International Accounting:
1. Cost and Revaluation Models of Accounting
When preparing balance sheets and income statements, companies must account for tangible assets (e.g., buildings, machinery, furniture, and land) and intangible assets (e.g., intellectual property, goodwill, and brand recognition). IAS 16 Property, Plant, and Equipment and IAS 38 Intangible Assets allow the use of two models when accounting for assets: cost model and revaluation model. Consider these two International Accounting Standards, as well as the related U.S. accounting standards. Think about how the revaluation model might impact U.S. accounting if it were adopted. For example, if the U.S. Securities and Exchange Commission (SEC) adopt the use of the International Accounting Standards (including IAS 16 and 38), should they permit companies to use the revaluation model or should they continue to require companies to use the cost model of accounting? With these thoughts in mind discuss a differentiation of the cost and revaluation models of accounting. Evaluate the potential impact of the revaluation model on U.S. accounting. Provide your position for or against the use of revaluation accounting within the United States. Be sure to support your response with references to this week's Learning Resources (half Page).
2. Application: International Harmonization vs. Convergence
The move to establish international accounting standards is not a new development in the accounting field. For decades, standard setting boards have been calling for the need for globalized standards. Initially, efforts were made to establish the international harmonization of standards. However, in more recent years, standard setting boards have moved to establishing the international convergence of accounting standards.
While some literature uses the terms harmonization and convergence interchangeably, the IASB and FASB have assigned distinct meanings to these words. With this in mind, think about the difference between international harmonization and international convergence. Consider why harmonization issues led to the IASB and FASB promoting the convergence of international reporting standards through the production of the conceptual framework. Determine the impact of the convergence of financial reporting standards on multinational companies.
Assignment:
Write a 2- to 3-page paper analyzing the difference between international harmonization and international convergence of financial reporting standards. In your analysis, explain why harmonization issues have led to the IASB and FASB promoting the convergence of international reporting standards through the production of a conceptual framework. Evaluate the impact of the convergence of financial reporting standards on multinational companies.