In today's unpredictable stock markets, it is extremely important for investors to expand investments to minimize risk and earn reasonable returns on funds. The diversification does not have to be restricted to domestic companies because of opportunities available in foreign markets. On the other hand, securities analysis becomes more complex because of supplementary variables such as foreign exchange risk, political, economic, cultural diversities, etc. that need to be taken into deliberation in making investment judgment. A significant variable in the analysis of foreign securities is various accounting standards. The accounting standard of United States (US) and United Kingdom (UK) and identifies the major differences that materially impact the Tangible Assets, Goodwill, Inventory, Auditing, and financial statements. The study is helpful in evaluating the financial statements of UK companies and comparing them with US financial statements.
U.K was one of the initial and first countries in the world to expand and have Companies acts containing supplies and also one of the initial professional accounting bodies was established in the U.K. Certified accountants and company law play a key role in dominating the U.K corporate financial reporting and play a important persuade varying from external and domestic factors. Britain's financial market is structured around a "capital financial market based financial system" where the stock market finances large scale businesses, trading securities and pricing role. The stock exchange and taxation system have very little power in financial reporting. Having said that, the stock market has association in increasing financial reporting standards for listed companies. Although U.K seems to have urbanized its own companies act and regulations, it still has established indirect foreign influence from member states of the European Union throughout EU directives and from U.S.A with their new accounting standards.
Financial reporting and accounting in the U.S.A appear to have a large and dominant powers on accounting in the world today with its mostly consistent standards circulate by the international accounting standards committee. On the other hand, the U.S.A accounting is very similar to U.K accounting due to the fact that U.S accounting was originally an export from the U.K, which is often recognized to be the financial support fathers of US accounting. For example, many of the largest accounting firms in the US such as Ernst & Young and ICPMG were expatriate Britain.
The U.S.A has taken that initial leadership and is flattering the accounting sector leaders in their accounting standards by exploring and increasing quickly in the accounting field. Standards have become mainly huge and detailed due to the litigious-ness of American society and intense competition among accounting firms for business.
Company Law and Standards of the UK have developed and concern only a few number of accounting standards. The standards that have been introduced expand around the set of forth-broad principles. The major current legal instrument used in the U.K to govern the accounting practices of limited accountability companies is the Companies Act 1985 amended in 1989, introducing stipulation of the EC 7th directive. Reporting requirements in the U.K are governed by the FRS (Financial Reporting Standards) issued by the ASB (Accounting Standards Board) that introduce the basic provisions contained in company law in the U.K The companies act consists of a number of act which generally govern the actions of U.K companies. These acts are regularly updated and amended therefore seem to be increasing further.
The most important transform seen in the Companies act which was consolidated in 1985 and modify in 1989, was that small and medium sized businesses required to explain any flow seen in their accounts away from accounting standards. Another aspect that was also introduced was the true...
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