CHAPTER 4
REPORTING AND DISCLOSURE
4.1. DISCLOSURE ACCOUNTING PRACTICES INFLUENCE BY DIFFERENCES GOVERNANCE FINANCE COMPANY IN ANY STATE.
Development of disclosure Development of the disclosure system is closely associated with the development of accounting systems. Disclosure standards and practices are influenced by financial resources, legal systems, political and economic ties, the level of economic development, education, culture, and other influences.
National differences in disclosure is driven largely by differences in corporate governance and finance. In the United States, Britain and other Anglo-American countries, equity markets provided most of the funding that the company needs to be very advanced. In these markets, ownership tends to spread widely among many shareholders and investor protection is emphasized. Institutional investors play an increasingly important role in these countries, demanding financial returns and increasing shareholder value.
In most other countries (like France, Japan and some emerging market countries), share ownership remains highly concentrated and the bank (or the owner and family) has traditionally been a major source of corporate financing. These banks, and the other in obtaining more information about the company’s financial position and activities.
VOLUNTARY DISCLOSURE
The Company will make disclosures beyond minimum disclosure if they feel that such disclosure would lower the cost of capital or if they do not want to miss the disclosure practices are competitive. Instead, the company will reveal company if they feel less financial disclosure would reveal the secrets to competitors or to show the bad side of the company in front of the various parties.
Pros:
• Provide an international appearance to the primary reports
• Provide an international appearance to the primary reports
• Provide benefits in terms of public relations
Disadvantages:
• Translation is misleading, as if to give the impression to the foreign reader as if the accounting principles underlying financial statements have been associated also translated, so that wrong conclusions could arise.
Disadvantages:
• Translation is misleading, as if to give the impression to the foreign reader as if the accounting principles underlying financial statements have been associated also translated, so that wrong conclusions could arise.
• Financial analysts tend to finance interpretation report such as financial statements is substantially comparable to the domestic financial statements, so the potential for abuse will occur.
4.2. MANAGEMENT AND DISCLOSURE ISSUES DECISION DECISION
Problem (problem) is a deviation between the should (should) happen in a real (actual) occurs, so that the cause should be found and verified. Decision-making (desicion making) is to assess and impose choise. Decision was taken after some calculations and considerations alternative. Before option was dropped, there are several steps that may be traversed by the decision maker. These stages may include identification of major problems, planning alternative will be selected and arrive at the best decision.
4.3. PURPOSE OF DISCLOSURE ACCOUNTING IN EQUITY MARKETS
In a competitive economy, the disclosure is a means to channel cooperation accountability to capital providers (investors) and to facilitate allocation of resources to their most productive use. Cooperation a need to attract capital in a very large amount to finance the production and distribution activities are extensive. Therefore internal costing is highly dependent on external capital invested by the investor on a corporation, In return, an investor requires disclosure in which investors can assess the quality of their stock to cultivate. Disclosure of the company will increase the probability distribution of outcomes expected by investors by reducing the uncertainty associated with the refund. So will improve performance (performance of the company) in the eyes of investors that lure investors to invest on a larger similar securities so as to reduce the cost of capital.
4.4. DIFFERENT ASPECTS OF PRACTICE REPORTING AND DISCLOSURE
Disclosure of Corporate Governance: Corporate Governance relating to internal tools used for running and controlling a firm – responsibility, accountability and the relationship between the shareholders, board members and managers are designed to achieve corporate objectives. The problems of corporate governance include the rights and treatment to the shareholders, the board’s responsibilities, disclosure and transparency and the role of the parties concerned. Corporate governance practices has gained the attention of regulators, investors and analysts.
Disclosure and Reporting Business Through the Internet: World Wide Web is increasingly being used as channels of information dissemination, where the print media now plays a secondary role. Business Reporting Language (Extensible Business Reporting Language – XBRL) is an early stage of financial reporting revolution. This computer language is built into almost all software for accounting and financial reporting to be issued in the future, and most users do not need to learn how to cultivate it so that it can directly enjoy the benefits.
4.4. DIFFERENT ASPECTS OF PRACTICE REPORTING AND DISCLOSURE
Disclosure of Corporate Governance: Corporate Governance relating to internal tools used for running and controlling a firm – responsibility, accountability and the relationship between the shareholders, board members and managers are designed to achieve corporate objectives. The problems of corporate governance include the rights and treatment to the shareholders, the board’s responsibilities, disclosure and transparency and the role of the parties concerned. Corporate governance practices has gained the attention of regulators, investors and analysts.
Disclosure and Reporting Business Through the Internet: World Wide Web is increasingly being used as channels of information dissemination, where the print media now plays a secondary role. Business Reporting Language (Extensible Business Reporting Language – XBRL) is an early stage of financial reporting revolution. This computer language is built into almost all software for accounting and financial reporting to be issued in the future, and most users do not need to learn how to cultivate it so that it can directly enjoy the benefits.
Disclosure of the Annual Report on Emerging Markets Countries: disclosure of the company’s annual report on emerging market countries are generally less extensive and less credible than the reporting companies in developed countries. Low level of disclosure in emerging market countries is consistent with the system of corporate governance and finance in these countries. Less developed equity markets, banks and internal parties such as family groups distribute most funding needs and generally not too much of a need for public disclosure of credible and timely manner, when compared with the more advanced economies.
CHAPTER 5
FOREIGN CURRENCY TRANSLATION
5.1. DIFFERENCES BETWEEN TRANSLATION AND FOREIGN CURRENCY CONVERSION
- Translation is just a change of monetary units, There is no physical exchange that occurred, and no related transactions that have occurred as it carried out the conversion.
- Balances in foreign currencies are translated into domestic currency equivalent value based on the foreign exchange rate is the price of one unit of a currency expressed in another currency.
Foreign currency transactions occur on the spot market, forward, or swap. Spot market exchange rate is influenced by many factors, including differences in inflation rates between countries, differences in national interest and expectations of the future exchange rate. - Transaction on forward markets is an agreement to exchange one currency for a certain amount into another currency at a future date.
- Swap transaction involves the purchase of spot and forward sales or spot sales or purchases forward, on a currency simultaneously.
5.2. TERMS IN FOREIGN CURRENCY TRANSLATION
1. Conversion, an exchange of one currency into another currency.
2. Exchange rate now, the exchange rate prevailing on the date of the relevant financial report.
3. Net asset position at risk, the excess assets are measured or denominated in foreign currency and in translation at the exchange rate of duty is now measured or denominated in foreign currencies and translated at the exchange rate now.
4. Exchange forward contracts, an agreement to exchange currencies of different countries by using a specific rate (forward rate) at a given date in the future.
5. Functional currency, is the main currency used by a company in the conduct of business activities. Usually such currency is the currency of the State where the company is located.
6. Historical exchange rate, the exchange value of foreign currency that is used when an asset or liability denominated in foreign currencies bought or going.
7. Reporting currency, the currency used in preparing the company financial statements.
8. Spot exchange rate, the exchange rate for currency exchange in the time immediately.
9. Translation adjustments, the adjustments arising from the translation of financial statements of a company’s functional currency into the reporting currency.
Glossary of foreign currency translation, adapted from GAAP (SFAS) No.52, 1981.
1. Attributes, quantitative characteristics of an item being measured for accounting purposes. Example, historical cost and replacement cost which is an attribute of an asset.
1. Attributes, quantitative characteristics of an item being measured for accounting purposes. Example, historical cost and replacement cost which is an attribute of an asset.
2. Conversion, pertukatan a currency into another currency.
3. Present exchange rate, exchange rate prevailing on the date of the relevant financial statements.
4. Discount, while the subsequent exchange rate lower than current levels.
5. Net asset position at risk, as measured in excess of assets or denominated in foreign currencies and translated at the exchange rate of duty is now measured or denominated in foreign currencies and translated at the exchange rate now.
6. Foreign currency, a currency other than the currency used by a State, a currency other than the reporting currency used by the company.
7. Financial statements in foreign currencies, the financial statements using foreign currency as the unit of measurement.
8. Foreign currency transactions, the transaction (ie sale or purchase of goods or services, or debt loans or accounts receivable) under the conditions stated in currencies other than the functional currency of the company.
9. Foreign currency translation, the process to declare the amounts denominated or measured in one currency into another currency using the exchange rate between two currencies.
10. Foreign operation, an operation that produces financial statements that (1) combined or consolidated or accounted for under the equity method in reporting the company’s financial statements and (2) arranged in foreign currencies other than the reporting currency of the reporting enterprise.
11. Forward exchange contacts, an agreement to exchange currencies of different countries by using a specific rate (forward rate) at a given date in the future.
12. Functional currency, the currency used by major companies in the course of business, and in generating or using cash.
13. Historical exchange rate, exchange rate of foreign currency that is used when an asset or liability denominated in foreign currencies bought or going.
14. Local currency, the currency of a State that is used; the reporting currency used by a domestic or foreign operations.
15. Items of monetary policy, the obligation to pay or the right to receive a unit of currency in a fixed value in the future.
16. Reporting currency, the currency used in preparing the company financial statements.17. Completion date, the date when the debt is paid by an uncollectible receivables.
18. Spot exchange rate, exchange rate for currency exchange in the time immediately.
19. Date of the transaction, the date when a transaction is recorded in the accounting records of the reporting company.
20. Translation adjustments, adjustments arising from the translation of financial statements of a company’s functional currency into the reporting currency.
21. Unit of measurement, the currency used to measure the assets, liabilities, revenues and expenses.
5.3. DIFFERENCE OF PROFITS AND FOREIGN CURRENCY TRANSLATION LOSES
- If the point of view of local currency to be used (local companies viewpoint), the entry of the translation adjustment in current earnings do not need to be done.
- Entering translation gains and losses in earnings will distort the real financial relationships and can mislead the users of such information.
- If the parent company’s reporting currency is the unit of measurement of the financial statements are translated (the parent company’s point of view), it is advisable to recognize gain or loss on translation of profit as soon as possible.
- parent company perspective view foreign subsidiaries as an extension of its parent company.
5.4. BENEFITS AND FOREIGN CURRENCY TRANSLATION LOSES
1) Suspension
Changes in the value of domestic currency equivalent of the net assets of foreign subsidiaries are not realized and no effect on the local currency cash flows generated from foreign entities. Translation adjustment should be accumulated separately as part of consolidated equity.
2) Suspension and Amortization
2) Suspension and Amortization
Suspension of translation gains or losses and to amortize it over the useful adjustment items related to balance, especially as related to the debt will be amortized over ditangguhakan and related fixed assets, which is charged against earnings in the same way with the burden of depreciation or deferred and amortized over the remainder of the loan as an adjustment to interest expense.
3) Partial Suspension
3) Partial Suspension
Translation gains and losses is to recognize the losses as soon as possible after it happens, but admitted only after the profits realized, this is simply because it is an advantage, it ignores the changes in exchange rates.
4) Not be suspended
Recognize translation gains and losses in the income statement as soon as possible. However, inserting translation gains and losses in the current year’s profit will introduce a random element in the profits that may result in significant fluctuations in earnings in case of exchange rate changes.
5.5. EFFECT OF FOREIGN CURRENCY TRANSLATION METHOD TO THE FINANCIAL STATEMENTS
Present exchange rate (current) is the exchange rate at the date of the financial statements. Historical exchange rate is the exchange rate at the time an asset is denominated in foreign currency was first acquired, or when a foreign currency liabilities in the first place. Average rate (average) is the simple average of the exchange rate now and historically.
Effect of exchange rate against the use of financial statements
1. The use of the exchange rate to protect the historical financial statements of profits and foreign currency translation loss.
Effect of exchange rate against the use of financial statements
1. The use of the exchange rate to protect the historical financial statements of profits and foreign currency translation loss.
2. The use of the exchange rate now lead to a gain or loss on translation.
• Transactions in foreign currencies occurs when a company buys or sells goods to the payments made in a foreign currency or when companies borrow or lend in foreign currencies.
• A foreign currency transactions can be denominated in one currency, but the measured or recorded in other currencies.
• Transactions in foreign currencies occurs when a company buys or sells goods to the payments made in a foreign currency or when companies borrow or lend in foreign currencies.
• A foreign currency transactions can be denominated in one currency, but the measured or recorded in other currencies.
5.6. EVALUATION AND SELECTION OF FOREIGN CURRENCY TRANSLATION METHOD ACCORDING TO CONDITION OF THE BEST AND THE MONEY MARKET
Translation methods can be classified into two types of methods that use a single exchange rate for the present re-translation of foreign currency balances to the equivalent value in domestic currency or a method that uses a variety of rates.
Translation methods can be classified into two types of methods that use a single exchange rate for the present re-translation of foreign currency balances to the equivalent value in domestic currency or a method that uses a variety of rates.
1. Methods Single Currency.
This method has long been popular in Europe, applying the exchange rate, the current exchange rate and the closing exchange rate, for all assets and liabilities lancer. Revenues and expenses denominated in foreign currencies are generally translated using the exchange rate prevailing at the time the posts are recognized. However, to facilitate these items are generally translated using the weighted average exchange rates are appropriate for the period. The financial statements of a foreign operation has its own reporting domicile, local currency environment in which the foreign affiliate companies do business. An asset or liability denominated in foreign currency is said to face foreign exchange risk if the equivalent in the currency used to translate the asset or liability.
2. Multiple methods of exchange rate
The method combines Multiple Currency exchange rate exchange rate historically and now in the process of translation.
3.Kini-Nonkini Method
Based on the Method of Kini, lancer current assets and liabilities of foreign subsidiaries are translated into the reporting currency of its parent company based on the exchange now. Assets and liabilities are translated lancer historical rates of exchange. Items of income statement (except for depreciation and amortization) are translated based on the average rate prevailing in each month of operation, or based on a weighted average over the entire reporting period. Depreciation and amortization are translated based on the historical exchange rate recorded when assets acquired. However, this method does not consider the economic element. Using year-end exchange rate to translate the lancer assets implies that cash, receivables, and inventory in foreign currencies are equally at risk of exchange rate.
4. Monetary-nonmonetary method
Non-monetary method Monetary also use the balance sheet classification scheme fatherly determine the appropriate exchange rate translation. Monetary assets and liabilities are translated based on the exchange rate now. Items of non-monetary assets, long-term investment, and stock investors are translated using historical exchange rates. Items of income statements are translated using a procedure similar to that described for the concept of non-present now.
5. Temporal method
By using the temporal method, translation currency conversion is a process of re-measurement or presentation of a certain value. This method does not change the attributes of an item being measured, but only change the unit of measurement. Translation of these balances in foreign currency-denominated causes repeated measurements such items but not the actual assessment. Under U.S. GAAP, measured by the amount of cash on hand at the balance sheet date. Receivables and liabilities are stated at amounts expected to be received or paid at maturity.
CHAPTER 6
FINANCIAL REPORTING AND PRICE CHANGES
6.1. FINANCIAL STATEMENTS MAY HAVE THE POTENTIAL FOR MISLEADING PRICES DURING THE PERIOD OF CHANGE
Changes the definition of price
To understand the notion of price changes (changing prices), the following terms in use:
A general price changes occur when the average price of all goods and services in an economy subject to change. Price increases are collectively known as inflation (inflation), while the price declines known as deflation (deflation). Specific price changes refers to changes in the price of goods or services which are caused by changes in demand and supply. A stable price level becomes a national priority for many countries around the world. Although the price changes occur throughout the world, the influence of business and financial reporting varies from one country to another.
• The lack of accuracy of measurement is distorted:
A general price changes occur when the average price of all goods and services in an economy subject to change. Price increases are collectively known as inflation (inflation), while the price declines known as deflation (deflation). Specific price changes refers to changes in the price of goods or services which are caused by changes in demand and supply. A stable price level becomes a national priority for many countries around the world. Although the price changes occur throughout the world, the influence of business and financial reporting varies from one country to another.
• The lack of accuracy of measurement is distorted:
- The financial projections are based on historical time series of data
- The budget is the basis for performance measurement
- Data can not isolate the performance effects of inflation can not be controlled
• Earnings are valued more in turn will lead to:
- An increase in the proportion of tax
- Request for more dividends of shareholders
- Request for salary and wages higher than the workers. Adverse action of the host country (such as the taxation of a huge advantage).
• Index
- Changes in the general price level is usually measured by the price level.
- A price index is the ratio of the cost. The use of price index consists of:
- Number of price index used to translate the amount of money paid during the previous period to the equivalent purchasing power at the end of the period.
- Numbers – numbers that have been adjusted price levels do not represent the current cost items in question or the numbers are still the historical cost figures – historical cost figures are presented only repeated in the new measurement unit – the general purchasing power at the end of the period.
• Objects General Price Level Adjustment
• Objects General Price Level Adjustment
- Traditionally, profit is part of the company’s assets that could be drawn by the company during an accounting period without reducing his wealth to below the starting position.
- Accounting conventional measure of income as the maximum amount that can be drawn from the company without reducing the amount of money into capital initially.
- During inflation, the company will experience a change in wealth that is not related to operating activities which generally arises from changes in assets or liabilities.
6.2. ACCOUNTING TERMS AND EFFECT OF INFLATION ADJUSTMENT TO THE FINANCIAL STATEMENTS PRICE
The method used in inflation accounting is similar to the method of determination of the profits, the emphasis is more value relevant earnings are described by the financial statements, Whereas, the inflation value of all items contained in the financial statements. The method of measuring assets and liabilities can be divided as follows:
1. The entry value of the common price system consisting of:
1. The entry value of the common price system consisting of:
a. Historical cost
b. General price level
c. Replacement cost
d. Reproduction cost
2. The exit value or current market pricing system that consists of market value:
a. Net realizable value
b. Selling price
c. Expexted value.
General Price Level, the advantages of using the General Price Level Adjustment (GPLA) is as follows:
General Price Level, the advantages of using the General Price Level Adjustment (GPLA) is as follows:
a. Explain the effect of inflation on the company
b. Improve the usefulness of comparative reports between periods
c. Help users assess the statement of cash flows in the future better
d. Improve the confidence level of financial statement ratios are calculated from the figures that have been customized reports.
Current Cost Accounting
In this measuring method assumes that what is needed by managers is how they allocate economic resources that exist to maximize profit. Therefore we need answers to three questions:
a. How many assets that must be owned at a specific date.
b. How should the form of assets;
c. How the assets financed.
To make decisions about the three questions above, then the managers need to formulate expectations about the future events. Managers often face the problem of whether to retain an asset or debt or sell or pay for it and how to use or fund company. To answer this it is proposed the calculation of profit business that has two components:
a) Current operating profit
To make decisions about the three questions above, then the managers need to formulate expectations about the future events. Managers often face the problem of whether to retain an asset or debt or sell or pay for it and how to use or fund company. To answer this it is proposed the calculation of profit business that has two components:
a) Current operating profit
b) the realizable cost saving (Holding Gain)
Current cost five forms, namely:
a. Replacement cost, is the measured current value to obtain new assets or replace it with the same production capacity.
b. Reproduction Cost, This method is similar to the replacement cost.
c. Net realizable value
c. Net realizable value
Which is a method in which the selling price less the costs of sale. NRV during inflation is greater than replacement cost because management may not sell the goods without expecting profit margins general price level. The method of depreciation is calculated based on the difference in sale price of assets at the beginning of the period compared to the end of the period.
d. Selling Price
In this method the values used are the selling price less cost of sales so that no financial statements prepared according to the selling price will be greater than the net value reliazable and other methods.
e. Expected value
This method is highly dependent on the hope that someone can be larger or smaller than the other methods.
6.3. CURRENT COST ACCOUNTING MODEL DIFFERENCES AND CONVENTIONAL
- conventional accounting, financial statements are presented based on the historical value that assumes that the price (monetary unit) is stable.
- Conventional accounting does not recognize the changes in general price levels or changes in the level of rates.
- During this period generally scored higher revenues while fixed assets valued lower.
- Actually, there are several methods of accounting on the effect of price changes, such as accounting fixed price, current value accounting, and general price level accounting. General price level accounting restatement will hold the components of financial statements into dollars at the same level of purchasing power, but did not change the accounting principles used in accounting at historical value.
Historical Cost Financial Statements Statements of Financial Position
1) The amount in the statement of financial position is not expressed in the units of measurement are now at the end of the reporting period, are restated by applying a general price index.
2) monetary items are not restated because they are expressed in monetary units is now at the end of the reporting period. Monetary posts are owned and the money to be received or paid in cash.
3) The assets and liabilities, with the agreement, which is connected with changes in prices such as index linked bonds and loans, adjusted in accordance with the agreement to ensure the balance at the end of the reporting period. The posts are recorded at amounts have been adjusted in the statement of financial position are restated.
2) monetary items are not restated because they are expressed in monetary units is now at the end of the reporting period. Monetary posts are owned and the money to be received or paid in cash.
3) The assets and liabilities, with the agreement, which is connected with changes in prices such as index linked bonds and loans, adjusted in accordance with the agreement to ensure the balance at the end of the reporting period. The posts are recorded at amounts have been adjusted in the statement of financial position are restated.
4) All other assets and liabilities are non-monetary. Some noted the number of non-monetary post is now at the end of the reporting period, such as net realizable value and fair value, then the post is not restated. All assets and liabilities to other non-monetary restated.
5) Most of the non-monetary items carried at cost or cost less depreciation.
6) detailed notes on the acquisition of units of fixed assets may not be available or can not be estimated.
7) the general price index may not be available for a period of time restate fixed assets required by this Statement. Under these circumstances, an entity may need to use the basic estimates, for example, the transfer rate between the functional currency and foreign currencies are relatively stable.8) Some non-monetary posts are recorded on the number now on a date other than the date of acquisition or date of statement of financial position, for example, fixed assets have been revalued in the previous date.
7) the general price index may not be available for a period of time restate fixed assets required by this Statement. Under these circumstances, an entity may need to use the basic estimates, for example, the transfer rate between the functional currency and foreign currencies are relatively stable.8) Some non-monetary posts are recorded on the number now on a date other than the date of acquisition or date of statement of financial position, for example, fixed assets have been revalued in the previous date.
9) The amounts are restated from net non-monetary items, in accordance with relevant GAAP, when the amount exceeds the recoverable amount.
10) the investee are recorded under the equity method may make a report in the currency hyperinflation economy.
11) The effect of inflation is usually recognized in borrowing costs.
12) An entity may acquire assets in a deal that allows entities to defer payment without incurring an explicit interest charge.
13) At the beginning of the first period of application of this, a component of equity, except retained earnings and revaluation surplus, are restated using general price index from the date of the equity component is contributed or appear.
14) At the end of the first period and subsequent periods, all components of equity are restated by applying a general price index from the beginning of the period or the date of contribution, if more recent. Shift in owners’ equity during the period disclosed in accordance with IAS 1 (revised 2009).
Presentation of Financial Statements. Comprehensive Income Statement
This statement requires that all items in comprehensive income statement are expressed in units of measurement are now at the end of the reporting period. Therefore, the entire amount necessary to implement the changes and display it in the general price index from the date income and expenses were initially recorded in the financial statements.
Gain or Loss on Net Monetary Position
1. Monetary position gain or loss is the difference in net non-monetary assets, and equity items in the comprehensive income statement are restated and the adjustment of index linked assets and liabilities.
2. Gains or losses can be estimated using changes in the general price index to the weighted average over the period of the difference between monetary assets and monetary liabilities.
3. Gains or losses net monetary position is included in the income statement.
Financial Statements Statements of Financial Position Costs Now
Items that are presented at current cost are not restated because they are expressed in units of measurement are now at the end of the reporting period.
Comprehensive Income Statement
Comprehensive income statement using the current cost, before restatement, generally reports costs are now at the time of the underlying transactions or events. Therefore, the entire amount is to be presented again in the unit of measurement is now at the end of the reporting period by using a general price index
Related Figures
Corresponding number in the previous reporting period, whether based on a historical cost approach or a current cost approach, are restated using general price index, so the comparative financial statements are presented in units of measurement are now at the end of the reporting period. Information disclosed in connection with previous periods is also expressed in units of measurement are now at the end of the reporting period. For the purpose of presenting comparative amounts in the presentation of foreign currency, applied IAS 10 (revised 2010).
Consolidated Financial Statements
The parent entity financial reports in the currency hyperinflation economy may have subsidiaries that also make a report in the currency hyperinflation economy. Entity’s financial statements are restated the child’s needs by using the general price index of the country whose currency is reported prior to inclusion in the consolidated financial statements issued by the parent entity. When a foreign subsidiary is an entity, then the restated financial statements are translated at the closing exchange rate. Entity’s financial statements were reported in children who are not hyper-inflation economy currencies are treated according to Foreign Exchange.
6.4. INFLATION ACCOUNTING DIFFERENCES IN THE U.S., ENGLAND, AND BRAZIL
Differences in inflation accounting in the United States, Britain, Brazil
Differences in inflation accounting in the United States, Britain, Brazil
• State of the United States
In 1979, the FASB issued Statement of Financial Accounting Standards / SFAS No.33, entitled “Financial Reporting and Changing Values” statement requires U.S. companies that have supply and asset still worth more than $ 125 million or assets of more than $ 1 billion, for the past 5 years trying to make disclosure of constant purchasing power as the basic framework of the historical cost basis of measurement for the primary financial statements.
FASB is allowing companies to use the present re-translation method or adjust to the foreign inflation and then do a translation into U.S. dollars. Thus, the adjustment of the data to reflect the current cost inflation index can be based on the general price level of the U.S. or abroad.
FASB is allowing companies to use the present re-translation method or adjust to the foreign inflation and then do a translation into U.S. dollars. Thus, the adjustment of the data to reflect the current cost inflation index can be based on the general price level of the U.S. or abroad.
• State of Britain
UK Accounting Standards Committee / ACS issued a “Statement of Standard Accounting Practice 16 / SSAP,” Accounting for Costs Now “for a trial period of 3 years in March 1980. Although SSAP 16 was canceled in 1988, the methodology is recommended for companies that voluntarily report accounts-their account adjusted for inflation.
• State of Brazil
Although no longer required the recommended inflation accounting in Brazil today reflects two groups of reporting options, the Brazilian Corporate Law and Capital Market Supervisory Commission of Brazil. Inflation adjustment in accordance with the law firm presenting the accounts re-permanent assets and shareholders’ equity by using a price index which is recognized by the federal government to measure the local currency devaluation.
Inflation adjustment to permanent assets and shareholders’ equity are presented net of the amount over that disclosed separately in the profit gain or loss is now as monetary correction. Price-level adjustments to equity shareholders are shareholders in the amount of investment which should grow to period begin not loss with inflation. Adjustments to assets permanently smaller than equity adjustments cause loss of purchasing power that reflects the risk faced by the company on the net monetary assets.
Inflation adjustment to permanent assets and shareholders’ equity are presented net of the amount over that disclosed separately in the profit gain or loss is now as monetary correction. Price-level adjustments to equity shareholders are shareholders in the amount of investment which should grow to period begin not loss with inflation. Adjustments to assets permanently smaller than equity adjustments cause loss of purchasing power that reflects the risk faced by the company on the net monetary assets.
The recommended inflation accounting in Brazil reflects the two groups reporting options, namely:
a) The Brazilian Corporate Law
Presenting the accounts re-permanent assets and shareholders’ equity by using a price index which is recognized by the federal government to measure the local currency devaluation.
b) Commission of the Brazilian Securities and Exchange Commission
b) Commission of the Brazilian Securities and Exchange Commission
Requires that the method of accounting for companies whose shares are publicly traded must resize all transactions that occur within a period by using the functional currency.
6.5. FINANCIAL REPORTING IN THE ECONOMY HYPERINFLATION
Financial Reporting in Hyperinflation Economic Statement of Financial Accounting Standard 63: Financial Reporting in Hyperinflation Economic consists of paragraphs 1-40. The entire paragraph has the power to set the same. Paragraphs which are printed in bold and italics to set the main principles. IAS 63 should be read in the context of goal setting and the Framework of the Preparation and Presentation of Financial Statements.
6.6. CONSTANT DOLLARS ARE NOW OR COST (CURRENT COST) BETTER FOR MEASURING INFLATION EFFECT
Current Cost
According to Philips Edgar Edwards and Bell (1961) is the most intense character of this CCA concept. According merka required by managers is how they allocate economic resources available. Here are some current forms of cost:
Replacement cost is the value of the measured current (current cost) to obtain new assets or replace it with the same production capacity. This method has been criticized in terms of:
- The subjectivity of judgment or estimate of the price so that the numbers that arise are not based on actual transactions.
- In the case of an asset price decline that would cause the decrease in charges to the income statement (such as depreciation and cost of production) is lower than the load at historical cost. Finally, income will be higher than historical cost.
- Changes in the general price is not reflected in the replacement cost method, as it was for certain assets. Therefore this method of replacement cost is not considered a method of inflation accounting
- It is hard to make comparisons between companies that differ from each other.
6.7. PREVENTION OF “DOUBLE-DIP”
- At the time to restate the estimates beyond horrified to account for inflation abroad, caution must be maintained to prevent the phenomenon of “double-dip”.
- inflation adjustment to the cost of goods sold and depreciation expense are designed to suppress earnings “as reported” in order not terjadioverstate ment laba.meskipun so, due to the negative relationship between local inflation and currency values, changes in exchange rates between the financial statements of the other sequence, which in generally caused by inflation (at least for a certain period), will lead the company at least partly reflect the impact of inflation (ie the currency translation adjustment), the profits “as dilaporkanya”.
- Adjustment on relevant for multinational companies based in the U.S. for adopting the dollar as the functional currency of foreign operations by FA SB 52 and the translating inventory at the exchange rate goes.
