International Financial Reporting Standards Argumentative Essay Example

2000). The Anglo-Saxon group is primarily influenced by capital markets and shareholder orientation, as well as a strong accountancy profession. Conversely, the Continental Europe group is characterized by a focus on taxes, legal matters, and creditor protection. The countries examined in this paper are generally classified as part of the Continental Europe accounting group (Choc and Mueller, 1992; Nobles, 1998).

While France and Italy are influenced more by tax law, Germany is dominated by commercial law (Nobles and Parker, 2000). However, all three countries differ from the Anglo-Saxon approach to accounting. It is interesting to analyze how these countries are adapting to the strategy of convergence to FIRS (Financial Reporting Standards) and the integration of capital markets in Europe. This is particularly important as current FIRS have been mainly established by the Anglo-Saxons (Flower and Beers, 2002, p. 6). Meek and Quadrants (1997) suggest that for companies competing in international capital markets, the pressures for convergence act as a counterbalance to national-level accounting diversity. They predict that these pressures will reduce accounting differences. In Germany, although the traditional national approach to financial reporting differs significantly from FIRS, companies are playing a leading role in the globalization of the world economy.

The merger of Daimler-Benz and Chrysler had a major impact on German financial reporting. German companies recognized that their traditional financial reporting methods were inadequate for the demands of globalization, leading to a demand for accounting reforms (Burns, 2001). Out of the top 50 multinational enterprises in Europe, France has 12, Germany has 2, and Italy has 4. Additionally, Germany, France, and Italy are among the countries with the largest stock exchanges in Europe following

London.

This paper focuses on the regulatory accounting changes in three countries and their impact on reporting practices. It conducts empirical research on accounting rules followed by major listed companies in Germany (ADDAX 30), France (CA 40) and Italy (S/MIB) during 2002 and 2003. The paper also examines the environmental factors driving these changes and explores the reasons behind the convergence of France, Germany, and Italy towards FIRS.

Since the mid-1980s, the French financial reporting system has continuously evolved to enhance the transparency of published information, as a response to market pressure. Especially, bigger French enterprises that could take advantage of the options provided by the 1986 decree on consolidated accounts sought permission from the government to directly align their accounts with globally recognized accounting standards.

The French government acceded to the demand and enacted the law on 6 April 1998, allowing French listed companies to no longer comply with French law for their consolidated accounts. However, the required decree for implementation, prepared by the French Accounting Regulation Committee (CAR), was not published until 2005, coinciding with the application of EX. Regulation 2.1.

The publication of the LOL De Se ;Currie; Finance're (LSI 2003-706, Law on Financial Security) in 2003 brought significant modifications to the French Accounting Regulation Framework. These changes were influenced by both the reforms of the European Commission and the American Serbians Solely Act. The main objective of this law was to improve transparency and supervision in financial reporting and securities transactions, resulting in the implementation of new regulations for financial markets, audit profession, and financial information.

The LSI is divided into three sections: Section l focuses on modernizing control and supervisory

authorities for insurance, banks, and investment companies. Section II is concerned with investor protection, and Section Ill focuses on modernizing financial statements, legal control, and transparency. One of the main changes for companies and auditors is the establishment of a new financial markets oversight body called the Authority des Marcher's Financiers (MAP).

The text discusses three key initiatives in the French financial system. Firstly, the establishment of the Financial Markets Authority (AMF). Secondly, the creation of the Audit Supervisory Board (HACK) under the Ministry of Justice. And thirdly, the implementation of new measures to enhance transparency in corporate governance and financial reporting. The French accounting system is also highlighted, particularly the role of the Accounting Regulation Committees (CAR) in endorsing pronouncements from the National Accounting Council (CNN).

The CAR is composed of 12 members who include government ministers (Justice, Economy, and Finance), senior judges, and heads of the CNN, MAP (formerly COB), CNN, and EEOC. Its main role is to issue government decrees regarding accountancy and financial reporting. The creation of the CAR aimed to centralize the authority to issue financial reporting decrees in one entity to enhance coordination of the government's efforts.

Due to the eminence of its members, the decrees of (Ge ' lard, 2001, p. Accelerate the necessary accounting reforms) carry significant authority. In fact, since 1999, the rules on group accounts have undergone substantial changes through new regulations and interpretations of both the CAR and the CNN, as well as its Commit ' adherence (Urgent Issues Committee). In many cases, the reform process has incorporated international accounting rules into French law.

The principle of 'substance over form', exemplified in the Re

' clement CAR 99-02 on consolidated counts, has been adopted, although its application is not yet mandatory for all significant measurement items (Glee et al. , 2001, p. 472; Richard, 2001, p. 1147). The LSI mandates companies to submit a report on the board's organization and the implemented internal control procedures. Furthermore, the LSI requires the consolidation of ad hoc vehicles (SPED) in group accounts if exclusive control exists, regardless of share possession. This provision stems from the modified 7th Directive (Directive 2003/51 ICE, 18 June 2003), aiming to eliminate incompatibility with FIRS by applying SIS 27 and SIC 12. By allowing French groups listed on American stock exchanges to adopt the same accounting treatment as US GAP, this new requirement brings about significant changes. However, French rules for individual accounts are unlikely to undergo such significant changes until tax accounts can be separated from financial reporting accounts. The ongoing debate necessitates all stakeholders to proceed cautiously.

Detailed et al. Downloaded by [Manchuria University] at 05:59 12 October 2014, efforts for convergence in France (Tally and Lubber, 2003). The authorities, particularly the tax authorities, in early 2003 identified a problem - no impact studies had been conducted on the effects of new accounting rules on tax returns. Recently, CNN published a report on the tax impact of FIRS. This report provides a comprehensive explanation of the main differences between tax rules and FIRS, such as the utilization of fair value and leasing contracts.

In France, prior approval from the tax authorities is required before publishing any revised accounting standard for individual entity accounts. Two working groups, one focusing on 'accounting and taxation' and the other

on 'accounting and law', must provide their opinions before new rules can be adopted. Another change in the regulatory framework is the introduction of the Market Abuse Regulation (MAP). The COB was responsible for regulating the securities market in France until the end of 2003 and aimed to enhance the quality of accounts by providing recommendations on financial reporting for listed companies.

The recommendations proposed by the MAP are consistent with international capital market standards (Locator, 2002). As an illustration, when advising companies on the annual consolidated counts for the year ending December 31, 2003, the MAP requested information on the transition project to FIRS. Additionally, they requested commentaries highlighting the key variances between FIRS and French GAP, along with an opening balance sheet under FIRS to be furnished promptly.