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Accountancy Best Practice

Best Practice

Internationally renowned finance leaders, experts and educators distil and summarize the most important aspects of finance best practice. Each Best Practice essay has an Executive Summary for quick reference, outlining the main points. The Making It Happen feature illustrates practical applications, and where relevant authors have provided illustrative case studies and definitions.

  • Accounting and Economics—Critical Perspectives
    by John C. Groth
    This article reveals some important differences between accounting and economics. It does not seek to explain the various arguments that prompt, support, or question such differences. The ultimate objectives are an awareness that accounting and economics differ, and that knowledge of the differences allows the manager to benefit from both. At the same time, this understanding helps to avoid errors in the application of accounting and economics.
  • Accounting for Share-Based Payments under IFRS
    by Shân Kennedy
    Share-based payments are often made to employees for the purpose of incentivizing them to remain with a company or to improve their standard of performance and, thus, may be granted subject to certain conditions. IFRS 2, Share-based Payment, analyzes in detail the types of condition that might be applied and how they impact the accounting treatment.The standard requires that equity-settled share-based payment awards are accounted for using the...
  • Creative Accounting: Auditors’ Roles in the Detection of Financial Fraud
    by Zuraidah Mohd-Sanusi, Yusarina Mat-Isa
    “Creative accounting practices” is a term used to describe any means that may be employed to manipulate financial data, and it includes the aggressive choice and application of accounting principles as well as fraudulent reporting (Mulford and Comiskey, 2002). These practices may fall within or beyond the boundaries of Generally Accepted Accounting Principles (GAAP). Creative accounting practices cover a wide range of areas, especially premature...
  • Cultural Changes in External Auditing
    by Jyothi Manohar
    This chapter focuses on external audits of financial statements. The objective of an external audit is to conclude that financial statements are, or are not, fairly presented in accordance with appropriate accounting standards. Consequently, a knowledge of accounting is a prerequisite for auditing. An auditor of financial statements must, therefore, have a thorough understanding of the accounting rules and other regulations that impact the...
  • How to Implement a Standard Chart of Accounts Effectively
    by Aziz Tayyebi
    A chart of accounts (COA) is essentially a set of codes for the consistent classification of financial information. This allows for the systematic production of decision-useful accounting information for management, such as budgeting, monitoring, and management reporting. Similarly, a standard COA helps to ensure comparability in external financial reporting.The COA facilitates the recording of all transactions, which are filtered into a unique...
  • Origins and Rationale for IFRS Convergence
    by Peter Walton
    How did an internal phone call in a Sydney hotel in 1972 lead 40 years later to a worldwide movement that is changing financial reporting radically and opening up international investment?Thanks to that conversation, companies can more and more easily access different stock markets, and investors can step across national and cultural boundaries. Investment should be getting more efficient. Since 2001, International Financial Reporting Standards...
  • Performance Reporting under IFRS
    by Peter Casson
    Financial statements prepared under International Financial Reporting Standards (IFRS) include a statement of comprehensive income which, together with associated notes, report a company’s performance for the accounting period. The International Accounting Standards Board (IASB), an independent body, sets the IFRS. The IASB took over responsibility for setting international accounting standards from the International Accounting Standards...
  • Procedures for Reporting Financial Risk in Islamic Finance
    by Daud Vicary Abdullah, Ramesh Pillai
    The key elements of Islamic finance can be summarized as follows:Materiality and validity of transactions: There is no profit sharing without risk taking, and earning profit is legitimized by engaging in economic venture. Money is not a commodity but a medium of exchange, a store of value, and a unit of measurement. Mutuality of risk sharing: Clearly defined risk and profit sharing characteristics serve as an additional built-in mechanism. There...
  • The LIFO Conundrum: Convergence of US GAAP with IFRS and Its Implications on US Company Competitiveness
    by William C. White IV
    Since August 2008, when former Securities Exchange Commission (SEC) chairman, Christopher Cox, presented a timeline for public companies to transition away from US GAAP (generally accepted accounting principles) to (IFRS) international financial reporting standards, many executives and policy-makers have been concerned about the implications of the differences between the two standards of reporting. The goal of the SEC and the International...
  • The Rationale of International Financial Reporting Standards and Their Acceptance by Major Countries
    by Véronique Weets
    Why Financial Reporting Needs to Be HarmonizedAlthough basic accounting principles such as the accrual basis and the going-concern assumption are widely accepted, the application of these principles in different economic and cultural environments has led to significant differences in how accountants report similar transactions. Local differences exist in, for example, the treatment of goodwill, the definition of a group, treatment of borrowing...
  • What Are the Leading Causes of Financial Restatements?
    by Todd DeZoort
    Both the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) in the United States highlight the importance of “reliability” as a primary qualitative characteristic necessary to make accounting information useful to users making economic judgments and decisions. Reliability in this context refers to a quality of financial reporting that makes it a verifiable, faithful representation of transactions...

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