Research Paper: Financial Standards Reporting

Pages: 10 (2690 words)  ·  Bibliography Sources: 7  ·  Level: College Senior  ·  Topic: Accounting  ·  Buy This Paper

SAMPLE EXCERPT:

[. . .] S. companies, so the preparers have to have some understanding of the U.S. GAAP, and make decisions based on it also. Therefore, German companies try to conform, as best they can, with the large U.S. GAAP as well as their own and the IASB standards. There is no wonder that it seems piecemeal to the rest of the world.

Impact on Deutsche Bank

Companies in Germany have gotten used to a piecemeal way of doing financial accounting. Though the accountants are exacting, there still has been no single accepted national standard that they have had to follow. With all countries likely to adopt the IASB standards by 2014, it is imperative that they learn to follow the single standard instead of using the formula that they have in the past. As stated previously, there have been many differences between the international and German standards historically, so German accountants have to understand the new IASB and conform to it.

This means that large companies, such as Deutsche Bank, have to understand how these reporting standards are going to impact their businesses specifically. Deutsche Bank is one of the leading investment banks in the world with significant investment in Europe and growing interests in North America and Asia (Deutsche Bank, 2011). Because the company does a majority of its business with companies outside of Germany, incorporating international standards is an important piece of the company's business.

From their 2010 financial statement Deutsche Bank lists its accounting standards as;

"Except where we have indicated otherwise, we have prepared all of the consolidated financial information in this document in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and as endorsed by the European Union ("EU"). Until December 31, 2006, we prepared our consolidated financial information in accordance with generally accepted accounting principles in the United States ("U.S. GAAP"). All 2006 data included in this report, however, have been prepared in accordance with IFRS as issued by the IASB. Our group division and segment data come from our management reporting systems and are not in all cases prepared in accordance with IFRS" (Deutsche Bank, 2011).

This means that since the country has agreed to the IASB standards, that Deutsche Bank is trying to comply with that as well. Since the company has done a significant business in the United States for many years they have also complied with the U.S. GAAP standards exclusively at times. Because of this some of the reporting data (that before 2006) conforms to the U.S. GAAP standards. However, some subsidiaries are still not completely compliant with the IASB or U.S. GAAP standards, so that information cannot be relied upon under either of those umbrellas. Also, the reason that Deutsche Bank is complying with the IASB is that the European Union as a whole decided to adopt the standards. Unfortunately from this information, it sounds like German companies are still applying different accounting rules because there are different standards still mentioned. Even thought they no longer adhere to the U.S. GAAP, the company is still not completely under the IASP banner.

Deutsche bank has complied with the international standards almost exclusively since 2007 (Deutsche Bank, 2011), so there is little impact that will occur after the rest of the world adopts the standards. The only issue that may arise is making sure that all parts of the business are in line with the IASB standards. Some researchers have suggested that large companies like Deutsche Bank could put pressure on noncompliant partners to adopt the standards (Schipper, 2010). But the problem for Deutsche Bank seems to be that not all of its components are reporting using the IASB standards. The pressure in that instance is going to have to come from the member countries to get businesses to use the reporting standards.

The disclosure requirements according to the IRFS 7 standards have changed some of the reporting that previous documents required. Specifically, this new standard contains "two main categories of disclosures" which are "information about the significance of financial statements, and; information about the nature and extent of risks arising from financial estimates" (IAS Plus, 2011). This effects Deutsche Bank in that the new standards has some exemptions for companies which work with government entities (Deutsche Bank, 2011). The company's financial statement specifically mentions one piece of the new IFRS 7 standards which could potentially affect Deutsche Bank.

"The amendments comprise additional disclosures on transfer transactions of financial assets (for example, securitizations), including possible effects of any risks that may remain with the transferor of the assets. Additional disclosures are also required if a disproportionate amount of transfer transactions are undertaken around the end of a reporting period."

These standards do not take effect until July 1, 2011, so the company is still trying to determine how the standards will affect them specifically. The reason for this is that "While approved by the IASB, the amendments have yet to be endorsed by the EU. The Group is currently evaluating the potential impact that the adoption of the amended disclosure requirements will have on the disclosures in its consolidated financial statements" (Deutsche Bank, 2011). The general disclosure requirements have been in place now since 2007 when the EU first decided to adopt the standards, and Deutsche bank has been abiding by them since then, so there will only have to be minor changes made to the information they disclose and the way that is completed.

Conclusion

German accounting principles were scattered before the country adopted the IASB rules in 2007 along with the rest of the European Union. However, the specificity that German accountants used when preparing financial reports was still considered very exacting. Looking at Deutsche Bank in particular, it is easy to see that this company has quickly been able successfully adopt the standards. The financial reporting mentioned repeatedly the IFRS standards with which they were complying. Although the standards are fluid (e.g., new disclosure requirements go into effect July 1 of this year), Deutsche Bank has been able to switch to the new standards easily. It seems that these standards will be simpler for those companies doing business with the U.S. When the U.S. goes to the IASB in 2014, it should be easier for all businesses to comply with the accounting standards.

References

Bonthrone, R. (2000). German financial accounting and reporting. Translation Journal, 4(3). Retrieved from http://translationjournal.net/journal/13finan.htm

Deutsche Bank. (2011). Company. Deutsche Bank. Retrieved from http://www.db.com/en/content/company/company.htm

Feige, P. (1997). How "uniform" is financial accounting in Germany? European Accounting Review, 6(1), 109-122.

Gornik-Tomaszewski, S., & McCarthy, I.N. (2003). Cooperation between FASB and IASB to achieve convergence of accounting standards. Review of Business, 24(2), 52-61.

IAS Plus. (2011). Summaries of international financial reporting standards. Retrieved from http://www.iasplus.com/standard/ifrs07.htm

McArthur, J.B. (2006). Cultural influences on German vs. U.S. management accounting practices. Management Accounting Quarterly, 7(2), 10-14.

Schipper, K. (2010). How can we measure the costs and benefits of changes in financial reporting? Accounting and Business Research, 40(3), 309-326.

Shoaf, V., & Zaldivar, I.P. (2005). Goodwill impairment: Convergence no yet achieved. Review of Business, 26(2), 31- 36. [END OF PREVIEW]

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Financial Standards Reporting.  (2011, April 2).  Retrieved April 21, 2019, from https://www.essaytown.com/subjects/paper/financial-standards-reporting/6490203

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