International accounting and financial reporting are the accounting standards which are based on accounting interpretations and the framework as they have been stipulated by the international accounting Standards Board which were formed in 1989.
It is a business trend and technique that the financial report of a business enterprise should be prepared at the end of the financial period. The financial period in this case may be at the end of the year or the middle of the year.
Whichever the case, the system adopted in making the financial report made is referred to as the Interim financial report system (IFRS) (IASB, 2009, p.405).
This paper seeks to compare the non-accounting variables that might influence the disclosure and financial reporting regulations in developing and non-developing countries.
The time at which the financial report is prepared depends on the organizations mode of operation and when the company started counting it is fiscal year.
In other terms, international Accounting and financial reporting permits one to have an understanding of how IFRS are interpreted and their application in preparing the financial statements (IFRS, 2008). Financial Reporting is a system which is stipulated and has a guideline which ought to be followed to the latter.
The financial service mostly comprises of three steps and this includes; 1. The status of international accounting system board (IASB) – entails integrating the project to bring authenticity of the accounting records; 2 An account for the foreign companies, and for this matter only those that keep their files with the IFRFS; and 3. Documents having major accounting standards that affects the foreign investments.
Contents in International Accounting and Financial Reporting
The system is updated on a quarterly basis and is based on the following procedure ‘
- It is an accounting procedure which classifies diverse sets of standards within the accounting option
- It also highlights a numerous examples of IFRS which can be computed in compliance to the standards
- The international finance report system (IFRS) has a capability to disclose all the requirements needed in making the report.
- It holds a good number of examples on financial statement presentation and supporting evidence from the original IFRS, both the yearly and quarterly reports.
- It also maintains numerous extracts from recent form 20-F filings and this discloses on the variations from the U.S.A. G.A.A.P.
- It also harbors a swift reference material which discloses relevant differences which subsist between IFRS and U.S G.A.A.P.
Non-accounting variables that might influence the disclosure and financial reporting in a developed country (U.S.A)
Non – accounting variables are the costs or the conservatives which do no change with any changes within the organizations, they are more of the fixed variables. In other words they remain untouched regardless of whatever happens within the organization.
United States of America is considered as one of the developed Nations among nations, and this therefore will be the reference in relation to the developed countries. It is the role of the financial officer to present financial report and this should portray transparency, accountability besides being very authentic.
Some factors within the organization may compel or influence presentation of financial reporting since they may appear very crucial within the organization (IASB, 2008, p.2500).
Information technology in the developing countries is one of the aspect or a non-accounting variable which may influence presentation of financial reporting. Unlike in the developing countries such as Zimbabwe, the factor has well been embraced in almost all the organization.
This has been a bit easy since most of the emerging trends within the organizations are from the developed countries. For instance, Automation is a non- accounting variable which has greatly influenced making of financial reporting.
As an emerging trend it may impact great changes within the organization because the manual labor used in accounting for products is changed but in a way but at the same time their no effect in the production quota.
This means that it remains to be a fixed variable since the change in technology does not influence the working conditions of the employees. This is because the developed nations have been used to diverse technologies and thus any changes do not affect the production (IASB, 2009, p.405).
However, it influences disclosure of financial re porting since introduction of technology into an organization means a lot of finances have been used thus ought to be accounted for in order to portray transparency and accountability both internally and externally.
This sets an organization on better position as opposed to those organizations which do not distinguish between the variables. This raises eyebrows as to why investors do invest in the developed countries instead of uplifting the developing countries.
Organizational structure within an organization is another non-accounting variable which may not affect the production process within the organization but may influence disclosure of financial reporting.
A well set up organizational structure is a strong determinant for a stable and consistent organization as the hierarchy is well defined and therefore no conflict of duties or dies. Each person is satisfied and contented with his or her position and this comes from the favorable working conditions besides satisfactory payments.
In essence, this will boost their motivation and thus increasing the rate of production and therefore accelerating the sales. In order to upshot this within the organization; a report ought to be prepared to the shareholders in order to alert them (Timothy, 2007, p.100).
The changes in organizational structure made by the strategic management team may be required to be financed, thus a need to also effect this in the books of account.
Environmental uncertainties are another non-variable factor which compel or influence an organization to disclose the financial report regulations. Though, an organization may try as much as possible not to disclose some vital information regarding it is operations, some un-predetermined factors may force them to reveal.
Natural calamities for instance, earthquakes may dilapidate an organization but since the developed nations such as the U.S have always kept some reserves for such miss-happenings, may try to cover up the mess by reimbursing everything to its original situation but it may be difficult.
The difficulty in this case may be lack of enough resources to cover up the mess and due to fear that the organization may lose reputation by collapsing, they may decide to open up and ask for finances from outside sources.
The borrowing of funds will therefore be determined by the financial report. The lenders will be in a position to decide whether the business was a going concern or not.
New management accounting policies is another factor which may influence an organization to disclose their financial report.
Developed countries work under the healthy competition strategy and since the organizations have common objective of making profit and boosting their own economy, they are compelled to disclose some of the vital information within the financial report in order to keep them moving.
Non-accounting variables which might influence disclosure of financial report in developing countries (Zimbabwe)
Developing countries such as Zimbabwe experience many non-accounting variables as compared to developed nations. To begin with, management credibility is one of the major factors that affect the reporting of organizations’ financial positions in a rather shaky economy of Zimbabwe.
Transparency, accountability and trustworthy among the management team is a factor which has in a way affected the overall organizations in the developing world or nations. This being a non- accounting variable has extensively compelled most of the organizations to openly expose their financial for the public interest.
This is another way to reveal those that behind the fall or collapse of a given organization. When the responsible find themselves in such circumstances and they have no other ways to cover up the reputation of the organization they disclose the documents to the public (Timothy, 2007, p.200).
Market share is seen as another factor. Market share is the amount of portion which an individual or an organization holds out of a given proportion.
Since it is a fixed asset and cannot directly affect the production of the country since the company does not depend on its operations, it always appears on the financial accounts as an additional capital.
Due to the instability and inconsistency of most of the organizations in Zimbabwe, any minor changes in the additional capital will have an impact in the whole system and thus this may influence disclosure of the same in the financial report.
Moreover, developing countries might find it difficult to be able to maintain the competent and skilled manpower within the organization.
Therefore, this being a non-accounting variable may influence the organization to disclose its financial report to the shareholders and public with an aim of getting viable and incompetent workforce who may demand for less fee for the services offered.
This is a factor which has made the developing countries to remain in the same state for quite a long time (Jerry, Et al, 2009, p.250).
In conclusion, financial reporting is essential in any organization and managers are urged to consider the non-financial variables that may influence this disclosure. The US and Zimbabwe are the countries analyzed in this paper.
The major non-financial variable in US is information technology since many organizations are compelled to provide information that can be audited using computer applications. In Zimbabwe the main factor is management credibility which aims at withstanding the shaky economy in the country.
Other factors in both countries include market structure, organizational structure, and ability to retail talented employees. It is therefore essential for any organization seeking to enter the international market to consider all the non-accounting variables in order to have proper management plans.
References
IASB, 2009, International Financial Reporting Standards, New York: Kluwer.
International Accounting Standards Board, 2008, International Financial Reporting Standards IFRS, 2008, International Accounting Standards Board Chicago: Kluwer.
International Accounting Standards Board , 2008, International Financial Reporting Standards (IFRSs®) 2008: Chicago: Kluwer.
Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso, 2009, Financial Accounting, Edition7, New York: John Wiley and Sons.
Timothy, J, 2007, Advances in International Accounting, Volume 20, Elsevier Book Series on Science Direct, Chicago: Elsevier.