Shall we have international financial reporting standard?

It has been said that there would be an international standard for financial report in the future. The expected time may be 2009, 2010 etc.

With globalization for investment, it seems that we are going to have the ideal standard some day. Yet, I do believe that this would be applied to listed corporations only.

The situation for SMEs is different among all countries. Since SMEs have no public buying and selling of stocks, it is without any need to make them universally alike.

Of course, it is a best choice to have standardized financial reporting especially for those SMEs that may look for IPO in the future. With such reporting requirement, the management will be forced to develop. Certainly, there are many SMEs preferring to remain unchanged for everything including accounting. Remember that many SMEs are not employing any IT applications besides email etc.

There are more SMEs than listed corporations. May be we can apply the 80-20 ratio as average for most countries. With over 80% SMEs, we cannot hope that all of them would be able to develop for their business and accounting. That means they would rely on their auditors to prepare the reporting accordingly. This is not the best outcome and the standardization would become a routine description.

In fact, there are amendment for smaller listed corporations going on and we can see that it will take some years to have the final version of reporting standard.

Although I do not expect to have any international financial reporting standard in years for SMEs the world over, yet taking such as guidelines for regional standards is a certain result.

Cooking book and tax shelter, which is the worse?

In working for my account project, I discussed the FRS with two accountants.

By chance, we talked about the accounting frauds. I suddenly compare the Enron case and the tax shelter.

After the meeting, I spent some minutes thinking about this and found that there is something new for me.

Usually we suppose that cheating your government is a deadly sin and cheating individuals may be considered guilty but in a lesser degree. For example, if you owe tax to your government, you would never be free. But it you owe some individuals, you might be free because either they could not find you or they just gave up.

The Enron case is about cooking the book to hide loss. In other words, the corporation had paid unnecessary tax to the government. Of course, all shareholders suffered huge loss while the government was not in the short term.

Tax shelter is another matter. Check: "Tax Cheats Called Out of Control". This type of fraud might cost the country lots of money. Cheating your country is like cheating every one in the country. Anyone can see the difference between this whole number and the shareholders of a single corporation.

Yet, Enron case lead to complete closing down and the top-level executives had to face long prison term. The auditor, Arthur Andersen disappeared forever.

The latest tax shelter case may finalize with fine and charging the previous leaders and the involved accounting firm remains intact.

What we can learn from these cases? Nothing, just try anything bad and hope that luck is on our side. That is it. Remember not to teach youngsters about not to be bad.

The fact tells us we are wrong. The law shows us we are wrong.