UK and USA Accounting Framework - Coursework Example

The paper "UK and USA Accounting Framework" is an inspiring example of coursework on finance and accounting. The establishment of the multinational euro currency in 1999 has made Europe a formidable competitor in the global economy and has challenged the dominant positions of the US dollar and US equity markets. A significant contributor to the Europe-US competition is the adoption of the UK system of accounting, now more or less considered the ‘international’ system, which has some critical differences from the accounting system in the US. The main result of this is that the use of these two accounting systems by firms in different countries makes the comparison of financial statements difficult, due to variations in the handling of common accounting procedures and different definitions being applied to accounting entry items.

1.1 The FASB and the IASB

Two bodies are responsible for maintaining the two different sets of standards. In the US, accounting standards are developed by the Financial Accounting Standards Board (FASB), which was founded in 1973, the same year the International Accounting Standards Committee (IASC) was formed; the IASC was reorganized in 2001 as the IASB, or International Accounting Standards Board (Barth, Landsman & Lang, 2008; US Securities & Exchange Commission, 2011).

A good example of the kind of problem the discrepancies between the two systems can cause is seen in the experience of the introduction of Daimler-Benz shares on the New York Stock Exchange in 1993. In order to be listed on the world’s largest equity markets, the New York or London Stock Exchanges, companies from outside of the US and UK are required to reproduce their financial reports in US and UK Generally Accepted Accounting Practises (GAAP) formats. Just prior to the October 1993 listing of Daimler-Benz in New York, the company’s accountants announced the company had made a profit of DM 615 million; but when this was converted into dollars, the confusing result was an announcement that Daimler-Benz suffered a loss of DM 1.839 billion in the same year. Obviously, this diminished the attractiveness of the stock offering, particularly amongst US investors.