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COMPARISON OF SEVEN FUNDAMENTAL FEATURES OF THE STATEMENT OF CHANGES IN FINANCIAL POSITION IN THE UNITED STATES, CANADA, THE UNITED KINGDOM, NEW ZEALAND AND AUSTRALIA
Abstract
Enthusiasts believe that the funds statement could be a major facilitating factor in the harmonization of accounting practices between countries. This study provides a starting point by delineating the state of the art regarding the funds statement in the United States, Canada, the United Kingdom, New Zealand and Australia. The historical development of the funds statement in the United States is reviewed. Seven major reporting areas identified in the United States Accounting Principles Board Opinion 19 (APB Opinion 19) are then compared with those in other countries--these seven areas are (1) reporting requirements, (2) concept of funds, (3) funds from normal operations, (4) extraordinary items, (5) financing activities, (6) investing activities, and (7) noncurrent exchanges. The reporting provisions were found to be similar in the United States, the United Kingdom and New Zealand except that New Zealand reports profit after tax and extraordinary items. In presenting funds from operations, Canada does not require the presentation of nonfund items. Significantly, Canada and Australia's promulgations do not require the presentation of a funds statement; however, both countries require the statement as a stock exchange listing requirement and Canadian companies are required by the Canada Business Corporations Act to present the statement annually. All of the countries are members of the International Accounting Standards Committee (IASC). Canada, New Zealand and the United Kingdom have implemented International Accounting Standard 7 (IAS 7). Australia considered its contents in the development of an exposure draft, which if adopted would be an excellent Standard. The United States does not adopt the International Standards. The European Economic Community countries are also members of IASC. Ireland, the Netherlands, Luxemburg, Denmark and West Germany have implemented IAS 7. Belgium and Italy have not implemented IAS 7. Some significant differences were found in the major reporting areas. Also there is considerable variation in the amount of detail provided in the promulgations. All of them lack specific guidelines and there is a need for more explicit terminology and definitive illustrations. This study recommends the adoption of IAS 7 as the minimum Standard in all countries. The following recommendations are made to improve APB Opinion 19: (1) Provide a funds statement for the previous period. (2) Identify the funds concept in terms of "all financial resources" in each section of the statement. (3) Profit or loss on the disposal of a long-term asset should be removed from operating income and the sale reported separately at the sale price. (4) When acquiring a subsidiary, report: (a) purchase price, (b) cash and shares paid, and (c) intended method of payment of unpaid balance. (5) Investments in unconsolidated subsidiaries, report: (a) dividends, or (b) investor's share with retained portion shown as a reinvestment. Recommendations for future research are discussed in terms of adapting the statement to provide: (1) current cost information, (2) cash flow information, and (3) forecasted data. The adoption of IAS 7 would provide more uniformity and improve the reporting practices in some areas. The statement may be a key cog in the harmonization process and appears to have the potential to enhance the financial reporting process.
Subject Area
Accounting
Recommended Citation
DE RIDDER, JEROME J, "COMPARISON OF SEVEN FUNDAMENTAL FEATURES OF THE STATEMENT OF CHANGES IN FINANCIAL POSITION IN THE UNITED STATES, CANADA, THE UNITED KINGDOM, NEW ZEALAND AND AUSTRALIA" (1980). ETD collection for University of Nebraska-Lincoln. AAI8105836.
https://digitalcommons.unl.edu/dissertations/AAI8105836