-REPORTING AND
DISCLOSURE-
Accounting Disclosure Practices in Corporate Governance Differences Affect The Finance in a State
National differences
in disclosure is driven largely by differences in corporate governance and
finance. In the United States, Britain and other American countries, equity
markets provided most of the funding that the company needs to be very
advanced. In these markets, ownership tends to spread widely among many
shareholders and investor protection is emphasized. In most other countries
(like France, Japan and some emerging market countries), share ownership is
still highly concentrated and the bank (or the owner and family) has
traditionally been a major source of corporate financing. These banks, and the
other in obtaining more information about the company's financial position and
activities.
Important
Issues for Management
Decisions Affecting the Disclosure Decision
A decision is a
choice made from available alternatives. A management thought that making
choices is a big part in the decision making process, but it is not. Making
choices is just one part of it.
Decision-making is a
process for identifying problems and opportunities and then solved. Decision
making requires the efforts made either before or after the real choice. Most
decisions are incorrect assessment errors stemming from the limited capacity of
the human mind and the natural bias shown managers during the decision process.
These factors influence a manager in the decision:
• Unaffected by First Impressions
• Justifying the decisions of the past
• Seeing what you want to see
• Influenced by the frame problem
• Overconfidence
• Justifying the decisions of the past
• Seeing what you want to see
• Influenced by the frame problem
• Overconfidence
Accounting
Disclosure purposes in Equity Markets
The equity market has
an important position in the national economy and individual investors are
becoming increasingly active in these markets. As a result, public disclosure,
investor protection, shareholder value and form of corporate governance is driven
by the stock market is increasingly important.
Fundamental
Differences In Corporate
Financial Disclosure Practices in
Various Aspects
Level of disclosure
in the financial statements are the things that need to be considered by the
assessment (judgment) managers. Level of disclosure that is moving towards full
disclosure (full disclosure) will reduce the information asymmetry is a
necessary condition (Necessary condition) to do earnings management (Trueman
and Titman, 1998). Therefore the level of disclosure is negatively related to
earnings management. Companies with a minimum level of disclosure likely to do
earnings management and vice versa (Lobo and Zhou, 2001) in Yanivi (2003).
-TRANSLATION OF FOREIGN-CURRENCY-
Translation
and Inter-Conversion and Foreign Currency Conversion
Foreign currency translation The process is repeated
presentation of financial information
from one currency to another currency. While foreign currency conversion between the exchange
of one currency to
another currency physically.
The difference is, the translation is simply a
change of monetary units, for example, on a
balance sheet that is expressed in British pounds are presented back to
the U.S. dollar
equivalent value. There is no
physical exchange that occurred, and no relevant
transaction occurs. While the conversion, allowing
the physical exchanges
that occur and there is a related transaction occurring.
Glossary of
Terms In Foreign
Currency Translation
Glossary of foreign currency translation, adapted from GAAP (SFAS) No.52, 1981:
Glossary of foreign currency translation, adapted from GAAP (SFAS) No.52, 1981:
1. Attributes, quantitative characteristics
of an item being measured for accounting purposes.
Example, historical cost and replacement
cost which is an attribute
of an asset.
2.
Conversion, exchange a currency
into another currency.
3. Present exchange rate, exchange rate prevailing on the date
of the relevant financial
statements.
4.
Discount, while the subsequent exchange rate
lower than current levels.
5. Net asset position at risk,
as measured in excess of assets or denominated
in foreign currencies and translated at the exchange rate of duty is now measured or denominated
in foreign currencies and translated at the exchange rate now.
6.
Foreign currency, a currency other
than the currency used by a State, a currency other than the reporting currency used by the company.
7.
Financial statements in foreign currencies, the financial
statements using foreign currency
as the unit of
measurement.
8.
Foreign currency transactions, the transaction (i.e. sale
or purchase of goods or services, or debt
loans or accounts
receivable) under the conditions stated
in currencies other than the functional
currency of the company.
9.
Foreign currency translation, the
process to declare the amounts
denominated or measured
in one currency into another currency using
the exchange rate between two currencies.
10. Foreign operation, an
operation that produces financial
statements that (1) combined or consolidated or accounted for under
the equity method in reporting
the company's financial statements
and (2) arranged in foreign currencies other
than the reporting currency of
the reporting enterprise.
11.
Forward exchange contacts,
an agreement to
exchange currencies of different
countries by using a specific rate (forward rate)
at a given date in
the future.
12.
Functional currency, The main currency used by
a company in the course of business, and in generating or
using cash.
13. Historical exchange rate, exchange
rate of foreign currency that is
used when an asset or liability denominated
in foreign currencies bought or
going.
14. Local
currency, the currency of a State
that is used; the reporting currency
used by a domestic or foreign
operations.
15.
Items of monetary policy, the
obligation to pay or the right to receive a
unit of currency in a fixed value in the future.
16.
Reporting currency, the
currency used in preparing the company
financial statements.
17.
Completion date, the date when
the debt is paid
by an uncollectible
receivables.
18.
Spot
exchange rate, exchange rate for currency exchange in the time immediately.
19.
Date of the transaction, the
date when a transaction is recorded in the accounting records of the reporting
company.
20.
Translation adjustments, adjustments
arising from the
translation of financial statements
of a company's functional
currency into the reporting
currency.
21.
Unit
of measurement, the currency used
to measure the assets,
liabilities, revenues and expenses.
Differences
Advantages and Disadvantages of Foreign
Currency Translation
1. Suspended
1. Suspended
Changes in the value of domestic
currency equivalent of the net assets of foreign subsidiaries are not realized
and no effect on the local currency cash flows generated from foreign entities.
Translation adjustment should be accumulated separately as part of consolidated
equity.
2. Suspended and Amortization
Suspension of translation gains or losses and to amortize it over the useful adjustment items related to balance, primarily associated with deferred debt will be amortized over the related fixed assets, which is charged against earnings in the same way with the burden of depreciation or deferred and amortized over the remaining the loan as an adjustment to interest expense.
2. Suspended and Amortization
Suspension of translation gains or losses and to amortize it over the useful adjustment items related to balance, primarily associated with deferred debt will be amortized over the related fixed assets, which is charged against earnings in the same way with the burden of depreciation or deferred and amortized over the remaining the loan as an adjustment to interest expense.
3. Partial
Suspension
Translation gains and losses is to recognize the losses as soon as possible after it happens, but admitted only after the profits realized, this is simply because it is an advantage, it ignores the changes in exchange rates.
4. Not suspended
Recognize translation gains and losses in the income statement as soon as possible. However, inserting translation gains and losses in the current year's profit will introduce a random element in the profits that may result in significant fluctuations in earnings in case of exchange rate changes.
Translation gains and losses is to recognize the losses as soon as possible after it happens, but admitted only after the profits realized, this is simply because it is an advantage, it ignores the changes in exchange rates.
4. Not suspended
Recognize translation gains and losses in the income statement as soon as possible. However, inserting translation gains and losses in the current year's profit will introduce a random element in the profits that may result in significant fluctuations in earnings in case of exchange rate changes.
Translation gains and losses
reflect the increase or decrease in equity investments
in domestic currency and should be recognized.
Effect of Various Methods Use of Foreign Currency Translation of Financial Statements
Effect of Various Methods Use of Foreign Currency Translation of Financial Statements
Although most of the technical issues in
accounting tends to resolve itself over time, foreign currency translation turned out to be an exception.
That this trend will continue to be supported by such
developments as the collapse of the dominance of the dollar, the currency rate movements are approved by the
government, and the
globalization of world capital markets,
which have increased the importance of reporting and financial disclosure.
Foreign Currency
Translation Methods Match the Best Business
and Money Market Conditions
Under the temporal method, monetary items
such as cash, receivables,
and liabilities are translated based on the exchange now.
In particular, the value of assets in
foreign currencies are reported at historical cost,
are translated based on the historical exchange rate, because of historical cost
in foreign currencies are translated at the
exchange rate exchange rate historically
produces historical cost in domestic
currency.
These three methods are (now the exchange rate method, the method now-non-date, and method-monetary non-monetary)
are used in the identification of
assets and liabilities
which are at risk
or may be
protected from foreign exchange risk.
Where's the Best? Right now the exchange rate. So far this term the exchange rate used in translation method refers to the historical or present exchange rate. The average rate is often used in the income statement for the posts load. Some countries use the exchange rate is different for different transactions.
Where's the Best? Right now the exchange rate. So far this term the exchange rate used in translation method refers to the historical or present exchange rate. The average rate is often used in the income statement for the posts load. Some countries use the exchange rate is different for different transactions.
Understanding the Relationship Between Foreign Currency Translation With Inflation
The use of the exchange rate is
now to translate the cost of non-monetary
assets located
in an inflationary environment will ultimately lead to an equivalent value in domestic
currency is much lower than the initial
baseline measurement. FASB rejected before the inflation
adjustment process of translation,
because the adjustment is not inconsistent
with the historical cost basis of the assessment framework used in the basic
financial statements in the U.S..
As a solution FAS
No. 52 requires the
use of the U.S. dollar as the functional currency for those residing overseas
operations with hyperinflation
environment. This procedure will maintain a
constant value of the dollar
equivalent of foreign currency assets, because these assets will be
translated according to the
historical rate.
-FINANCIAL REPORTING AND CHANGES IN PRICE-
Why Has Potential Misleading Financial Statements For Price Changes
Because the period of inflation, asset values are recorded at acquisition cost. Values
of the assets yield lower assessed expenses
lower and profits are valued more highly. This distorts the measurement
inaccuracies:
a.
financial projections based on historical
time series of data
b.
budget is the basis of
performance measurement
c.
performance data can not isolate the effect of inflation that can not be controlled.
Glossary of Terms Accounting Understanding the Effect of Inflation and Price Adjustment Against the Financial Statements
To
understand the notion of price changes
(changing prices), a general price change
occurs when the
average price of all goods and
services in an economy subject to
change. Price increases are
collectively known as inflation
(inflation), while the price declines known as deflation (deflation).
Specific price changes refers to changes in the price of goods or services which are caused by changes in demand and supply. A stable price level becomes a national priority for many countries around the world. Although the price changes occur throughout the world, the influence of business and financial reporting varies from one country to another.
Specific price changes refers to changes in the price of goods or services which are caused by changes in demand and supply. A stable price level becomes a national priority for many countries around the world. Although the price changes occur throughout the world, the influence of business and financial reporting varies from one country to another.
Current Cost Accounting Model Differences With Conventional
In general, the conventional
accounting, financial statements are presented based on the
historical value that assumes that
prices are stable.
Conventional accounting does not recognize the changes
in general price levels or changes in the level
of rates. As a consequence,
if there is a change in purchasing power as
inflation period, the historical financial statements is economically irrelevant. In this period generally scored higher revenues while
fixed assets valued lower.
Accounting for
differences in inflation in the U.S., Britain, and
Brazil
1.
Country United States
In 1979, the FASB issued Statement of Financial Accounting Standards
/ SFAS No.33,
entitled "Financial Reporting and
Changing Values" statement
requires U.S. companies have inventories and
fixed assets worth more than $ 125 million or
assets of more than
$ 1 billion, for
the past 5 years trying to
make disclosure of constant purchasing power as the basic framework of the historical cost basis of
measurement for the primary
financial statements.
2.
English country
English Accounting
Standards Committee / ACS issued a "Statement of Standard Accounting
Practice 16 / SSAP," Accounting for Costs Now "for a trial period of
3 years in March 1980.
Differences SSAP 16 with SFAS 33 are:
a. If the U.S. standard requires constant cost accounting and now, SSAP 16 only adopt the current cost for external reporting.
Differences SSAP 16 with SFAS 33 are:
a. If the U.S. standard requires constant cost accounting and now, SSAP 16 only adopt the current cost for external reporting.
b.
If the adjustment of U.S. inflation based on the income statement, cost report in the UK now require
both an income statement and balance sheet of costs
along with explanatory notes.
3. Brazilian state
Although no longer required the recommended inflation accounting in Brazil today reflects two groups of reporting options, the Brazilian Corporate Law and Capital Market Supervisory Commission of Brazil.
Although no longer required the recommended inflation accounting in Brazil today reflects two groups of reporting options, the Brazilian Corporate Law and Capital Market Supervisory Commission of Brazil.
Financial Reporting in Hyperinflation Economy
Financial reporting in hyperinflation economy
is the adoption of IAS 29 Financial
Reporting in Hiperinflationary
Economies. IAS 29
is related to the restatement of financial statements in the event of
hyperinflation in entity reporting currency.
In these circumstances, the entity's financial statements are presented in units
of measurement are now at the end of the reporting period. In addition, the related posts in the previous
period are presented in units of measurement are
now at the balance sheet and
income statement or net monetary position
is recognized in the income statement
and disclosed separately.
Constant
Dollar Costs Are
Now Better Or
For Measuring the Effect of Inflation
It turned out that constant dollar
or current cost is
better to measure only the
issue of inflation alone, the following four
issues of inflation accounting:
1. Is constant dollars or Current Cost better
to measure the effects of inflation?
2. Accounting Treatment of gains and losses of inflation
3. Accounting for inflation abroad
4. Avoid the phenomenon of "double fall"
2. Accounting Treatment of gains and losses of inflation
3. Accounting for inflation abroad
4. Avoid the phenomenon of "double fall"
How to double dip and workarounds
At the start of the estimates to account for inflation abroad, must be guarded
carefully to prevent the phenomenon of "double dip" This problem
arises due to the
fact that inflation is a local member a direct
impact on the rate used in the
translation process. So to avoid double
counting inflation, translation losses are
reflected in earnings "as
reported" a company should be counted as part
of arranging inflation.
Sources:
Choi D.S. Frederick & Meek K. Gary.
2005. AKUNTANSI INTERNASIONAL, EDISI 5 BUKU 1. Jakarta : Salemba Empat.
http://kornetcincang.blogspot.com/2009/05/translasi-mata-uang-asing.html
http://kornetcincang.blogspot.com/2009/05/translasi-mata-uang-asing.html
R. Luki SE.AK.MK Akuntansi Internasional
