Chapter 06 – Comparative Accounting
Answers to Questions
1. Gradual capital market liberalization will open up international investment opportunities for
2. The economic reforms have increased demand for accounting services in many ways. Key
3. A unique feature in the development of accounting and auditing in China is that, unlike in
4. The pressures arise from the need to change from an accounting system designed to
5. Features of the accounting profession in China, which are different from those of Anglo-
American countries:
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Chapter 06 – Comparative Accounting
6. One of the distinct Japanese cultural values is collectivism or group consciousness. This has
directly affected the Japanese attitude towards external auditors and the audit function.
7. In the 1990s, Japanese companies were compelled to seek finance from overseas markets
due to various reasons, such as large scale losses among Japanese banks and other
8. In August 2007, the ASBJ and IASB jointly announced the Tokyo Agreement, highlighting the
desire to accelerate the process of convergence between Japanese GAAP and IFRS. As
9. The principle of prudence is firmly established in the German law mainly because of the
heavy losses suffered by creditors of German companies during the Great Depression in the
10. In Germany, tax law has a strong influence on accounting and financial reporting. The
reason for this link between taxation and financial reporting is historical. When corporate
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Chapter 06 – Comparative Accounting
11. There are two main external factors that have influenced financial reporting in Germany in
recent years. They are, EU Directives and the forces of globalization. The 1985 Accounting
12. DRSC/GASB in their annual report for the year 2009, provide a comprehensive overview of
the national and the international activities of these bodies. Accordingly, the work of the
13. It is correct that BilMoG is not ‘IFRS light’ instead it is ‘German GAAP complex’. BilMoG
introduced many notions to German GAAP which brought German GAAP closer to IFRS.
14. The NBSC’s role in the area of financial reporting by Mexican companies is similar to that of
15. The Professional Mutual Recognition Agreement (PMRA) signed by NAFTA participants
16. The significance of Bulletin A-8 is that it requires Mexican companies to apply international
17. There are three main external factors that have influenced financial reporting in Mexico in
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Chapter 06 – Comparative Accounting
18. Recent amendment to Mexico’s MFRS B-10 requires corporations to include the effects of
19. An important contribution that Mexican accounting has made to international accounting is in
20. Membership in the EU has had a profound effect on accounting regulation in the U.K. The
U.K. pioneered private-sector regulation of accounting where legislation provides broad
21. The Companies Act of 2004 in the United Kingdom made the FRC the unified independent
regulator with three specific roles: set accounting and auditing standards; proactively
22. The most important feature of the approach taken in the United Kingdom in setting
23. The discussion paper referred to aims at responding to the growing concerns about the
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Chapter 06 – Comparative Accounting
24. In October 2012, the UK Department for Business, Innovation and Skills (BIS) published
draft regulations for narrative reporting. The key points of the draft regulation are: a separate
Solutions to Exercises and Problems
1. The purpose of this exercise is to encourage students to consider the approach taken in
their own country towards accounting regulation, compare that with another country that has
2. The number of accountants per head of population is much higher in the U.K. than in Japan.
The main reason is that there is a greater demand in the U.K. for accounting information,
3. a. The factor that has exerted the greatest influence on the development of accounting in
each of these countries is the providers of finance for business enterprises. While the
b. China: A distinguishing feature is the manner in which accounting and auditing have
developed. Unlike in many other countries, In China accounting and auditing have taken
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Chapter 06 – Comparative Accounting
4. a. China: IFRS are permitted for some domestic listed companies, but not permitted for
b. Germany, Japan, and the U.K. have residents who are members of the IASB.
5. a. An issue for which the practices of several countries are at variance with IASB GAAP:
b. While the most important financial accounting practice at variance with IASB GAAP is a
6. Companies listed on the NYSE as at June 3, 2004:
China: 16 companies
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7. The main mechanisms put in place to regulate accounting and financial reporting in U.K. are
8. In 2012, there were two major reforms affecting accounting and financial reporting in the
United Kingdom. First, The FRC developed a suite of three standards, FRC 100 (published
9. Students are expected to explain that professionalization in accounting refers to the
Question 5.
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Chapter 06 – Comparative Accounting
10. In recent years, both Germany and Japan have undertaken major projects to reform their
systems of accounting regulation. Both countries have recognized the need for companies
11. In Germany, the Act to Modernize Accounting Law introduced major changes to the German
Commercial Code, for example, it removed the close connection of accounting reports to tax
rules; and the controversial options relating to provisions and production cost that were
12. First, the level of inflation in Mexico has been much higher in Mexico compared to the other
countries covered in this chapter. As a result, incorporating the effects of inflation into
13. In comparing the financial statement prepared by companies in China, Japan, and Mexico
with those of other companies, which have used IASB GAAP, the treatments of the following
items should be considered carefully, as they can have a significant impact on the reported
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Chapter 06 – Comparative Accounting
14. a. As an outcome of the Big Bang reform in 2001, the Financial Accounting Standards
Foundation (FASF) and the new private-sector standard-setting body modelled on the FASB,
the Accounting Standards Board of Japan (ASBJ) were created. The FASF and ASBJ derive
15. The North American Free Trade Agreement (NAFTA) among the United States, Canada and
Case 6-1 CHINA PETROLEUM AND CHEMICAL CORPORATION
1. The net profit figure reported under PRC GAAP is RMB 19,011 million. This is RMB 2,592
million lower than the amount under IFRS, and RMB 6,566 million lower than the amount
under U.S. GAAP.
Students are expected to comment on the main reasons for those differences on the basis
of the information given in the case.
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2,582
The net profit figure of RMB 21,593 reported under IFRS was increased to RMB 25,577
under U.S. GAAP. The increase of RMB 3,984 under U.S. GAAP was due to the following
reasons:
2. The differences for CPCC between PRC GAAP and IFRS, and between IFRS and U.S.
GAAP are given in the case. Students are expected to identify the main areas of
difference.
As mentioned in the case, treatments of the following items under PRC GAAP and IFRS
are different:
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Chapter 06 – Comparative Accounting
3. U.K. readers of the financial statements may not find them very useful, as the information
is not reconciled to the U.K. GAAP. There are differences between U.K. GAAP and IFRS,
4. U.S. readers should find the information useful. However, it would be better for them if the
5. When a company is listed on a foreign stock exchange, it is always useful to explain the
differences, if any, between accounting standards used in preparing financial statements,
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