international accounting differences
Contents
Introduction
As being part of the European Union, both Netherlands and the UK share some similarities in their accounting systems. Being strongly influenced by the individualism culture, both countries exercise a high level of professionalism among accountants. There is a common tendency to follow accounting standards bodies in both countries. In the UK this would be the Accounting Standards Board (ASB) which helps to set the Financial Reporting standards (FRS) used in the UK, whereas in the Netherlands the Dutch Generally Accepted Accounting Polices (GAAP) are provided by the council for annual reporting and the influential Dutch accounting profession the Royal Nederlands Institut van Register accountants (NIVRA). Sharing the tradition of public ownership, they both present a true and fair view in their accounts.
However, there are some differences between the accounting systems of the two countries. As strongly driven by the security market force, in the UK, financial accounting and reporting tends to focus more on the information needs of investors. This leads to a stronger emphasis on the income statement. Whereas, with the business economic approach which implies economic perspective in solving organisational problems, the Netherlands’ financial statements focus on profit maximisation, cash management and forecasts, according to Bouma and Feenstra (1997). Therefore, there is a balance focus on both balance sheet and income statement.
Tangible Assets
Inventory
In the UK under SSAP 9 inventories is measured at the lower of cost or net realisable value this is similar to Dutch GAAP however there is one key difference. Under Dutch GAAP inventories valuation at current level is also permitted. Current level is defined under Dutch GAAP as the lower of replacement value and net realisable value. This allows companies in the Netherlands to choose between a current value and historical cost approach, whereas in the UK SSAP 9 is strictly based
Introduction
As being part of the European Union, both Netherlands and the UK share some similarities in their accounting systems. Being strongly influenced by the individualism culture, both countries exercise a high level of professionalism among accountants. There is a common tendency to follow accounting standards bodies in both countries. In the UK this would be the Accounting Standards Board (ASB) which helps to set the Financial Reporting standards (FRS) used in the UK, whereas in the Netherlands the Dutch Generally Accepted Accounting Polices (GAAP) are provided by the council for annual reporting and the influential Dutch accounting profession the Royal Nederlands Institut van Register accountants (NIVRA). Sharing the tradition of public ownership, they both present a true and fair view in their accounts.
However, there are some differences between the accounting systems of the two countries. As strongly driven by the security market force, in the UK, financial accounting and reporting tends to focus more on the information needs of investors. This leads to a stronger emphasis on the income statement. Whereas, with the business economic approach which implies economic perspective in solving organisational problems, the Netherlands’ financial statements focus on profit maximisation, cash management and forecasts, according to Bouma and Feenstra (1997). Therefore, there is a balance focus on both balance sheet and income statement.
Tangible Assets
Inventory
In the UK under SSAP 9 inventories is measured at the lower of cost or net realisable value this is similar to Dutch GAAP however there is one key difference. Under Dutch GAAP inventories valuation at current level is also permitted. Current level is defined under Dutch GAAP as the lower of replacement value and net realisable value. This allows companies in the Netherlands to choose between a current value and historical cost approach, whereas in the UK SSAP 9 is strictly based
References: ASB, UK GAAP: FRS10, FRS11, FRS15, FRS26, SSAP9, SSAP13 Bouma J. L. & Feenstra D. W. (1997): Accounting and business economics traditions in the Netherlands, European Accounting Review, 6:2, 175-197 Doost, Roger K., and Karen M. Ligon. (1986) "How US and European accounting practices differ." Management Accounting 67.4: 38-41. Dutch GAAP: Netherlands Civil Code (Part 9, Book 2), DAS 120, 121, 122, 210, 212, 213, 220, 273, 290, 291 Current Value Decree. Gray, S.J. 1988. Towards a theory of cultural influence on the development of accounting systems internationally. Abacus. Vol. 24: 1-15. Radebaugh,L.H, Gray,S.J and Black,E.L (2006) International accounting and multinational enterprises (6th ed) Hoboken, N.J. ; Chichester : Wiley