International Developments in Accounting of Switzerland Paper Example

Switzerland is an important country for the analysis of the accounting system. Switzerland adopted the New Accounting Model in 2008 and had been using it ever since. The New Accounting Model takes a dual viewpoint in presenting the financial processes and situations. For general fiscal policy between revenue and expenditure, the cash or financing aspect is handled critically (Wong 2004, p. 8). Nevertheless, in regards to administrative and operational management, the performance facet is the core. In the private sector, performance aspect is reflected in the income statement and complemented with operational cost accounting.

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Switzerland financial reporting under the New Accounting Model is grounded on the International Public Sector Accounting Standards, the only detailed and generally approved set of guidelines for the public sector. This inspires transparency and progressiveness in financial reporting, generating more significant financial statements (Steinhoff 2016, p.20). Additionally, the accounting system and the change to business-based accounting practices brings Switzerland closer to the accounting principles of other public agencies and the private sector thus advancing comparability. Swiss GAAP FER is part of the accounting standards identified in Switzerland. The accounting standards are stipulated by the FER Commission and are structured to offer a real and fair view of the monetary positions (Argento, Grossi and Vollenweider 2012, p.11).

There were numerous reasons for choosing Switzerland for financial reporting analysis. Switzerland is fascinating due to its cultural setting. There are four languages spoken in this country, which is enclosed by five neighbors (Austria, Italy, France, Germany, and Liechtenstein). The Swiss adopted the language of France, Italy, and Germany which may have influenced the Swiss accounting (Achleitner 1995, p. 141).

Another reason for selecting Switzerland is because it is prominent for its banking secrecy and the significance of privacy and secrecy in general. To acquire information regarding Switzerland, one had to review the magazines, books, newspapers and the Internet. From the analysis, it is clear that even experts deal with the challenges of switching the accounting system. Since Switzerland is not a member of the European Union, it is interesting to explore the extent the EU policy influences the accounting system in Switzerland (Federal Finance Administration 2008, p.15).

The Swiss accounting system is much simpler when compared to International Financial Reporting Standards (IFRS). Swiss GAAP FER decreases the cost for the businesses located in the country. Swiss GAAP FER is also easily deployed in Swiss SME's than IFRS (IMF 2004, p.31). On the other hand, IFRS focus is to provide a credible position of finances and bans the identification of unjustified provisions. It is a lawful requirement for accounting systems listed in the EU to be prepared according to IFRS. The same system is distinguishable from the Swiss accounting system because it is more complex and contains large volumes of disclosures (Douglas, Hotaling and McCarthy 2000, p.1). The preparation of a cash flow statement and the valuation of a certain number of items in IFRS is more detailed as compared to the less comprehensive Swiss GAAP FER.

All firms integrated in Switzerland are required by law to prepare their statutory financial statements while following the Swiss code of ethics apart from their initial reporting requirements like IFRS. In Swiss accounting systems, a firm that is not subject to a comprehensive audit usually will be subject to a restricted audit, which can be undertaken by an elected and approved auditor. This is different from IFRS. Firms followed an established process used by other countries especially in the EU (Wyss 2014, p. 4). Swiss GAAP is rule-based while IFRS is principle-oriented. Additionally, with Swiss GAAP, the financial information is indicated below the net income while under IFRS, LIFO cannot be utilized. Firms choose between FIFO and LIFO (Brand 2011, p.12).

The changes in the accounting system impact the accounts structure, the preparation of accounts, financial reporting and budget management. It is also clear that the annual financial statements with its linked income statement balance sheet and notes are expected to be prepared (Robinson 2012, p.90). It should also be prepared in a way that the organizations' assets and incomes can be valued as precisely as possible.

Although a more distant variation in the accounting system is imminent, there is a clear identification of the possible benefits of incorporated reporting. There is more to be attained in terms of better decision making and a more exact image of general performance from the illustration of monetary, administration and sustainability from information in an incorporated format (Holt et al. 2013, p.23).

The Swiss Code of Ethics in accounting does not comprise any provisions on the standards to which a consolidated financial statement must be prepared. Nevertheless, Swiss GAAP FER accounting standards are utilized by the national groups and SME's. Additionally, sector-oriented standards are prevalent to manage accounting provisions for insurance firms, pension finances, and non-profits firms. Firms listed on the keyboard of the Swiss Exchange and listed firms domiciled in the European Union have to prepare their consolidated financial statements as stipulated by IFRS (Kirk 2009, p.67). The variations show that stakeholders must seek a statutory auditor to evaluate an annual audit of the monetary well-being of their firm. According to the Swiss commercial law, an investor is subject to a comprehensive audit in case it qualifies as a public organization or if it fulfills the thresholds set by the Swiss accounting system. (Krimpmann 2015, p. 210)

There is substantial progress in addressing the Swiss standards gap. The execution of IFRS in Switzerland is offering a foundation that enables investors to make correct cross-border comparisons of firms (United Nations 2010, p.6). It also permits Swiss firms to communicate their strategy to stakeholders better. Increasing knowledge with Swiss standards in financial reporting continues to eliminate resistance to IFRS implementation (Praquin and Bensadon 2016, p.88). There is a level of positivity in the implementation of IFRS in Switzerland is slowly increasing.

Conclusion

The impact of the financial crisis in the EU has been to advance notions of Swiss standards among investors and issuers. Additionally, the increasing demand from clients and investors for larger disclosure is propelling an appetite for accounting standards in non-financial reporting. Most people believe that providing non-financial reports to financial benchmarks will advance their reputations among clients and stakeholders. Numerous standards benefit from a network impact; as more individuals implement a given strategy, the value increases. Within the past decade, numerous jurisdictions have implemented IFRS during financial reporting. The advantages to both stakeholders and issuers have also increased. IFRS is also enabling investors to suitably manage and evaluate organizational performance while establishing reduced costs for capital and reinforcing cross-border enterprise activity (Nobes 2014, p.101). As demand increases for advanced disclosure from Swiss firms, it increases insight of the value in adopting accounting standards to other approaches of corporate performance.

References

Achleitner, A.K., 1995. Latest developments in the Swiss regulation of financial reporting. European Accounting Review, 4(1), pp.141-154.

Argento, D., Grossi, G. and Vollenweider, P., 2012. Explaining the consolidation of financial statements in the Swiss Federal Government. Swiss Society of Administrative Sciences SSAS. p. 11-22

Brand, H.2011. Towards greater convergence. Retrieved from: https://www.accaglobal.com/content/dam/acca/global/PDF-technical/financial-reporting/cfo-investor-perspectives.pdf on date 7/1/2019

Douglas, K., Hotaling, C., and McCarthy, E. 2000. International Accounting Regional Analysis. Retrieved from: https://www.albany.edu/acc/courses/acc611/northeurope/ on date 7/1/2019

Federal Finance Administration. 2008. The New Accounting Model of the Swiss Confederation. OECD Journal on Budgeting, 8(1). Pp. 10-15

Holt, G., Tweedie, D., Richard, P., Mirza, A. A., & Orrell, M. 2013. International financial reporting standards (IFRS) workbook and guide: Practical insights, case studies, multiple-choice questions, illustrations. Hoboken, N.J: Wiley

International Monetary Fund. 2004. Switzerland: Detailed Assessment of Implementation-IOSCO Objectives and Principles of Securities Regulation. IMF.

Kirk, R. J. 2009. IFRS: A quick reference guide. Oxford: CIMA.

Krimpmann, A. 2015. Principles of group accounting under IFRS. Chichester, West Sussex, UK: Wiley, Inc.

Nobes, C. 2014. International Classification of Financial Reporting: Third Edition. Routledge.

Praquin, N., & In Bensadon, D. 2016. IFRS in a Global World: International and Critical Perspectives on Accounting. Springer International Publishing.

Robinson, T. R. 2012. International financial statement analysis. Hoboken, N.J: John Wiley & Sons.

Steinhoff, S. 2016. The Effect of Implementing Accounting Standards on Swiss Companies' Cost of Equity Capital. Retrieved from: https://essay.utwente.nl/70216/1/Steinhoff_BA_BMS.pdf on date 7/1/2019

United Nations. 2010. International Accounting and Reporting Issues 2008 Review. Retrieved from: https://unctad.org/en/Docs/diaeed20096_en.pdf on date 7/1/2019

Wong. P. 2004. Challenges And Successes In Implementing International Standards: Achieving Convergence To IFRS and ISAS. Retrieved from: http://www.cimaglobal.com/Documents/ImportedDocuments/ifac_report_challengesuccess_111004.pdf on date 7/1/2019

Wyss, W. 2014. New Swiss law on accounting and financial reporting - at the halfway mark of the implementation. Retrieved from: https://www.lexology.com/library/detail.aspx?g=15bd8ca7-f306-4071-baeb-5c745b9f5d5a on date 71/2019