Editor's note: The editor welcomes suggestions of English-language international accounting books for possible review by JIAR. Books for review should be sent to Thomas A. Carnes, Berry College, PO Box 495024, Mount Berry, GA 30149-5024. While unsolicited reviews will not be considered for publication, individuals may volunteer to be reviewers by emailing their full contact information, affiliation, and areas of expertise to Dr. Carnes at firstname.lastname@example.org.
Wolfgang Dick and Frank Missonier-Piera,
Financial Reporting under IFRS: A Topic Based Approach
WOLFGANG DICK and FRANCK MISSONIER-PIERA, Financial Reporting under IFRS: A Topic Based Approach (West Sussex, U.K.: John Wiley and Sons, 2010, I, ISBN: 978-0-470-68831-1, pp. 344).
This near 350-page book provides a summarized discussion of financial reporting under IFRS using a topic-based approach. Each of the ten chapters covers different topics of financial reporting. As we slowly move toward global accounting standards, knowledge of financial reporting under IFRS is becoming important for accountants day by day in both adopting and non-adopting countries. For example, in the United States, the Uniform CPA Examination now tests future accountants' knowledge of IFRS and international accounting. This book will serve as a handbook for accounting students, teachers, and professionals as a quick reference to different aspects of accounting under IFRS. This book may prove beneficial for CPA candidates in preparing the international accounting (IFRS) portion of the examination. However, the book does not provide a detailed discussion of the topics covered and, therefore, it may not be useful for people with no prior knowledge of financial accounting.
The concise introduction talks about the users of financial and accounting information, discusses the role of accounting information, states the objectives of the International Accounting Standards Board (IASB), and, finally, discusses the structure of the book. The last section of the introduction helps readers determine what to expect from each of the chapters in the book. However, this chapter lacks an in-depth discussion and does not even provide a brief overview of the history of international accounting and evolution of international GAAP. The discussion of the background of the IASB and IFRS is covered in the last chapter, rather than at the beginning of the book. I believe Chapter 1 of the book should be an “Introduction and History of IFRS.” This could be accomplished by bringing Chapter 10 to the front of the book.
The first part of Chapter 1, “Financial Statements and Accounting Mechanisms,” provides a brief discussion of the balance sheet and income statement, and a detailed discussion of cash flow statement. I believe that a detailed discussion of cash flow statements is premature, and should have been included later in the text as a new chapter or as a part of later chapter. The second part of this chapter briefly covers the accounting principles (IAS 1) and explains the accounting mechanism for the preparation of financial statements under IFRS using examples (referred to as “applications” in the text). The term “liabilities” has been loosely defined and used in the whole text. On page 7, “liability” is defined to carry two different meanings—(1) all financial resources available to the entity, and (2) all the obligations of the entity to third parties. To prove their point, the authors refer to Figure 1.4, saying, “The bottom line of the balance sheet entitled ‘Total liabilities' includes both current and non-current liabilities and shareholders' equity.” However, a close look at Figure 1.4 reveals that the bottom line reads “Total equity and liabilities” and not “Total liabilities,” which actually proves that the term “liability” in Figure 1.4 is used to refer to the external obligations alone. The term “equity” is used to refer to internal obligations of the business.
Chapter 2, “Income from Ordinary Activities,” briefly covers different elements of ordinary income and accounting issues pertaining to ordinary revenues and expenses (costs). However, there is no discussion of income from non-ordinary activities.
Chapter 3, “Current Assets,” and Chapter 5, “Non-current Assets,” cover several accounting issues associated with financial reporting of current and non-current assets, respectively. Chapter 5 provides only a general overview of financial reporting for non-current assets, rather than explaining each type of non-current asset (e.g., Property, Plant, and Equipment) separately. The discussion of intangible assets has been omitted and carried over to a later chapter.
Chapters 4 and 6 cover the financial reporting of liabilities and stockholders' equity. Chapter 4, “Non-financial Liabilities,” covers accounting and financial reporting issues about obligations (liabilities) that are not related to financing (debt) of the company. Chapter 6, “Financing,” on the other hand, covers the financial reporting issues associated with obligations that are related to external financing and financial reporting issues associated with stockholders' equity (internal financing). This classification of liabilities itself is a little unconventional and, hence, confusing. I believe that current versus non-current classification of liabilities is more appropriate and meaningful for financial reporting purposes.
Chapter 7, “Taxation,” discusses and illustrates financial reporting and accounting issues pertaining to income taxes, such as determination of corporate income tax, differences between pretax accounting income and taxable income, provisions of loss carryback and carry forwards. Additionally, this chapter provides an interesting discussion of accounting for a value-added tax (VAT).
Chapter 8, “Group Accounts,” is about the accounting and reporting issues pertaining to consolidated financial statements for a group of related companies. It is a concise discussion of important accounting and reporting issues associated with consolidations.
Chapter 9, “Financial Analysis and Communication,” provides an appropriate discussion of several measures associated with different types of financial statements that can be used to analyze the performance of a business for making an investment, credit, or some other business decision. It also includes an interesting section on segment reporting under IFRS 8, which requires disclosure of segment-specific information on each industry, geographic area, and company's major customers. However, various topics in this chapter could be discussed as a part of other chapters of the book. For example, balance-sheet ratios could be included in Chapters 3 and 5, and profitability ratios could be included in Chapter 2.
Chapter 10 covers the history and background of the IASB and IFRS. As I mentioned above, this chapter should be at the beginning of this book rather than the end, and a section on current developments, such as the convergence project between the IASB and the Financial Accounting Standards Board (FASB), would also be appropriate to include in this chapter.
Overall, this book provides a quick overview of financial reporting under the IFRS and would be appropriate for higher-level accounting students, as well as professionals who are interested in a quick reference to financial reporting under IFRS. However, it is hard to recommend this book as a textbook, as it lacks detailed discussions and appropriate practice problems at the ends of the chapters. Also, the book does not include any comparison of IFRS versus U.S. GAAP, limiting the use of the book by students in the United States. The primary target audience is students and accounting professionals in the European Union, as evident from the structure and language of the book.
In my opinion, the authors have done a commendable job in writing this book concisely so that it can serve as a quick reference or handbook for accountants and accounting students to understand financial reporting under IFRS without going into too much detail. However, the lack of detailed discussion and the omission and misplacement of certain important topics are shortcomings.
Jagjit Singh Saini
Western Michigan University
Timothy Doupnik and Hector Perera,
TIMOTHY DOUPNIK and HECTOR PERERA, International Accounting, Third Edition (New York, NY: McGraw-Hill, 2012, ISBN: 978-0-07-811095-5, pp. xviii, 793). Information available at: http://highered.mcgraw-hill.com/sites/0078110955/information_center_view0/
Undergraduate students will likely be prepared for the concepts presented in International Accounting (Doupnik and Perera 2012) once they have completed intermediate-level accounting courses, although some of the financial accounting topics are at a high level. The text is also appropriate for graduate students. Faculty who teach an international accounting course using this text should be up to the task of covering advanced topics in financial and managerial accounting, auditing, and tax. Alternatively, a team of faculty members could teach the course jointly. Using this textbook should serve to push students to remember material learned from earlier classes, spark discussions on how different accounting areas relate to each other, and extend students' previous understanding of accounting in a new context, that of international accounting.
Selecting which topics to cover, and how to cover them, in an international accounting textbook is critical given the breadth of international accounting. The authors explain their intent in this regard by stating: “International accounting can be viewed in terms of the accounting issues uniquely confronted by companies involved in international business … More recently, international accounting has come to be viewed as the study of rules and regulations issued by international organizations … This book is designed to be used in a course that attempts to provide an overview of the broadly defined area of international accounting, but that focuses on the accounting issues related to international business activities and foreign operations and provides substantial coverage of the IASB and IFRS.” Overall, the authors do very well in meeting their stated objectives.
The text begins with a general introduction (Chapter 1) and continues to a discussion of worldwide accounting diversity (Chapter 2). Chapters 3 through 9 focus on financial accounting. This section of the text begins by covering convergence of accounting standards, continues on to discuss International Financial Reporting Standards (IFRS), provides a comparative view of accounting in select nations, and proceeds to give detailed instruction on accounting for foreign currency transactions, hedging foreign exchange risk, and translating foreign currency financial statements. Chapter 10 provides an overview of analysis of foreign financial statements. Chapters 11 and 12 are on tax topics, Chapter 13 is on managerial topics, and Chapter 14 covers auditing and corporate governance issues. Chapter 15 discusses reporting on corporate social responsibility (this last chapter is new with this edition). There is not yet a chapter on international issues pertaining to accounting information systems.
Chapter 1 does a superb job of drawing the reader into the text and contemplating the importance of studying international accounting. From the viewpoint of coming to understand accounting in a new nation, Chapter 6, “Comparative Accounting,” is helpful. Accounting in several different nations is discussed. The material in Chapter 6 tends to be eye-opening to students who have not yet been exposed to international accounting in a meaningful way. The value in this chapter is found primarily in the exercises and problems, and the instructor should consider using them or coming up with similar questions. The questions ask students to compare mechanisms for regulation and to consider reasons for the differences between national standards and IFRS. This level of understanding is fundamental to understanding international accounting.
Most of the text is devoted to covering international extensions of the traditional accounting silos of managerial accounting, financial accounting, tax, and audit, with a clear focus on financial accounting. The authors have done quality work overall, and the material they have developed is critical to understand for those students who continue on to careers in international accounting. There are high-level introductions of concepts to provide students with foundations upon which future knowledge may be added (for example, Chapter 3, “International Convergence of Financial Reporting,” and Chapter 11, “International Taxation”). There are also more detailed instructions on more specific aspects of international accounting that are commonly encountered, such as hedging foreign exchange risk (Chapter 7) and transfer pricing (Chapter 12). The authors make complex topics, such as translating foreign currency financial statements (Chapter 8), accessible. This is accomplished through quality writing.
The text discusses roles of international organizations in setting accounting standards, in formulating model tax treaties, in developing corporate governance codes, and similar activities. Students will benefit from this. Just as accountants who focus on domestic accounting must be familiar with the many organizations that influence their work, accountants working at the international level must come to understand the important organizations that will impact their work. The text is helpful in this regard.
If the instructor is interested in bringing students up to speed on IFRS, this text is a good source, although one might expect to need updates. As the authors indicated, the text is heavily weighted toward financial accounting. For example, there is only one managerial accounting chapter, but at least seven chapters that fall into the arena of financial accounting. If one's goal is to teach international accounting, but to focus on financial accounting, the emphasis on current changes in financial accounting should be appealing.
I recommend this textbook, but I do so with the caveat that it does not give adequate attention to the practical issues that individual accountants, as opposed to corporations, face at the international level. The text generally assumes the viewpoint of the company, and only rarely considers the individual-level issues that accountants, as individuals, face when tackling international accounting assignments, aside from understanding differences in standards and regulations.
For instance, how should an accountant handle an audit from a regulator in a foreign country? There are challenges in such a task that are unique to international accounting. The authors go part way in addressing such a challenge when they discuss audits of transfer pricing (p. 613). They recommend building a relationship with local tax authorities. Yet, the reader is left wondering what this might mean in international contexts, and what insights one might wish to keep in mind when accomplishing this. The authors point out that such transfer price audits are increasing and make some suggestions as to what the firm should do to respond to this challenge, but they do not explain the solution with the accountant in mind who will actually be involved. Likewise, it would be helpful to be provided with a model to apply when confronted with ethical issues at the international, intercultural level.
If cultural challenges encountered in international accounting are considered important to a course in international accounting, then this textbook will need to be supplemented with additional material. The text discusses culture primarily through the lens of Hofstede's (1980) cultural dimensions, with some additional information, including a commentary on Gray's (1988) work. Having Hofstede's (1980) framework in mind, as well as his definition of culture, can be very helpful to accountants seeking to understand encounters with other cultures. Yet the introduction in the text to Hofstede's (1980) work is brief and there could be more illustrating examples. Other major and more recent cultural studies that have implications for international accounting, such as the Globe Study (House et al. 2004) and Trompenaar's (1998) work, can also be helpful to students. Concepts such as culture shock and indirect versus direct communication (see, for example, Smith et al. 2008), which may prove challenging to students who pursue international accounting careers, may also merit classroom attention.
The PowerPoint slides appear professional, and there is a test bank and instructor's manual. The test bank questions are all multiple choice, which instructors of graduate courses especially will want to consider. There could be more end-of-chapter exercises and cases, but those that have been included seem like they will be worthwhile to students. The textbook seems to have been written with the United States student in mind, although the influence may not be so heavy as to make the text unsuitable for students elsewhere. There are many comparisons between U.S. GAAP and IFRS. In summary, the text overall is reader-friendly and meets the objectives stated in the preface of the text, as quoted earlier.
Joshua K. Cieslewicz
Utah Valley University
Current Debates in International Accounting
CHRISTOPHER NOBES, Current Debates in International Accounting (Cheltenham, U.K.: Edward Elgar, 2010, ISBN: 978-1-84844-838-4, pp. v, 208). Information available at: http://www.e-elgar.co.uk/bookentry_main.lasso?id=13744&sub_values=Accounting&site_Bus_Man=Yes&site_dev=&site_eco=&site_env_ eco=&site_inn_tech=&site_int_pol=&site_law=&site_pub_soc=
Christopher Nobes, of Royal Holloway at the University of London, is one of the world's leading scholars in international financial accounting. As such, he is certainly well positioned to engage in the “current debates” in this field. His most recent book is titled Current Debates in International Accounting (hereafter, Current Debates), and as noted in the preface, it “brings together my writings on international accounting that were published in the first decade of the new millennium.” Current Debates is billed as a follow-up to Nobes' 1999 book, International Accounting and Comparative Financial Reporting (hereafter, IACFR), and, like IACFR, consists of a compendium of his published scholarly papers. Current Debates contains 17 papers published from 2000 through 2010 in 11 different journals, including four American journals, two Australian, two British, two Pan-European, and one Canadian. Of these 17 papers, five are co-authored. Seven of the papers also take the form of Professor Nobes “commenting” on the writings of other international accounting scholars.
Like IACFR, Current Debates begins with a short preface, followed by a much more substantive “Introduction.” In this section, Nobes presents the four themes he used in organizing the 17 papers. They are: first, “International Development,” which explores how financial reporting practices developed internationally—five papers are included within this theme; second, “Classification,” which explores how countries' financial reporting systems might be classified—three papers are included; third, “International Financial Reporting Standards,” being a specific examination of IFRS—five papers are included; and fourth, “On Truth and Fairness,” which explores the notion of the “true and fair” view—four papers are included. Within the “Introduction,” Nobes also presents some interesting and insightful commentary on each paper, often linking the discussion to earlier papers included in IACFR. The “Introduction” also contains a defense for the inclusion of the seven “comment” papers, highlighting the important role such commentaries play in advancing academic debate. Given the remainder of Current Debates are the 17 articles themselves, albeit conveniently gathered together for the reader, the “Introduction” is crucial to help understand how Nobes views the international financial reporting landscape, and both why and how these papers form an important part of the current debate. I must admit that I would have liked to have heard much more from Nobes in these regards.
The 17 papers in the anthology utilize a variety of research designs, range in length from four to 30 pages, and examine a variety of research questions. Presented individually as Chapters, they first explore, in “International Development”: the impact of corporate governance (Chapter 1), the impact of the tax/financial reporting link (Chapter 2), the potential misuse of a database of Professor Nobes in understanding international development (Chapter 3), the origins of double entry bookkeeping (Chapter 4), and the evolution of the equity method (Chapter 5). Within “Classification,” there is a defense of Nobes' classification system and a related critique of another researcher's “narrowness” of focus (Chapter 6), a critique of another researcher for having used unreliable data in drawing conclusions (Chapter 7), and whether the notion of “classification” has a future in a world of IFRS (Chapter 8). Next, within “International Financial Reporting Standards,” there is the debate over principles versus rules (Chapter 9), questioning of the quality of individual IFRS (Chapter 10), some theorizing on the notion of “national” versions of IFRS (Chapter 11), some empirical explorations of the existence of “national” versions of IFRS (Chapter 12), and some empirical examinations of the existence of “national” versions of audit reports on IFRS (Chapter 13). Finally, within “On Truth and Fairness,” there is a European examination of the true and fair value implementation (Chapter 14), a commentary on another researcher's true and fair override paper (Chapter 15), a commentary on a (faulty) held version of there being “one” European true and fair view (Chapter 16), and the general complexity inherent in the notion of a “true and fair view” and in “fair presentation” (Chapter 17).
Overall, the book contains an interesting and eclectic mix of papers and, along with the related works in IACFR, illustrates the important contributions Nobes has made and continues to make to international financial reporting. While Current Debates is likely to be of most interest to academics and graduate students engaged in research on international financial reporting, it may also be of some interest to accounting regulators charged with the difficult task of operating in an increasingly international accounting environment. I do question the choice of Current Debates as part of the title of the book, most notably in that neither of the first two sections—on “International Development” and “Classification”—are specifically germane to the current debates, nor are specifically made so by Nobes. I also would have liked in the “Introduction” for Nobes to have articulated more fully the link of each of the papers to the contemporary debates in international accounting. For example, the papers in Chapters 11 to 13 exploring national versions of IFRS and the related audit reporting deal with contemporary issues of vital importance, points perhaps worth emphasizing. A book well worth having, Current Debates fittingly ends (in Chapter 17) with Nobes presenting a set of hypotheses to be tested, suggesting the work in international accounting continues.
Gary M. Entwistle
University of Saskatchewan
Irene M. Wiecek and Nicola M. Young,
IFRS Primer: International GAAP Basics
IRENE M. WIECEK and NICOLA M. YOUNG, IFRS Primer: International GAAP Basics, U.S. Edition (Hoboken, NJ: John Wiley & Sons, Inc., 2010, ISBN: 978-0-470-48317-6).
I co-author a Canadian introductory financial accounting text on International Financial Reporting Standards (IFRS) used to teach Canadian students. IFRS is currently adopted in Canada, and used by reporting issuers traded on Canadian stock exchanges. But Wiecek and Young explicitly state that their text, IFRS Primer International GAAP Basics, is first intended as a supplement to, not a substitute for, all three levels of a U.S. accounting text used in U.S. colleges.
It is also intended as a standalone text for those with prior familiarity with U.S. financial accounting. The authors also make clear this is neither a comprehensive review of all IFRS, nor an attempt to reveal and teach all the complexity and ambiguity inherent in any set of standards. The objectives of the authors are modest and clear.
The central question guiding this review is how well does this text bridge the gap, for both instructors and students, between IFRS and Statements of Financial Accounting Standards (SFAS) during what promises to be a protracted transition? Given the structure of the text is a comparison of two complex sets of standards, how well did the authors accomplish their goals? The authors do so using a consistent structure, understandable language, and relevant end-of-chapter questions.
The text provides a set of icons to indicate elements that simplify and focus on the consistent dimensions of comparisons between the U.S. and International standards. The elements themselves are innovative additions to those in most introductory texts. The innovations include:
The conceptual framework icon directs attention to a major accounting principle underlying an IFRS standard.
A U.S. flag directs attention to the significant differences between the International Accounting Standards Board (IASB) requirement and U.S. GAAP standards.
A research icon indicates the content provides context for the standard.
End-of-chapter qualitative and quantitative questions reinforce the focus on differences between IASB and Financial Accounting Standards Board (FASB) GAAP that underlies the different expression of IFRS and SFAS for the same set of transactions.
In addition to assessing the content on how well it achieved its stated objective, given its intended audience, and in the spirit of the conceptual framework, other criteria include:
Understandability: the text is written in plain English, free of jargon, and uses a short, simple question-and-answer format.
Transparency: the Q&A format following content maintains focus and clarity on how to respond to the “so what” question of relevance that students need answered.
The text is unencumbered by the technical content that dominates most accounting texts. There are no quotes from the actual standards, which makes the content readily understandable by an audience whose knowledge is limited. While some may disagree, my assessment is that this text focuses on substance over form.
There are no extended examples of how to analyze transactions, balance the accounting equation, deal with exceptions, or do the bookkeeping. This is consistent with the claims of the authors that students using this text must have prior knowledge of technical processes of accounting, either through previous practice or current use of a more conventional text.
The approach is consistent with the content in the third tier in the conceptual framework, although the chapters do not follow the order of elements listed. Examples of a set of transactions reported in financial statements begin with a presentation of the Statement of Cash Flows. The choice seems to follow the intuition that most students will readily understand cash inflow and outflow and the universal business importance of managing cash flow.
The content itself assumes students are already acquainted with the indirect and the direct approach, consistent with the authors' claim regarding the knowledge of their intended audience. What follows in this and the other chapters is a comprehensive list of simple through complex transactions, defined in plain English. A series of common transactions is followed by relevant questions about how to classify them based on the standard itself. The transactions themselves are focused, transparent, and the reason for classifying it is understandable by an average undergraduate student.
Proceeding through the remaining chapters on the accrual-dominated statements, the specific items have been filtered for relevance. If a specific element is covered, then it is accompanied by the U.S. flag icon and a discussion of the difference between the U.S. and IFRS. The content is consistent with the author's claim to focus on the significant differences between IASB and FASB.
More advanced transactions, such as illustrating the differences between the principles of International Accounting Standards (IAS) underlying recognition, measurement, change in accounting estimates, and disclosure, highlight difficult transactions and exceptions. Examples include, among others, financial instruments, intangible assets valuation before and after acquisition, related-party transactions, consolidation and joint ventures, agricultural industry accounting, and accounting for post-employment benefits.
The text, however, requires updating to reflect more recent legislation in the U.S. regarding governance and internal control, to prevent bribery, for example.
The authors deliver exactly what they promise, a text written at the level their intended audience can understand.
Maureen P. Gowing
University of Windsor