Amity School of Business BBA All Programs I

Amity School of Business BBA (All Programs), I Semester Business Accountancy Ms. Geetika Batra 1

Amity School of Business International Accountancy as a Profession 2

Concept Amity School of Business • INTERNATIONAL ACCOUNTING is the international aspects of accounting, including such matters as accounting principles and reporting practices in different countries and their classification; patterns of accounting development; international and regional harmonization, foreign currency translation; foreign exchange risk; international comparisons of consolidation accounting and inflation accounting; accounting in developing countries; accounting in communist countries; performance evaluation of foreign subsidiaries. 3

WHAT MAKES A ACCOUNTING A PROFESSION Amity School of Business Essential Features (Bayles) § Extensive training § Provision of important services to society § Training and skills largely intellectual in character Typical Features § Generally licensed or certified § Represented by organisations, associations, or institutes § Autonomy Foundation of Ethical Values (Behrman) § Significantly delineated by and founded on ethical considerations rather than techniques or tools

FEATURES, DUTIES, RIGHTS, AND VALUES OF THE ACCOUNTING PROFESSION Amity School of Business Features § Provision of important fiduciary services to society § Extensive knowledge and skill are required § Training and skills required are largely intellectual in character § Overseen by self-regulating membership organisations § Accountable to governmental authority Duties essential to a fiduciary relationship § Continuing attention to the needs of clients and other stakeholders § Development and maintenance of required knowledge and skills § Maintenance of the trust inherent in a fiduciary relationship by behaviour exhibiting responsible values § Maintenance of an acceptable personal reputation § Maintenance of a credible reputation as a profession Rights permitted in most jurisdictions § Ability to hold oneself out as a designated professional to render important fiduciary services § Ability to set entrance standards and examine candidates § Self-regulation and discipline based on codes of conduct § Participation in the development of accounting and audit practice § Access to some or all fields of accounting and audit endeavour Values necessary to discharge duties and maintain rights § Honesty § Integrity § Objectivity, based on independent judgement § Desire to exercise due care § Competence § Confidentiality § Commitment to place the needs of the public, the client, the profession, and the employer or firm before the professional's own self-interest

MOTIVES INFLUENCING PEOPLE AT KOHLBERG’S SIX STAGES OF MORAL REASONING Amity School of Business STAGE DESCRIPTION MOTIVE FOR DOING RIGHT Preconventional Self-interest 1. Obedience Fear of punishment and authorities 2. Egotism–instrumental and social exchange Self-gratification, concern only for oneself “Let’s make a deal” Conventional Conformity 3. Interpersonal concordance Role expectation or approval from others 4. Law and duty (social order) Adherence to moral codes, or to codes of law and order Post-conventional, Autonomous or Principled Interests of Others 5. General individual rights and standards agreed upon by society Concern for others, and broader social welfare 6. Self-chosen principles Concern for moral or ethical principle

NATIONAL AND INTERNATIONAL ACCOUNTING ORGANISATIONS OPERATING IN NORTH AMERICA Amity School of Business NAME DESIGNATI ON PRIME MANDATE(S) LOCATION American Institute of Certified Public Accountants (AICPA) CPA Auditing, management accounting United States, some Canadian provinces Institute of Management Accountants (IMA) CMA Management accounting United States Canadian Institute of Chartered Accountants (CICA) CA Auditing, management accounting Canada Society of Management Accountants of Canada (SMAC) CMA Management accounting Canada Certified General Accountants Association of Canada (CGAAC) CGA Management accounting, auditing Canada, some provinces

FUNDAMENTAL PRINCIPLES IN CODES OF CONDUCT FOR PROFESSIONAL ACCOUNTANTS Amity School of Business Members should: § at all times maintain the good reputation of the profession and its ability to serve the public interest, § perform with: § integrity § due care § professional competence § independence § objectivity § confidentiality, and § not be associated with any misleading information or misrepresentation.

CODE OF ETHICS VALUES FRAMEWORK Amity School of Business Duty to Society, Serve the Public Interest Objectives Meet Expectations for Professionalism, Performance, Public Interest Basic Needs Credibility, Professionalism, Highest Quality Services, Confidence Fundamental Principles Integrity, Objectivity, Professional Competence and Due Care, Confidentiality, Professional Behavior, Technical Standards

ASSURING INDEPENDENCE OF MIND APPEARANCE Amity School of Business Identify and Evaluate Circumstances and Relationships that Create Threats To Independence Eliminate Threats Or reduce to an Acceptable Level by Applying Safeguards Self-Interest Self-review Advocacy Familiarity Intimidation Profession Legislation Regulation Within Client Within Firm

CONFLICTS OF INTEREST FOR PROFESSIONAL ACCOUNTANTS: CATEGORIES, SPHERES OF ACTIVITY AFFECTED AND EXAMPLES Amity School of Business STAKEHOLDER CATEGORY SPHERE OF ACTIVITY AFFECTED EXAMPLES Self vs. others Services offered Improper use of influence Misuse of information Conflicting services, shaving quality Improper purchases of client goods Improper investments by relatives Self & others vs. others Services offered Over-involvement with management or Directors erodes objectivity Client vs. client Employer vs. employer Services offered Serving competing clients at the same time Stakeholder vs. stakeholder Misuse of information (confidentiality) Whistle-blowing, reporting to government or regulators

Amity School of Business Positioning the Indian Chartered Accountancy & Auditing Profession Globally

Amity School of Business v Establishing contact points/liaison offices in major cities worldwide and opening up of ICAI offices in countries with sizeable presence of members of ICAI. v Raising profile of ICAI and Indian accounting profession in international forums of accountancy and related organizations. v Popularizing Indian CA qualification in countries of interest to Indian accounting profession through an aggressive strategy – by enhancing publicity in the foreign magazine v Representation on Technical Committees of Foreign Accountancy Bodies abroad and vice- versa. v Providing link of ICAI website on the website of foreign accounting bodies.

Amity School of Business Capacity Building of the Profession

Amity School of Business v Organizing events/ symposium with International Standard Setters and Program Organizing unit so as to carry forward the task of preparing members for International Standards at the grass root level. v Initiating steps for recognition of Indian qualification in foreign countries through Mutual Recognition Agreement. v Participating in the projects of the Multilateral Agencies and involving participation of members. v Studying the best practices globally to align the ICAI education as per the emerging imperatives. v Promoting students exchange programme and staff exchange programmes v Facilitating Member exchange programme

Amity School of Business Technical Cooperation to Developing and least Developed Countries

Amity School of Business v Continue to provide technical support to accounting bodies in SAARC Region. v Assuming a mentorship role through IFAC/CAPA/SAFA, or otherwise, in development of accounting profession in underdeveloped/developing nations, and promoting compliance in standards of accounting and auditing in those countries. v Providing technical and administrative help in institutionalization of accountancy profession in under developed and developing economies. v Providing capsule courses to accountants on IFRS, Accounting, Government Accounting, Public Sector Accounting from developing and under developed economies. *CAPA: Confederation of Asian and Pacific Accountants SAARC: South Asian Association for Regional Cooperation SAFA: South Asian Federation of Accountants IFAC: International Federation of Accountants

Amity School of Business Representation before Government accruing of International Developments

Amity School of Business v Liaising with regulators and other organizations for recognition of ICAI qualification v Utilizing resources of Indian Embassy abroad as brand ambassadors for promotion of Indian accountancy profession abroad.

Amity School of Business Professional Opportunities Abroad

Amity School of Business v Strengthening interface between the Institute and the members abroad in order to provide more and better services to them and take their inputs for external reach of the Indian accounting profession. v Pursuing best endeavour approach for MRAs keeping in view mutuality of interest and following a just and reasonable approach. v Appointment of Consultants abroad to explore professional opportunities abroad for members in India. v Sharing information about availability of professional opportunities abroad through website of ICAI.

Why do we need IFRSs and financial reporting comparability? Amity School of Business § § § Expanding world trade Proliferation of multinational corporations Increasing role of global capital markets Increased foreign direct investment Growth of multinational political organizations A way to minimize costs

Why Does GAAP Differ Among Countries? Amity School of Business § § § § Political/Legal System Sources of Capital Inflation Taxation Culture Accidents of History Business Complexity Stop & Reflect: Is there one GAAP that works best everywhere?

Key Problems that Cause Resistance to IFRSs Amity School of Business § Agreeing on who will create the rules § How different the rules will be from current national GAAP § Costs of changing GAAPs

Differences of Indian GAAP and IFRS Amity School of Business Differences with respect to: • Conceptual Accounting Framework • Content of Financial Statement • Accounting Differences

Accounting framework Amity School of Business Historical cost IFRS: Historical cost, but intangible assets, property plant and equipment (PPE) and investment property may be revalued. Derivatives, biological assets and most securities must be revalued. Indian GAAP: Historical cost, but fixed assets, other than intangibles, may be revalued.

Financial statements Amity School of Business Contents of financial statements IFRS: Two years’ balance sheets, income statements, cash-flow statements, changes in equity, accounting policies and notes. Indian GAAP: Two years’ balance sheets, profit and loss accounts, accounting policies and notes. Listed entities are required to give their consolidated financial statements and the related notes along with the standalone financial statements. (Financial Statements should also include cash flow statements in certain cases)