Accounting Reporting CriteriaDuring the last few years, the regulatory environment has drastically changed in the United States. The drastic change was done after the Tyco and Enron sandals were uncovered. The new changes are designed to help protect the American public who invest in companies in the United States of America. After the Tyco and Enron sandals, a light bulb went off at the government. The government finally realized that they needed to step in to ensure that companies are honestly reporting their finances. The action that congress took was to establish the Sarbanes Oxley Act of 2002. The Act details the requirements for financial reporting for public corporations and is overseen by the Securities and Exchange Commission. The Sarbanes Oxley Act requires all publicly traded corporations to follow strict requirements for financial accounting and reporting. (Phillips, Libby and Libby, 2006)Although several differences exist between the accounting reporting criteria of the United States and each county, the global business world requires a unique consideration. With heightened consumer protection becoming increasingly important, regulation of American reporting criteria such as The Sarbanes-Oxley Act (SOX) is common to hear (Phillips, Libby and Libby, 2006) Since the U.S. has had so much attention given to reposting regulations, other countries are finding it more difficult to identify their own regulations. Other counties do not have such high levels of accounting criteria and when the U.S. deals with them extra caution is needed. Below Team A will identify, compare and contrast the accounting reporting criteria differences between a U.S. company and a foreign company in regards to the regulatory environment, issues with foreign currency and differences in GAAP.Comparing U.S. and foreign companies issues with the Regulatory EnvironmentEnvironmental accounting is to provide a management tool in the environmental area. This accounting tool offer indices for corporate evaluation and serve as a data source for the disclosure to the public. The FASB and SEC are important organizations in terms of standard setting in the United States. The Sarbanes-Oxley Act of 2002 (SOX) and other regulatory initiatives by the PCAOB and SEC have dramatically changed the environment in which public companies operate. These regulatory factors have affected how companies calculate and report financial results- and how executives utilize external auditors, tax advisors and other consultants to help them manage financial aspects of their business (Maxick and Battaglia, 2008). Integrity of financial reporting is important because of the reliance that is placed on financial information by both outside and inside the reporting organization. This measure is used to keep companies honest about their money.Comparing U.S. and foreign companies issues with foreign currencyFor organizations to remain competitive in the global marketplace, they will have to face issues of foreign currency. Organizations wanting to make doing business easier may want to have the currency exchange issue run as smoothly as possible. Doing business outside the United States, an organization will create exposure to currency movement. A great many companies consider foreign currency transactions a part of doing business in the international arena, this is figured into the operations (Hollein, 2002). Wal-Mart is considered the worlds largest retailer and Carrefour of France is the second largest retailer in the world. Both retailers adhere to the International Accounting Standards Board (IASB) (Hill, 2004). Many countries outside of the United States adopt this accounting standard. International Monetary Fund (IMF) is an international system dealing with floating exchange rate. This international procedure gives countries more control over their own monetary policies (Hill, 2004). Currency challenges will always exist when doing business with foreign nations this is an ongoing concern. Many organizations dealing in import and export seek out buyers and sellers who provide pricing in their own currency; it makes transactions easier for all involved. Many international companies like Wal-Mart and Carrefour are continually exposed to currency swings, understanding this exposure has kept them in their global positions (Hollein, 2002). Organizations that plan to stay in the global marketplace will have to learn how to manage exposure. Those organizations that do manage exposure will be able to participate in favorable currency movement (Hollein, 2002).Comparing U.S. GAAP with U.S. and foreign companiesPWC is helping affected companies to understand what FIN 48 means for them and to implement measures to get them ready for when the new rules begin to take effect. (pwc.com) FIN 48 has been issued because of the perceived diversity of how companies have accounted for uncertain tax positions under US GAAP in the past. The key aims of the interpretation are to provide greater comparability, reduced flexibility for manipulation, and increased transparency of tax issues. (pwc.com) Some of the companies should be concerned because there is a greater disclosure to the tax authorities on what the company believes is going to be the likely outcome of uncertain tax positions. (pwc.com) There are also indications of tax authorities around the world considering their positions in relation to companies tax accrual working papers and potentially seeking the ability to re-examining previous settled enquiries. (pwc.com) This was the final countdown for companies reporting under US GAAP.Some of the foreign firms will no longer need to reconcile their financials to GAAP. The Securities and Exchange Commission continues to seriously explore the possibility of allowing U.S. companies to report their financial results using international accounting standards. U. S. companies report using generally accepted accounting principles, or U.S. GAAP, which are largely set by the Financial Accounting Standards Board. (cfo.com) The SEC currently requires foreign companies using International Financial Reporting Standards, or IFRS, to reconcile their reports to U.S. GAAP in order to list on U.S. exchanges. (cfo.com)ConclusionThe accounting reporting criteria is a vast amount of key factors and elements. Accounting is so important for companies that it is often called the language of business. In fact, accounting affects not only individual businesses but also society as a whole (Phillips, Libby and Libby, 2006). With accounting being so important, its easy to see why accounting regulations are needed, not only for the U.S. but also for our global business partners.ReferencesR.H., Hermanson, and J.D. Edwards, Financial Accounting, A business perspective, 6thed, Richard D. Irwin, Inc., 1995Phillips, F., Libby, R. & Libby, P. A. (2006). Fundamentals of Financial accounting.Boston: McGraw-Hill Irwin.Katz, David M. (2007, May, 3). IFRS or GAAP: Take your Pick? from http://www.cfo.comFIN 48: Countdown for companies reporting under US GAAP. Retrieved August 20, 2008, from PriceWaterhouseCoopers Web site: http://www.pwc.co.ukHill, C.W.L., International Business: Competing in the Global Marketplace,5th Ed, the McGraw-Hill Companies, 2004Hollein, M.N., Pricing in foreign currency vs. U.S. dollars how is your company managing currency risk? AFP Exchange. Bethesda: Nove/2002Vol. 22, Iss. 6; pg 112. 3 pgs
