Emerging Issues in International AccountingSession 13Course: F0812 Accounting TheoryYear: February 2011

GODFREYHODGSONHOLMESTARCACHAPTER 14EMERGING ISSUES IN ACCOUNTING AND AUDITING

XBRLXBRL = Extensible business reporting languageAllows financial information to be presented in an interactive way that in turn allows individual items of data to be extracted by software to produce reports custom designed by individual usersSEC (2008)500 of largest US companies 2009 financial reports*

XBRLXBRL will loosen the control managers currently have on data aggregation decisions and place their performance under greater scrutiny*

The effects of corporate collapses and Sarbanes-Oxley Act (2002)High profile collapses in early 2000s changed the image of accounting and auditing and its regulatory environmentCriticism of auditor independence and corporate governanceSOXpeer reviews replaced by PCAOB inspectionsrestrictions on provision of non-audit services by audit firms to their audit clients

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Issues surrounding the application of fair value accounting during the global financial crisisSome believe the practice of fair valuing assets was contributing factor it requires the write-down in the value of some assets when markets are turbulentmarking financial assets to marketConsiderable dispute about thisSEC investigation (2008)recommendations offered for improving fair value accounting*

Is the criticism leveled at fair value measurement fair?*

Reactions by standard settersIASB (October, 2008) changed rules so that losses from changes in market values of financial assets could be reclassified under certain circumstances avoiding charging mark-to-market losses to the income statementFASB (2009) introduced a ruling to allow banks to use their own judgement in determining the fair value of assets, rather than using markets*

Auditors and the global financial crisisThe GFC could lead to regulatory action affecting auditorsrelatively little attention paid to the auditors role in the crisisthe accounting profession and regulators have proactively issued guidance auditors of banks later suffering financial difficulties can expect to come under scrutiny*

IASB and FASB convergence project2002 and 2006 convergence agreementsSEC issued (2008) a roadmap for the use of IFRS by US companies by 2014markets becoming increasingly globalnew investment opportunities to US investorswould make firms from different countries easier to compare progress toward 7 milestones to be assessed in 2011*

Issues in IFRS-US GAAP convergenceIt is not certain that the US will adopt IFRSSome argue that competition between standard setters is desirable*

International auditing standardsAuditing standards are also being internationalisedhave been redraftedgrowing international acceptanceA move to IFRS would require US auditing standards to change from assessing conformity with rules to assessing true and fair*

International auditing standardsBoth the auditing and accounting standards boards must deal with issues relating to their independence and governance before both sets of standards are truly global*

Sustainability accounting, reporting and assuranceCompanies are issuing sustainability reportsSustainability accounting is a subset of social accountingSustainability can be regarded as meeting the needs of the present without compromising the ability of future generations to meet their own needsenvironmental protectionjustice between peoples and generations*

Recent developments in sustainability reportingGlobal reporting initiative (2006)Accounting for carbon emissions Sustainability reports are increasingly being either audited or reviewed by independent auditorscompanies with the most to gain from increasing the credibility of their reports are more likely to seek assurancelittle authoritative guidance *

Trends in sustainability reportingSome companies are now seeking assurance for their sustainability reports

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Other non-financial accounting and reporting issuesWater accounting applies accrual accounting concepts to water resourcesGreenhouse gas emission accountingBoth attempt to provide data on scarce resources other than those traditionally captured by financial accounting systems*

SummaryOne of the major influences on accounting and auditing practice and research is the growing internationalisation of accounting and auditing standardsThere have been recent developments in sustainability reporting and assuranceWater accounting and greenhouse gas emission accounting are new developments*

Key terms and conceptsXBRLSarbanes-Oxley Act 2002Fair value accounting and the GFCAuditors and the GFCConvergence projectSustainability accounting and assuranceWater accountingGreenhouse gas emission accounting*

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