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Essay on International Accounting Standards
What are the five elements of a high quality global financial reporting structure?
To be effective, financial reporting and disclosure standards must be part of a financial reporting and disclosure system or infrastructure that ensures these standards are properly and consistently applied. Such a system must have the following five elements:
- Well-specified and understandable financial reporting and disclosure standards;
- Ethical, trained preparers;
- Ethical, trained and independent auditors;
- Effective regulatory oversight and enforcement, including the threat of litigation, economic and criminal penalties for fraud and non-compliance; and
- Shareholder and investor responsibility and involvement in corporate governance.
What are some exceptions to the general rule that a foreign private issuer using accounting standards other than U.S. GAAP must provide an audited reconciliation to U.S. GAAP?
Regulation G does not apply to public disclosure of a non-GAAP financial measure by, or on behalf of, a registrant that is a foreign private issuer if: (Orrick, 2003)
- The securities of the foreign private issuer are listed or quoted on a securities exchange or inter-dealer quotation system outside the United States;
- The non-GAAP financial measure is not derived from or based on a measure calculated and presented in accordance with generally accepted accounting principles in the United States; and
- The disclosure is made by or on behalf of the foreign private issuer outside the United States, or is included in a written communication that is released by or on behalf of the foreign private issuer outside the United States.
The SEC has determined that the exception outlined above shall continue to apply, notwithstanding the existence of one or all of the following circumstances:
A written communication is released in the United States as well as outside the United States, so long as the communication is released in the United States.........
