Now in its tenth edition, Comparative International Accounting by Nobes and Parker is renowned for
its depth of discussion and comprehensive coverage of the international dimensions of financial
accounting and reporting.
Comparative International Accounting has been extensively revised for the many changes in international
accounting since the last edition.
New to this edition are:
An additional chapter on how the practice of IFRS
•
can vary within a country and between countries
Updated case studies and an increased number of
•
real-world examples
New information on pension accounting, auditing
•
standards and IFRS 8
Increased coverage of China and of small and
•
medium enterprises (SMEs)
•
Contributions from a diverse group of international
practitioners and academics, which are updated
every two years to incorporate the latest
developments in the field
Christopher Nobes is Professor of Accounting at Royal Holloway, University of London. From 1993 to 2001 he was
a representative on the board of the International Accounting Standards Committee.
Robert Parker is Emeritus Professor of Accounting at the University of Exeter, UK. He was formerly editor of the
journal, Accounting and Business Research.
Both authors have received the American Accounting Association’s award of ‘outstanding international accounting
educator’.
Revised resources for lecturers are available to download at www.pearsoned.co.uk/nobes.
an imprint of
CVR_NOBE4767_10_SE_CVR.indd 1
Front cover image: © Getty Images/Iconica
Comparative
International Accounting
It uncovers the conceptual and contextual foundations of the increasingly used International
Financial Reporting Standards (IFRS) and contrasts them with US generally accepted accounting
principles (GAAP). Nobes and Parker examine the key issues inherent in the subject, such as transition,
harmonization and political lobbying, and the international differences that remain. They also look at the
special accounting problems of multinational companies.
Tenth
Edition
Christopher Nobes and Robert Parker
Comparative
International
Accounting
Tenth Edition
Nobes
Parker
www.pearson-books.com
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COMPARATIVE
INTERNATIONAL ACCOUNTING
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We work with leading authors to develop the strongest
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Tenth Edition
COMPARATIVE
INTERNATIONAL
ACCOUNTING
Christopher Nobes
and
Robert Parker
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Pearson Education Limited
Edinburgh Gate
Harlow
Essex CM20 2JE
England
and Associated Companies throughout the world
Visit us on the World Wide Web at:
www.pearsoned.co.uk
First edition published in Great Britain under the Philip Allan imprint 1981
Second edition published 1985
Third edition published under the Prentice Hall imprint 1991
Fourth edition published 1995
Fifth edition published under the Prentice Hall imprint 1998
Sixth edition published 2000
Seventh edition published 2002
Eighth edition published 2004
Ninth edition published 2006
Tenth edition published 2008
© Prentice Hall Europe 1991, 1995, 1998
© Pearson Education Limited 2000, 2002, 2004, 2006, 2008
Chapter 18 © John Flower 2002, 2004, 2006, 2008
The rights of Christopher Nobes and Robert Parker to be identified as authors
of this work have been asserted by them in accordance with the Copyright,
Designs and Patents Act 1988.
All rights reserved. No part of this publication may be reproduced, stored in a
retrieval system, or transmitted in any form or by any means, electronic, mechanical,
photocopying, recording or otherwise, without either the prior written permission of the
publisher or a licence permitting restricted copying in the United Kingdom issued by
the Copyright Licensing Agency Ltd, 6–10 Kirby Street, London EC1N 8TS.
ISBN: 978-0-273-71476-7
British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging-in-Publication Data
Comparative international accounting / [edited by] Christopher Nobes
and Robert Parker. – 10th ed.
p. cm.
Includes bibliographical references and index.
ISBN-13: 978-0-273-71476-7 (alk. paper) 1. Comparative accounting.
I. Nobes, Christopher. II. Parker, R. H. (Robert Henry)
HF5625.C74 2008
657— dc22
2008007524
10 9 8 7 6 5
12 11 10 09
4
3
2
Typeset in 9.5/12.5pt Stone Serif by 35
Printed by Ashford Colour Press Ltd., Gosport
The publisher’s policy is to use paper manufactured from sustainable forests.
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Brief contents
Contributors
Preface
xvi
xviii
Part I SETTING THE SCENE
1
2
3
4
Introduction
Causes and examples of international differences
International classification of financial reporting
International harmonization
3
24
51
74
Part II FINANCIAL REPORTING BY LISTED GROUPS
5
6
7
8
9
10
The context of financial reporting by listed groups
The requirements of International Financial Reporting Standards
Different versions of IFRS practice
Financial reporting in the United States
Enforcement of Financial Reporting Standards
Political lobbying on Accounting Standards – US, UK and
international experience
101
117
145
157
189
206
Part III HARMONIZATION AND TRANSITION IN EUROPE
AND EAST ASIA
11
12
Harmonization and transition in Europe
Harmonization and transition in East Asia
237
257
Part IV FINANCIAL REPORTING BY INDIVIDUAL COMPANIES
13
14
15
The context of financial reporting by individual companies
Making accounting rules for non-listed business enterprises in Europe
Accounting rules and practices of individual companies in Europe
285
293
314
Part V MAJOR ISSUES IN FINANCIAL REPORTING BY MNEs
16
Key financial reporting topics
343
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Brief contents
17
18
19
Consolidation
Foreign currency translation
Segment reporting
368
384
427
Part VI ANALYSIS AND MANAGEMENT ISSUES
20
21
22
23
International financial analysis
International auditing
International aspects of corporate income taxes
Managerial accounting
Glossary of abbreviations
Suggested answers to some of the end-of-chapter questions
Author index
Subject index
457
481
510
531
558
563
583
587
Supporting resources
Visit www.pearsoned.co.uk/nobes to find valuable
online resources
For instructors
I
Complete, downloadable Instructor’s Manual,
Convenience. Simplicity. Success.
including answers to the end of chapter questions
in the text, additional questions for further study and multiple choice questions
(with answers).
I
PowerPoint slides of the figures and tables in the book that can be downloaded
and used as OHTs
For more information please contact your local Pearson Education sales representative
or visit www.pearsoned.co.uk/nobes.
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Contents
Contributors
xvi
xviii
Preface
Part I SETTING THE SCENE
1 Introduction
Contents
Objectives
1.1
1.2
1.3
1.4
1.5
Differences in financial reporting
The global environment of accounting
The nature and growth of MNEs
Comparative and international aspects of accounting
Structure of this book
Summary
References
Useful websites
Questions
2 Causes and examples of international differences
3
3
3
4
5
12
15
18
21
21
22
22
24
Contents
Objectives
24
24
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
25
25
28
29
33
35
36
37
38
Introduction
Culture
Legal systems
Providers of finance
Taxation
Other external influences
The profession
Conclusion on the causes of international differences
Some examples of differences
Summary
References
Questions
46
47
50
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Contents
3 International classification of financial reporting
51
Contents
Objectives
51
52
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
3.10
52
53
53
55
56
60
66
67
69
69
Introduction
The nature of classification
Classifications by social scientists
Classifications in accounting
Extrinsic classifications
Intrinsic classifications: 1970s and 1980s
Developments related to the Nobes classification
Further intrinsic classification
Is there an Anglo-Saxon group?
A taxonomy of accounting classifications
Summary
References
Questions
4 International harmonization
70
71
73
74
Contents
Objectives
74
74
4.1
4.2
4.3
4.4
4.5
75
76
78
87
91
Introduction
Reasons for, obstacles to and measurement of harmonization
The International Accounting Standards Committee
Other international bodies
The International Accounting Standards Board
Summary
References
Useful websites
Questions
94
95
97
98
Part II FINANCIAL REPORTING BY LISTED GROUPS
5 The context of financial reporting by listed groups
101
Contents
Objectives
101
101
5.1
5.2
5.3
5.4
5.5
5.6
101
102
105
106
108
110
Introduction
IFRS in the EU
Adoption of, and convergence with, IFRS
Foreign listing and foreign investing
Reconciliations from national rules to US GAAP and IFRS
High-level IFRS/US differences
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Contents
5.7
5.8
Reconciliations from IFRS to US GAAP
Convergence of IFRS and US GAAP
Summary
References
Useful websites
Questions
6 The requirements of International Financial
Reporting Standards
111
113
114
115
116
116
117
Contents
Objectives
117
118
6.1
6.2
6.3
6.4
6.5
6.6
118
118
125
128
130
131
Introduction
The conceptual framework and some basic standards
Assets
Liabilities
Group accounting
Disclosures
Summary
References
Further reading
Useful websites
Questions
Appendix 6.1 An outline of the content of International
Financial Reporting Standards
7 Different versions of IFRS practice
132
132
133
133
133
134
145
Contents
Objectives
145
145
7.1
7.2
7.3
7.4
145
146
148
154
Introduction
Motivations for different IFRS practice
Scope for different IFRS practice
Conclusion
Summary
References
Questions
8 Financial reporting in the United States
155
155
156
157
Contents
Objectives
157
158
8.1
8.2
158
159
Introduction
Regulatory framework
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Contents
8.3
8.4
8.5
8.6
8.7
8.8
8.9
Accounting standard-setters
The conceptual framework
Contents of annual reports
Accounting principles
Consolidation
Audit
Differences from IFRS
Summary
References
Further reading
Useful websites
Questions
9 Enforcement of Financial Reporting Standards
163
166
169
174
181
183
184
186
186
187
188
188
189
Contents
Objectives
189
189
9.1
9.2
9.3
9.4
9.5
189
190
194
195
201
Introduction
Modes and models of enforcement
United States
European Union
Australia
Summary
References
Useful websites
Questions
10 Political lobbying on Accounting Standards – US,
UK and international experience
202
202
204
205
206
Contents
Objectives
206
206
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
207
208
210
220
224
228
229
231
Introduction
Motivations for political lobbying
Political lobbying up to 1990
US political lobbying from 1990
Political lobbying of the IASC/IASB
Preparer attempts to control the accounting standard-setter
Political lobbying of the FASB’s convergence with the IASB
Some concluding remarks
Summary
References
Useful websites
Questions
231
232
234
234
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Contents
Part III HARMONIZATION AND TRANSITION IN EUROPE
AND EAST ASIA
11 Harmonization and transition in Europe
237
Contents
Objectives
237
237
11.1 Introduction
11.2 Harmonization within the European Union
11.3 Transition in Central and Eastern Europe
238
238
244
Summary
References
Useful websites
Questions
253
253
256
256
12 Harmonization and transition in East Asia
257
Contents
Objectives
257
257
12.1 Introduction
12.2 Japan
12.3 China
258
258
272
Summary
References
Further reading
Useful websites
Questions
Appendix 12.1 ASBE Standards
277
278
280
280
280
282
Part IV FINANCIAL REPORTING BY INDIVIDUAL COMPANIES
13 The context of financial reporting by
individual companies
285
Contents
Objectives
285
285
13.1 Introduction
13.2 Outline of differences between national rules and
IFRS or US GAAP
13.3 The survival of national rules
13.4 Financial reporting, tax and distribution
13.5 Special rules for small or unlisted companies
285
Summary
References
292
292
286
286
289
290
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Contents
Useful websites
Questions
14 Making accounting rules for non-listed business
enterprises in Europe
292
292
293
Contents
Objectives
293
293
14.1 Introduction
14.2 Who makes accounting rules?
14.3 Which business enterprises are subject to accounting rules?
293
294
303
Summary
References
Further reading
Useful websites
Questions
Appendix 14.1 Contents of the Plan comptable général
Appendix 14.2 Financial accounting chart of accounts
307
308
309
310
311
312
313
15 Accounting rules and practices of individual
companies in Europe
314
Contents
Objectives
314
314
15.1
15.2
15.3
15.4
314
315
319
324
Introduction
France
Germany
United Kingdom
Summary
References
Further reading
Useful websites
Questions
Appendix 15.1 Formats for French financial statements
Appendix 15.2 Formats for German financial statements
Appendix 15.3 Formats for British financial statements
326
326
327
327
327
328
333
336
Part V MAJOR ISSUES IN FINANCIAL REPORTING BY MNEs
16 Key financial reporting topics
343
Contents
Objectives
343
343
16.1 Introduction
344
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16.2
16.3
16.4
16.5
16.6
16.7
16.8
16.9
Recognition of intangible assets
Asset measurement
Financial instruments
Provisions
Employee benefits
Deferred tax
Revenue recognition
Comprehensive income
Summary
References
Questions
17 Consolidation
344
345
347
350
354
358
362
364
365
366
366
368
Contents
Objectives
368
368
17.1
17.2
17.3
17.4
17.5
17.6
17.7
369
369
370
371
375
376
377
Introduction
Rate of adoption
The concept of a ‘group’
Harmonization from the 1970s onwards
Definitions of group companies
Publication requirements and practices
Techniques of consolidation
Summary
References
Further reading
Questions
18 Foreign currency translation
381
382
382
382
384
Contents
Objectives
384
385
18.1
18.2
18.3
18.4
18.5
18.6
18.7
18.8
18.9
18.10
18.11
385
389
395
398
401
406
409
411
413
419
423
Introduction
Translation of transactions
Introduction to the translation of financial statements
The US initiative
The temporal method versus the closing rate method
FAS 52
IAS 21
Translation of comprehensive income
Accounting for translation gains and losses
Research findings
An alternative to exchange rates?
Summary
References
423
424
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Contents
Further reading
Questions
19 Segment reporting
425
425
427
Contents
Objectives
427
427
19.1
19.2
19.3
19.4
427
432
433
443
What is segment reporting?
The need for segment information
Disclosure regulations
Evidence on the benefits of segment reporting
Summary
References
Questions
450
451
453
Part VI ANALYSIS AND MANAGEMENT ISSUES
20 International financial analysis
457
Contents
Objectives
457
457
20.1
20.2
20.3
20.4
20.5
458
458
463
470
474
Introduction
Understanding differences in accounting
Disclosure practices in international financial reporting
Interpreting financial statements
Financial analysis and the capital market
Summary
References
Useful websites
Questions
21 International auditing
477
478
480
480
481
Contents
Objectives
481
481
21.1
21.2
21.3
21.4
482
484
489
495
Introduction
Reasons for the internationalization of auditing
Promulgating international standards
The international audit process
Summary
References
Further reading
Useful websites
Questions
507
508
508
508
509
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Contents
22 International aspects of corporate income taxes
510
Contents
Objectives
510
510
22.1
22.2
22.3
22.4
22.5
22.6
511
513
517
518
519
525
Introduction
Tax bases
International tax planning
Transfer pricing
Tax systems
Harmonization
Summary
References
Further reading
Useful websites
Questions
23 Managerial accounting
527
527
529
529
529
531
Contents
Objectives
531
531
23.1
23.2
23.3
23.4
23.5
23.6
23.7
532
533
535
539
540
549
551
Introduction
The balanced scorecard as an overview tool
Currency and control
Variances and foreign exchange
Culture and management accounting
Control and performance
Looking forward
Summary
References
Questions
553
554
557
Glossary of abbreviations
558
Suggested answers to some of the end-of-chapter questions
563
Author index
583
Subject index
587
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Contributors
Co-editor, author of Chapters 2, 3, 4, 5, 6, 7, 8, 12, 13, 16 and 22, and co-author of
Chapter 17
Christopher Nobes Professor of Accounting at Royal Holloway College, University of London. He has also taught in Australia, Italy, the Netherlands, New Zealand,
Scotland, Spain and the United States. He is currently a visiting professor at the
Norwegian School of Management. He was the 2002 ‘Outstanding International
Accounting Educator’ of the American Accounting Association. He was a member
of the Accounting Standards Committee of the United Kingdom and Ireland from
1986 to 1990, and a UK representative on the Board of the International Accounting
Standards Committee from 1993 to 2001. He is vice-chairman of the accounting
committee of the Fédération des Experts Comptables Européens.
Co-editor, author of Chapters 1, 9, 11, 14 and 15, and co-author of Chapter 17
Robert Parker Emeritus Professor of Accounting at the University of Exeter and
former professorial fellow of the Institute of Chartered Accountants of Scotland.
He has also practised or taught in Nigeria, Australia, France and Scotland and was
editor or joint editor of Accounting and Business Research from 1975 to 1993. He was
the British Accounting Association’s ‘Distinguished Academic of the Year’ in 1997,
and the 2003 ‘Outstanding International Accounting Educator’ of the American
Accounting Association.
Authors of other chapters
Jan Buisman IFRS Senior Technical Partner for PricewaterhouseCoopers in
Sweden and partner in the firm’s Global Corporate Reporting Group. He was formerly the Netherlands representative on the International Auditing Practices
Committee, and chairman of Royal NIVRA’s Auditing Standards Board. He is now
chairman of the Accounting Practices Committee of FAR in Sweden. (Co-author of
Chapter 21)
John Flower Formerly, Director of the Centre for Research in European Accounting (Brussels), and earlier with the Commission of the European Communities and
Professor of Accounting at the University of Bristol. He now lives in Germany.
(Chapter 18)
Graham Gilmour Senior Manager in the Global Corporate Reporting Group of
PricewaterhouseCoopers. (Co-author of Chapter 21)
Stuart McLeay Professor of Treasury at the University of Wales, Bangor. Formerly,
he worked as a chartered accountant in Germany, France and Italy, and was a financial analyst at the European Investment Bank. Co-editor of the ICAEW European
Financial Reporting series. (Chapter 20)
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Contributors
Clare B. Roberts Professor of Accounting at the University of Aberdeen Business
School. (Chapter 19)
Stephen Salter Associate Professor and Director of the Center for Global Competitiveness at the University of Cincinnati. Formerly, he was a partner at Ernst &
Young Management Consultants. (Chapter 23)
Stephen A. Zeff Herbert S. Autrey Professor of Accounting at Rice University.
(Chapter 10)
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Preface
Purpose
Comparative International Accounting is intended to be a comprehensive and coherent text on international financial reporting. It is primarily designed for undergraduate and postgraduate courses in comparative and international aspects of
accounting. We believe that a proper understanding requires broad overviews (as in
Part I), but that these must be supported by detailed information on real countries
and companies (as in Parts II to IV) and across-the-board comparisons of major
topics (as in Parts V and VI).
This book was first published in 1981. This present edition (the tenth) is a complete updating of the ninth edition which constituted the most extensive revision
that we had ever made. One chapter (7) has been added: an examination of the possible motivations and opportunities for different national versions of IFRS practice.
A revised manual for teachers and lecturers is available from http://www.
pearsoned.co.uk/nobes. It contains several numerical questions and a selection of
multiple-choice questions. Suggested answers are provided for all of these and for
the questions in the text. In addition, there is now an extensive set of PowerPoint
slides.
Authors
In writing and editing this book, we have tried to gain from the experience of those
with local knowledge. This is reflected in the nature of those we thank below for
advice and in our list of contributors. For example, the original chapter on North
America was co-authored by a Briton who had been assistant research director of
the US Financial Accounting Standards Board; his knowledge of US accounting was
thus interpreted through and for non-US readers. The amended version is by one of
the editors, who has taught in several US universities. This seems the most likely
way to highlight differences and to avoid missing important points through overfamiliarity. The chapter on political lobbying has been written by Stephen Zeff, an
American who is widely acknowledged as having the best overview of historical and
international accounting developments. Other contributors presently live or work
in Germany, in Sweden and in the United States.
Structure
Part I sets the scene for a study of comparative international financial reporting.
Many countries are considered simultaneously in the introductory chapter and
when examining the causes of the major areas of difference (Chapter 2). It is then
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Preface
possible to try to put accounting systems into groups (Chapter 3) and to take the
obvious next step by discussing the purposes and progress of international harmonization of accounting (Chapter 4).
All this material in Part I can act as preparation for the other parts of the book.
Part I can, however, be fully understood only by those who become well-informed
about the contents of the rest of the book, and readers should go back later to
Part I as a summary of the whole.
Part II examines financial reporting by listed groups. In much of the world
this means, at least for consolidated statements, using the rules of either the
International Accounting Standards Board or the United States. In addition to an
overview and chapters on these two ‘systems’ of accounting, Part II also contains
a chapter on whether national versions of IFRS exist, one on enforcement of
accounting regulations, and one on political lobbying.
Part III contains two chapters that examine the processes of harmonization and
transition as applied in the EU and East Asia. Part IV concerns the financial reporting of individual companies, where large international differences remain. There
are three chapters: context, regulatory styles, and accounting differences.
Part V examines, broadly and comparatively, particular major financial reporting
topics: key non-consolidation issues, consolidation, foreign currency translation
and segment reporting. Part VI considers four issues of international analysis and
management: international financial analysis, international auditing, international
aspects of corporate income taxes, and managerial accounting.
At the end of the book, there is a glossary of abbreviations relevant to international accounting, suggested answers to some chapter questions, and two indexes
(by author and by subject).
Publisher’s acknowledgements
We are grateful to the following for permission to reproduce copyright material:
Table 1.4: United Nations Conference on Trade and Development (UNCTAD) (2007)
World Investment Report 2007: Transnational Companies, Exractive Industries and
Development. Geneva, UNCTAD. Copyright © United Nations 2007; Table 1.8:
United Nations Conference on Trade and Development (UNCTAD) (2007) World
Investment Report 2007: Transnational Companies, Exractive Industries and Development. Geneva, UNCTAD. Copyright © United Nations 2007; Table 2.3: Source of
data: Datastream. Reproduced by kind permission of Jon Tucker and David Bence
of Bristol Business School; Figure 3.1: American Accounting Association (1977)
Accounting Review, Supplement to Vol. 52, 1977, p. 99. Copyright © 1977 American
Accounting Association. Reproduced with permission; Figure 3.2: Puxty, A.G.,
Willmott, H.C., Cooper, D.J. and Lowe, A.E. (1987) ‘Modes of regulation in
advanced capitalism: locating accountancy in four countries’, Accounting,
Organizations and Society, Vol. 12, No. 3, p. 283. Reproduced with permission of
Elsevier; Table 3.1: Nair, R.D. and Frank, W.G. (1980) ‘The impact of disclosure
and measurement practices on international accounting classifications’, Accounting
Review, Vol. 55, No. 3, p. 429. Reproduced with permission of the American
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