Despite the high demand for convergence, differences in accounting practices widely exist among different sets of accounting standards, causes of which include but are not limited to different industry practices, interpretation of accounting principles and selection of accounting choices.
Format difference is a main area of differences which first come to our eyes. The three primary financial statements have different titles and are presented differently across different countries. In France/Germany and UK, income statement appears first in the annual report, followed by balance sheet, indicating that companies in those countries are more concerned with operating results. In terms of their balance sheet presentation, current items follow non-current ones, whereas the opposite is true in Japan, U.S. and China. Furthermore, a separate statement—SORIE is found immediately after income statement in annual reports of French/German and UK companies, while SOCI is prepared by U.S. and Chinese companies.
The most significant difference is found in treatment of specific accounts, where U.S. and Japan like to be different from IFRS. Goodwill is a main area of Japan’s deviation. It is tested at least annually for impairment in all the countries except in Japan, where goodwill is amortised using e.g. straight-line method, indicating that Japanese prefer smoothing of accounts to volatility. In valuing long-term contract, completed-contract method is most widely used in Japan, but is not allowed under IFRS. Moreover, LIFO is acceptable under U.S. GAAP but not under IFRS. There are also some areas where U.S. and Japan have converged, but are still not in line with IFRS. For example, both U.S. and Japan GAAP prohibit upward revaluation of fixed assets, except a one-time optional revaluation of land in Japan. Besides, Japan previously allowed cost method for inventory valuation but revised its accounting standards later in 2006 to allow only the LOCOM method to converge with US.
Despite the existence of differences, convergence is also happening across world. The most welcoming convergence is seen between IFRS and U.S. GAAP, e.g. huge efforts have been made by IASB to converge with U.S. GAAP by revising IAS 23 to require capitalising borrowing cost to qualifying asset from 2009. Besides, most differences previously found in recognition, calculation and classification of deferred assets are expected to be eliminated with the introduction of Exposure Draft for Income Taxes in 2009. Japan is also moving towards convergence while still maintains discretion over accounting polices, e.g. it made a big step forward to converge with the world in 2007 by requiring that all finance leases be capitalised.
In conclusion, accounting practices in France/Germany and UK are largely the same, indicating IFRS influences across Europe. However, worldwide harmonisation is not seen because of disagreements between FASB and IASB despite recent convergence in some aspects, thus casting doubt on comparability of annual reports. Other factors such as language, political pressure and cultural differences may also lead to different national versions of IFRS. Japan is different in many aspects, e.g. their preference for smoothing, which may be due to their conservative national personality.
KPMG, Implementing IFRS, Extract from: IFRS Compared with Japanese GAAP. 2004
Germany |
Japan |
UK |
US |
China |
|
STRABAG AG |
Obayashi Corporation |
Kier Group plc |
McDermott International |
Renesola |
|
Country of registration |
Austria |
Japan |
United Kingdom |
Republic of Panama |
British Virgin Islands |
Country ofoperation |
Germany & Austria |
Japan |
United Kingdom |
United States |
China |
Stock markets on which shares are listed |
Vienna Stock Exchange |
l Tokyo Stock Exchange l Osaka l Nagoya l Fukuoka |
London Stock Exchange |
New York Stock Exchange |
l AIM l New York Stock Exchange |
Accounting systems used |
IFRS |
Japan GAAP |
IFRS (Group) UK GAAP (Parent) |
US GAAP |
US GAAP |
Proportions of sales outside the home country |
41% |
12% |
N/A |
55% |
42% |
Country/Region of highest sales outside the home country |
Central and Eastern Europe |
North America |
N/A |
Qatar |
East Asia |
Level of gearing |
30.5% |
23.3% |
32.6% |
0.46% |
8.6% |
Business segments |
l Building construction & Civil engineering l Transportation infrastructures l Special divisions & Concessions |
l Construction l Real Estate l Other |
l Construction l Support Services l Partnership Homes l Developments |
l Offshore Oil and Gas Construction l Government Operations l Power Generation Systems |
Single reportable business segment-sale of solar wafers and related products |
Breakdown of shareholding |
l Haselsteiner Group l Raiffeisen/UNIQA Group l Rasperia l Institutional investors l Retail |
l Japan Trustee Services Bank l Master Trust Bank of Japan l Takeo Obayashi l Nippon Life Insurance Co. |
l Standard Life Investments Limited l Legal & General Group Plc and its subsidiaries l Barclays global investors l Norges Bank |
l ClearBridge Advisors, LLC l PRIMECAP Management Company |
l Ruixin Holdings Limited l Yuncai Holdings Limited l Zhengmin Lian l Xiangjun Dong l Invesco Ltd. |
Annual Report Information |
Germany |
Japan |
UK |
US |
China |
|
STRABAG AG |
Obayashi Corporation |
Kier Group plc |
McDermott International |
Renesola |
||
Financial |
Segment information |
ü |
ü |
ü |
ü |
|
Key figures |
l Earnings figures l Balance Sheet figures l Output volume l Sales |
Consolidated financial results |
l Sales l Net cash balance l Profit l EPS/DPS |
Condensed financial statements |
Consolidated financial results |
|
CEO’s review |
ü |
ü |
ü |
ü |
ü |
|
Chairman statement |
ü |
|||||
Non-financial |
Shareholder information |
ü |
||||
Employee numbers |
ü |
|||||
History of the company |
ü |
|||||
Board directors and officers |
ü |
ü |
||||
Website information |
Shares & Bonds |
ü |
ü |
ü |
ü |
|
Reports |
l Financial l Corporate Governance |
l Financial |
l Financial l Social Responsibility l Corporate Governance |
l SEC filings l Annual report & Proxy |
l AIM Rule 26 l SEC filings l Financial l Corporate Governance |
|
Presentations to analysts |
ü |
ü |
ü |
ü |
ü |
|
Announcements |
ü |
ü |
ü |
ü |
ü |
|
Others |
AGM summary |
Medium term business plan |
l Earnings estimate l Stock purchase plan |
AGM summary |
Germany |
Japan |
UK |
US |
China |
|
STRABAG AG |
Obayashi Corporation |
Kier Group plc |
McDermott International |
Renesola |
|
Format of primary financial statements |
– Income statement; – SORIE; – Balance sheet; – Cash flow statement; – Statement of changes in fixed assets |
– Balance sheet; – Statements of income; – Statements of changes in net assets; – Statements of cash flows |
– Income statement; – SORIE; – Balance sheet; – Cash flow statement |
– Balance sheet; – Statements of income; – Statements of comprehensive income and stockholders’ equity; – Statements of cash flows |
– Balance sheet; – Statements of operations; – Statements of shareholders’ equity and comprehensive income; – Statements of cash flows |
Terminology used |
Share capital; |
Capital/treasury stock; Capital surplus |
Share capital; Share premium |
Common/treasury stock; Capital in excess of par value |
Common shares; Additional paid-in capital |
Level of detail in notes |
Fair |
Fair |
High |
High |
High |
Treatment of Goodwill |
Annual impairment test |
Amortised (straight-line) |
Annual impairment test |
Periodic impairment test |
N/A |
R&D expenditure |
Expensed as incurred |
Expensed as incurred |
N/A |
Expensed as incurred |
Expensed as incurred |
Other intangible assets |
Without defined useful life -impairment With defined useful life -amortise |
Amortised (straight-line) |
Cost less amortisation and impairment loss; Amortised by straight-line method |
Definite life-amortise using straight line method Indefinite life-unamortised |
Prepaid land use right -amortise using straight line method |
Valuation of tangible (fixed) assets |
Depreciated & impairment |
– Fair value upon acquisition; – Revaluation reserve for land |
Cost less depreciation |
– Depreciated & impairment; – No revaluation |
Depreciated & impairment |
Depreciation |
Straight-line method |
– Declining balance method – Straight-line method |
Straight-line method |
Straight-line method |
Straight-line method |
Inventory |
Lower of Cost and Net Realisable Value |
FIFO & Specific identification method |
Lower of Cost and Net Realisable Value |
Lower of Cost or Market & FIFO (LIFO possible) |
Lower of Cost or Market & FIFO |
Capitalisation of interest |
N/A |
N/A |
Capitalised to qualifying asset |
– Capitalise Required by SFAS |
Capitalised to PP&E |
Long term contracts |
Percentage-of-completion |
– Completed-contract or – Percentage-of-completion |
Percentage-of-completion |
Percentage-of-completion |
N/A |
Accounting for leases |
Finance lease-capitalised Operating lease-expensed |
Finance lease-capitalised Operating lease-expensed |
Capitalised or expensed on a straight-line basis |
Operating lease-expensed |
N/A |
Deferred taxation |
Balance sheet liability method; Non-current asset/liability |
Balance sheet liability method |
Balance sheet liability method; Non-current asset/liability |
Balance sheet liability method; Asset/liability |
Balance sheet liability method; Asset/liability |
Germany |
Japan |
UK |
US |
China |
|
STRABAG AG |
Obayashi Corporation |
Kier Group plc |
McDermott International |
Renesola |
|
CSR On annual report? |
ü |
ü |
ü |
ü |
|
What content? |
l social and societal l ecological l health and safety |
l only one page with pictures l communities and society |
l environment and climate change l health and safety l employees and training l customers and suppliers l community engagement l considerate construction scheme |
l government regulations l environmental matters |
N/A |
Additional information on website (other reports) |
|||||
Sustainability report? |
ü |
ü |
|||
What content? |
l first sustainability report 2008 l management systems l economic sustainability l environmental commitment l personal development l social accountability |
l Environmental l Social l Economic |
N/A |
||
CSR report? |
ü |
ü |
|||
What content? |
l first CSR report 2008 l environmental report l customers l shareholders l employees l partner companies l locality, society, environment |
Almost same content as in the annual report |
N/A |
Germany |
Japan |
UK |
US |
China |
|
STRABAG AG |
Obayashi Corporation |
Kier Group plc |
McDermott International |
Renesola |
|
Code to comply |
Austrian Code of Corporate Governance |
Combined Code on Corporate Governance |
Code of Business Conduct |
Code of Business Conduct |
|
Information included in Corporate Governance |
– commitment to the Code – corporate governance structure – working methods – report on the external evaluation of compliance |
– principles of corporate governance – basic philosophy – measures to promote corporate ethics |
– board of directors – corporate governance statement – remuneration report – statement of directors’ responsibilities |
Proxy Statement– executive compensation – directors and executive officers – security ownership |
– directors and senior management – compensation – board practices – share ownership |
Management philosophy |
ü |
ü |
|||
Management structure |
– dual-board – presidium – nomination committee – audit committee |
– unitary board – audit committee – remuneration committee – recommendation committee |
– unitary board – audit committee – remuneration committee – nomination committee |
– unitary board – audit committee – compensation committee – finance committee – governance committee |
– unitary board – audit committee – compensation committee – corporate governance and nominating committee |
Senior management (directors) information |
|||||
Background |
ü |
ü |
ü |
ü |
|
Terms of employment |
ü |
ü |
ü |
ü |
ü |
Share ownership |
ü |
ü |
ü |
||
Remuneration |
– fixed base salary – profit-related bonus |
– basic salary – benefits in kind – annual bonus arrangements – retirement benefits – long-term incentives |
– fees earned and cash paid – stock and option awards – bonus – perquisites – retirement plans |
– share incentive plan – share option |
|
Shares information |
|||||
Share ownership |
– institutional investors – geographical distribution |
– extensively held by financial institutions |
– extensively held by financial institutions |
– certain beneficial owners |
– major shareholders are board of directors |
Stock market performance |
ü |
ü |
ü |
ü |
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