International Accounting Standards: Transparency, Disclosure and Valuation for Latin America and the Caribbean
By José Antonio Laínez, Pietro Masci, Juan J. Durante (10/04, En, Es) See also Infrastructure and Financial Markets
 |
179 pp. 2004
English
Globalized markets make the need for disclosure even more compelling since information needs to be understood by market participants around the world. The need for a common language, as well as its exceptional role in preventing financial distress and enhancing the financial sector, account for the origin of international accounting standards. Numerous organizations have been engaged in the implementation and promotion of them. The most influential among them remains the International Accounting Standards Board (IASB), responsible for setting the International Financial Reporting Standards (IFRS) and promoting their convergence worldwide. Likewise, the International Federation of Accountants (IFAC), as well as the International Forum on Accountancy Development (IFAD) have been important forces in the course of developing and sponsoring an integrated set of international standards. IFAC is responsible for issuing International Standards on Auditing (ISA) and International Auditing Practice Statements. Inspired by their work and in collaboration with numerous accounting associations, the Inter-American Development Bank established several initiatives related to the dissemination, adoption, and implementation of IFRS. This book is, in fact, motivated by the fertile cooperation among these organizations and by the IDB?s existing work on this subject.
The different chapters in this book offer an overview of the overall framework of accounting reforms in the context of capital and financial market development. Furthermore, the various articles intend to show the role that transparency plays in the valuation of assets and other financial instruments, as well as, once again, in improving capital markets. The need for accounting reforms is addressed from different perspectives and point of views, both in terms of specific elements that require improvement as well geographical examples and case studies that clarify this. This publication seeks to identify the context in which the accounting and auditing reform takes place and the situation of countries in terms of their application of standards, as well as experiences outside the Latin American and Caribbean region.
The book has five sections. Section I offers a conceptual framework. Section II further expands on the role of accounting standards in capital market development and illustrates concrete accounting rules for valuation of companies and mergers and acquisitions. Section III illustrates different types of accounting standards implementation through the examples of various Latin American countries, Spain and the European Union. Section IV identifies gaps between national practices and international standards, whereas Section V offers conclusions, putting forth a general outlook of the international harmonization of accounting standards.
The chapter in Section I examines the effect and importance that proper disclosure has on the development of financial markets. Initially, it reviews the essential connection between a stable financial sector and economic growth and then turns to the importance of international accounting and auditing standards to accomplish financial disclosure and, thus, its influence on capital markets. Further, it stresses the relevance of liquid and vibrant financial markets in fostering economic growth in emerging economies, particularly in Latin America and the Caribbean. The chapter also analyzes the progress of international accounting and auditing standards application and identifies their implementation in Latin America and the Caribbean.
Section II contains Chapters 2 and 3. Chapter 2 analyzes the uses of accounting rules in further detail and expands on their key role in capital markets reform. Chapter 3 examines accounting rules for valuation of companies and mergers and acquisitions in Latin America and the Caribbean. Chapter 3 also makes a detailed analysis of US US GAAP as well as IFRS and highlights the main differences between them. Finally, it also describes the impact and the use of the different set of accounting standards ? US GAAP and IFRS? in Latin America and the Caribbean. The discussion in this Chapter is important in the context of the consequences globalization has had on capital markets. It reveals the main effects on business valuation and possible investments of local GAAP compared with U.S. GAAP and IFRS.
Section III illustrates and compares how accounting reforms have and are being undertaken in Spain in connection with the European Union, and in various Latin American countries. Thus, Chapter 4 offers an overview of the accounting situation in Spain and in the European Union (EU), along with concrete steps it is taking to achieve harmonization within the region and specific goals it has set. Numerous EU directives have determined, during the last 20 years, the aim of achieving comparable information released by companies throughout the Union. The EU, however, is aware of the fact that a sound accounting framework needs to be established to accomplish real harmonization. In fact, the framework will have the IFRS as a regulatory base and specific measures are being taken to implement them.
Chapter 5 provides a discussion and analysis of a survey prepared by the six largest accounting firms aimed at encouraging convergence of national accounting standards with the IFRS. In particular, it discusses the results for various Latin American countries such us Argentina, Brazil, Mexico, Peru and Venezuela.
Section IV consists of Chapter 6, which stresses the need for progress and development of transparency in international reporting. It proposes a plan to accomplish this at the country level, rather than a more global effort. Chapter 6 maps out a detailed action plan that includes establishing a country management team that completes fact finding missions, develops a specific plan and compares international with local standards (benchmarking) as first steps toward improving accounting standards and meeting international requirements.
The concluding section and chapter, provides a final overview of harmonization efforts carried out at present, those designed for the future, as well as their chances and prospects. Different endeavors related to the implementation and application of IFRS in diverse geographic regions, such as Latin America and the Caribbean or the European Union, are examined in detail, evaluating their scope and effects. Chapter 7 reflects on the crucial value of the harmonization accounting standards and its influence on functioning and globalized financial markets. It ends by demonstrating some of the problems and obstacles that IFRS still face and probably will confront in the future.
To buy this book, please submit your request to:
IFM Publications
Infrastructure and Financial Markets Division
Inter-American Development Bank
1300 New York Avenue, N.W.
Washington, D.C. 20577
Mail Stop W-0508
E-mail: sds/ifm@iadb.org
Fax: 202-623-2157
Last updated: 05/08/07
