Case2-1

Part 1 With the respect to the accounting value of conservatism, Gary has argued that the relations between cultural dimension and accounting value, and theorize a hypothesis that a country has a higher rank on culture dimensions of long-term orientation, that the country which has a lower rank on individualism and masculinity, and higher ranks on conservatism. This hypothesis obviously manifested that different countrys culture dimensions has a different implications of conservatism. The globalization serves the chance to the international business and investor to be involved in a wider market, but also brings the diversity of the accounting value of the conservation. Without a unified accounting stander, the financial report would normally lack of reference value, because of the diversity of the conservation which is sensitive to the recognition of liability or asset decreasing or increasing net income. Under this situation, people should analyses the different culture dimensions and what accounting value lead the most under different culture. What degree of conservatism could be suitable for the international accounting standers is the core problem should be analyses base on study of Grays research. Through all the information which be collected, we need create a stander which could suitable on major part of the world. This stander could have an appropriate conservatism degree, which most users could accept. Therefore, the general purpose of the global convergence of financial reporting standers is providing the financial information for wide range of the user without diversity of conservatism, help the users make right economic decisions.

Part 2 Religion and environment would play an important role in defining national culture and deeply affect business daily practice. Culture difference is the most effective indicator of diversities in accounting value, further more affect the accounting reporting standers. Over view the world, the specific area has created individual accounting system standers. Malaysian is an Islamic country, which accounting stander called MASB. This MASB all the ruling and issues are related to Shariah, item names in financial report would different from normal accounting standers. Another example is Koran has provided the guidance to the issue making charitable contribution and charging interest on loans with the respect to Islam (Doupnik, 2007). The reporting standers and accounting standers are all created with the respect to the

local culture. The United Kingdom is a self-sufficient country with strong equity-outsider system. New Zealand was dominated by United Kingdom in history, because the same culture, the accounting system would similar to the United Kingdom. The most significant areas in which differences would lead to difference in the application of financial reporting rule is different purpose for reporting. This theory is created by Nobes, he argues that a countrys financial system is mainly determined by weather the country has a large number of out-side shareholder and the strong equity financial system. The financial system in the world be classified into two class, based on the weather the out-sider shareholder equity financing system strong or not.

Case6-1
Question 1: As we know, the amount of net profit reported under PRC GAAP is lower than the net profit reported under IFRS, there are several reasons cause the differences between PRC GAAP and IFRS, the basic reason is when China wants to step into capital market, in order increase the comparability of the financial information, it should transfer its own accounting standard PRO GAAP to international accounting standard which is IFRS, some adjustments should be taken in order to finish the transfer process, there are some inherent differences between PRC GAAP and IFRS due to the different culture, society, political, government, economic situation and taxation rules, according to Gary(1988), cultural value is a big influence on accounting standard, also Hofstede(1980) said, society value is another factor which have impact on accounting standard, so there must have some material differences exist, in order to increase the comparability of financial statements at financial report level, it is necessary for local company to make some adjustments to eliminate to differences. The adjustments are based on the net profit under PRC GAAP, and then lead the different outcome come out; the analyzing should be made in details. Firstly, depreciation of oil and gas properties, the depreciation methods used for the PRC GAAP and IFRS are different, for PRC GAAP, using the straight-line basis, but for IFRS, using unit of production method. Secondly, the disposal methods of oil and gas properties are different between PRC GAAP and IFRS, for PRC GAAP, it recognizing the gains or losses of disposal as income or expense (disposal price-carrying). But for IFRS, recognizing the gains or losses of disposal only disposal an entire property, the disposal costs also is charged to accumulated depreciation. Thirdly, capitalization of general borrowing costs, for PRC GAAP, the

borrowing cost will be classified as cost of fixed assets, but for IFRS, the borrowing cost should be treated as cost of obtaining a qualifying asset. Fourthly, under PRC GAAP, when a company acquiring another company by using acquisition method, including acquiring subsequent of the acquired company, but for IFRS, when a parent acquiring sub-company, it will be treated as pooling-of-interests. Fifthly, for PRC GAAP, the sale of additional shares by subsidiary will be classified as capital reserve, but for IFRS, it should be recorded as income. Sixthly, gain from debt restructuring, for PRC GAAP, the gain from debt restructuring should be treated as capital reserve, but for IFRS, the gain from debt restructuring should be treated as income. Seventhly, revaluation of land use right, for PRC, the land use right is based on the revalued amount, but for IFRS, land use right equal to historical cost minus amortization. Eighthly, unrecognized losses of subsidiaries,, for PRC, the results of subsidiaries are included in the consolidated statement to the extent that the subsidiaries accumulated losses do not result in their carrying amount being reduced to zero, but for IFRS, the results of subsidiaries are included in the consolidated statement from the beginning of control and till the ending of the control. Ninthly, pre-operating expenditures, for PRC, the expense on start-up activities should be aggregated in long term deferred expenses, but for IFRS, I should be treated as expense immediately. (Doupnik & Perera, 2012)

Question 2 In this part we will discuss the difference between the IFRS and U.S. GAAP in the net profit figure report. Even though from our case only the difference in the profit attributable to shareholders can be found, so we may consider that the total amount of profit attributable to shareholder can be treated as net profit. The first difference is the foreign exchanges gains and losses. In the IFRS foreign exchange differences on found should be capitalized as property, plant and equipment however in U.S. GAAP, all the foreign exchanges can be included in current earnings in the report. The second difference is that in the IFRS, the interest and pre-production of the property, plant and equipment would be capitalization, and those were reserved and expensed under the U.S. GAAP(Doupnik, 2011, page 333) The next difference is occurred in revaluation of asset. In IFRS when the asset revaluation has a deficit, it carried as a cost, if there is a surplus, it carried to the retained earnings. However in the U.S. GAAP, when the asset revaluation has a deficit , it carried as historical cost and less accumulated depreciation, if there is a surplus in the asset revaluation it carried as historical cost and included in the current earnings. And actually it is the most impact on the change in reported profit, because in the asset revaluation and depreciation there are three areas would be different in the

U.S. GAAP and IFRS, and then the depreciation and revaluation always is a large part in the net profit reporter. The other difference area is in exchange of assets, under the IFRS the cost for the asset exchange is measured as the fair value, on the other hand under the U.S. GAAP, the cost for the asset exchange is measured as the historical cost. For the impairment of long-lived assets, when the carrying amount over the assets net selling value, it should be consider as the impairment charges in the IFRS, however in the U.S. GAAP when the expected future cash flow for the long-lived assets is less than the carrying amount ,it would be recognized as the impairment(Doupnik, 2011, page 333). There is also a difference in the capitalized interest on investment in associates, under the IFRS, with the interest is capitalized, the investment would not consider as the qualifying asset, however in the U.S. GAAP, when the interest is capitalized, it still can carried as the qualifying asset. As the above mentioned , that are the all difference between the U.S. GAAP and IFRS in the net profit figure reported , and both of these differences caused the profit under the IFRS being lower than the profit under the U.S. GAAP especially the revaluation of property, plant and equipment has the most impact on change in reported profit.

Question 3 The US readers that read financial statement are thinking that the financial statement is useful. The financial statements are financial data document that issued by the company in a year, semi-annual, quarterly or monthly basis. Because the aim of financial statement is to provide useful economic decision-making information. Especially, the data should be used to make investment and credit decisions. Financial statements should provide reliable financial condition information of the company. At the same time, the statement ingredients and category can help managers make decision. Financial statements may provide information to the authority of the specified requirements and supervision organization. Because management understand most of business, this is to encourage identify in some cases and explain their financial influence enterprise. To compare the differences between PRC and US GAAP. There are many differences between PRC and US GAAP and have many same parts as well. The common things are both of the two principles are accuracy, validity, timeliness, consistency, accrual basis of accounting and completeness. But the reason that cause the US GAAP is the internationally recognized system integrity, system perfect accounting standards is based on the difference between PRC and US GAAP.

For US readers of financial statement the difference is the most valuable things for them. For example, just like the employee benefit, PRC GAAP do not addressed in existing regulations and employee stock option plans are also not addressed, in practice, employee benefit expenses will only be recognized as incurred. This is the weak part for PRC GAAP. But for US readers, the employee benefit has been clearly addressed. An enterprise should recognize a liability when an employee has provided service in exchange for employee benefits to be paid in the future and detailed rules stipulating the accounting and disclosures for defined benefit and defined contribution plans and ESOP. The second example is about the Financial Reporting in Hyperinflationary Economies. For PRC GAAP, there is silent on the issue. But US readers can have the benefit from the financial statement, because US GAAP has set the financial statements of a foreign entity that reports in the currency of a hyperinflationary economy can be stated in order to measuring unit current at the balance sheet date. US readers can get the information from the financial statement which is making via US GAAP and know the effect of the hyperinflationary economy and use the information make the right decision. So the US readers can get the most useful information from the financial statement, because the US GAAP can disclosure more information that PRC GAAP, US GAAP can have a good transparency than PRCs.

Reference list
Doupnik T & Perera, 2012 International Accounting, third edition. Gray, S.J. 1988.Towards a theory of cultural influence on the development of accounting Systems internationally. Abacus. Vol. 24: 1-15. Hofstede, G. 1980. Culture's consequences: International differences in work-related values. London: Sage Publications.