on exposure drafts– do you think that accounting standards developed within theUnited States of America would be the same as accounting standardsdeveloped in another country? Explain and support your view.

Let's talk a little about the difference in tax and financialreporting and the impact IFRS could have. In the United States, inparticular, fair presentation under GAAP sets the standards forfinancial accounting. GAAP is adjusted, if you will, to comply withtax accounting. More specifically, taxable profits must be adjustedfrom GAAP presentation to tax accounting in order to facilitateaccurate tax reporting at year's end.

From an accounting perspective, do you think tax accounting andfinancial accounting should be uniform? I believe that is a hugeleap considering that countries themselves are separated in termsof how accounting systems developed legally. On the one hand, youhave micro-based, common law countries like the U.S., who haveadopted fair presentation standards. On the other hand, aremacro-based, code law countries whose accounting standards conformto tax legislation? I don't believe, under these separate set ofcircumstances, that uniformity will work internationally any morethan one would expect diverse systems of government and capitalmarkets to behave in one way. What are your thoughts?

An imaginary new country called Mazoa is attempting to create acapitalistic society with free markets but maintain some discretionover price control and market regulation. Since the country is new,private enterprise is generally not controlled by the governmentand accounting standards do not currently exist. Leaders of theprivate sector and government officials are meeting in an attemptto determine the best course of action in regard to accountingstandards. Some have suggested adopting international accountingstandards while others want the country to develop their ownstandards because IFRS is not suitable for Mazoa's fragile economy.Regardless of what step is taken, accounting standards must bedeveloped to show the rest of the world that Mazoa has a stableeconomy and to encourage foreign investment.

Based on the above scenario, what type of accounting systemwould you recommend for Mazoa? Discuss the factors that wouldinfluence your decision.

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