394 Planning and Forecasting
- Improve the quality of financial reporting.
- Make easier the comparison of the financial position, performance and
changes in financial position of enterprises in different countries. - Reduce the costs borne by multinational enterprises that presently have
to comply with different national standards. - Facilitate the mutual recognition of prospectuses for multinational secu-
rities offerings.
A subsequent statement has reported responses to this initial document
and outlined plans for implementation of some of the initial proposals and ad-
ditional study for others.^42 The major approach to implementation of the IASC
proposals is to incorporate those proposals on which agreement has been
reached into revised International Accounting Standards.
Examples of some of the accounting treatments that would be eliminated
under the IASC proposals follow:
- Completed contract method for the recognition of revenue on construc-
tion contracts. - Deferral of exchange gains and losses on long-term monetary items.
- Translation of statements of subsidiaries operating in hyperinf lationary
economies, without first applying price-level adjustments. - Use of the closing (end of period) exchange rate to translate income state-
ment balances. - Maintenance of investment properties on the books without depreciation
- Immediate deduction of goodwill against shareholders’ equity.
Examples of U.S. and international GAAP differences are provided in the
next section along with an illustration of how international firms mitigate the
impact of differences for U.S. statement users.^43
U.S. and International GAAP Differences
In spite of the harmonizing efforts of the IASC, there remain numerous dif-
ferences between the GAAP applied in countries around the world. A sampling
of some areas of current or previous differences between U.S. GAAP and
GAAP in selected other countries is provided in Exhibit 12.25.
As GAAP in different countries are constantly changing, as well as the
specific methods selected by firms within countries, some of the GAAP differ-
ences in Exhibit 12.25 may no longer be current. However, they remain illus-
trative of areas in which major GAAP differences are found between U.S.
GAAP and those employed in other countries. Fortunately, in the United States
the Securities and Exchange Commission requires that listed foreign firms
provide disclosures of differences between the GAAP on which their state-
ments are prepared and U.S. GAAP.