This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.
This report provides an analysis and evaluation of Carminho Building Products LTD and its international expansion for its core business competencies in United Kingdom.
Methods of analysis include the discussion of Hofstede's cultural dimensions and Gray's accounting values. These dimensions shows how each countries compare to each other in terms of an organisational behaviour and the effects on its financial reporting. The results of the cultural dimensions can be found in the Appendices.
Results from the analysis show that United Kingdom possesses high levels of individualism and masculinity with low levels of uncertainty avoidance and power distance. This shows that United Kingdom is classified as Professionalism, therefore all accounting reports are made with greater degree of professional self regulation and the lower need for government intervention.
United Kingdom's cultural values are similar to Australia's', therefore with Australia's accounting values of professionalism, it may be in the best interest for Carminho Building Products LTD to expand its business in United Kingdom, however that may change throughout the course of the report.
The report finds that the prospects of the Carminho Builing Products LTD to expand their core competencies internationally with its current analysis to be inadequate. The major areas of weakness in these report require further investigation on other factors such as politics, laws and thorough understanding of its business concepts.
In turn, this report analysis's Carminho Builing Products LTD cultural and historic influences and how this focus can be used to benefit Carminho Builing Products LTD's research and development as a whole. However, there are limitations to this report. The limitations include;
No real set benchmark
No quantitative measures to analysis, but rather qualitative
Major stereotypes of influence
Laws and Regulations
Table of Contents
The purpose of this report is to understand the accounting standards and values of United Kingdom and British respectively. The several major collapses that occurred in the US during 2004 prompted the UK government to strengthen its regulatory systems.
Furthermore, the scope of this research is on the influences of accounting standards of GAAP and IFRS and its convergence with United Kingdom GAAP (known as United Kingdom's FRS). However, the limitations to this report are major stereotypes with Hofstede's cultural dimensions, rules and regulations of United Kingdom and Australia and the differences between British FRS and Australia IFRS.
Current financial reporting requirements for public companies in UK
There are several requirements and a few are listed and described below:
Financial Reporting Standard (FRS) 100 is the application of financial reporting requirements. This section sets out the reporting requirements for UK, and the financial statements must be prepared in accordance their eligibility. Financial Reporting Standards for Smaller Entities (FRSSE) apply for those who are eligible for it. Those who do not fall within the range of FRSSE or do not wish to follow the standards, must prepare in accordance with FRC 102 The Financial Reporting Standards applicable in the UK, EU-adopted IFRS or Â if the financial statements are the individual financial statements of a qualifying entity, FRS 101 Reduced Disclosure Framework.
FRS 101 sets out a framework which addresses the financial reporting requirements and disclosure exemptions for the financial statements of subsidiaries and parents that otherwise apply the recognition, measurement and disclosure requirements of EU-adopted IFRS. These provisions produce the same quality report but at a lesser cost.
FRS 102Â provides accounting and reporting requirements for unlisted entities. The standard completes a fundamental modernisation of UK accounting standards and was approved by the FRC Board on 5 March 2013.
The true and fair view is a Companies Act concept and is therefore a legal notion. However neither the companies Act nor the courts have attempted to define it (Millichamp 2002). Financial statements are required to be presented in such a way that they are true and fair. Directors must consider the financial statements that they approve are appropriate. Similarly, auditors are required to exercise professional judgment before expressing an audit opinion. As a result, the Opinion confirms that it will not be sufficient for either directors or auditors to reach such conclusions solely because the financial statements were prepared in accordance with applicable accounting standards. A key contributor to the integrity of financial reporting in the UK is that opinion of the auditor.
Recent changes in the UK reporting requirements
The Financial Reporting Council develops accounting standards which were formally the Accounting Standards Board's responsibility (ASB) during mid 2012. The Accounting Council has replaced the ASB and now reports to the Codes and Standards Committee. FRS 100 of Financial Reporting requirements is a new standard created by the FRC and is effective in January 2015.
Accounts and Audit Exemptions and Change of Accounting Framework amends the Companies Act 2006 so that it aligns obligatory for audit thresholds with accounting thresholds, exempts certain subsidiary companies from mandatory audit and subsidiaries from preparing accounts. It also makes it easier for companies who currently use IFRS voluntarily to switch from IFRS to UK GAAP when preparing their accounts.
The Companies Act 2006 has adopted a different approach to the presentation of the provisions. In order to simplify the legislation, Part 15 CA 06 'Accounts and Reports' is structured so that provisions which apply to different kinds of company are easily identifiable. Accounting provisions are no longer required in schedules, as they were under the Companies Act 1985.
Cultural Influences on financial reporting and disclosure practices
Evidently, there are no such concepts as culture-free accounting in this modern day accounting society. Rather many country's accounting practices are mainly exhibited through cultural influences, therefore the much sought one size fits all accounting practices creates greater controversy rather than a mutual understanding. However, many countries including the United Kingdom are currently under convergence of International Financial Reporting Standards (IFRS).
There are four cultural dimensions researched by Hoftede to determine cultural influences within a country in an organisational and business setting. With the addition of Gray's accounting values, relationships are formed between the two theories. In retrospect these two theories when linked showed how each country's cultural values impact on the accounting practices. In turn, these different cultural values impact greatly on their economic, politics, qualitative characteristics, financial statements and disclosure.
Power distance is defined as the extent to which the less powerful members within a country expect and accept that power is distributed unequally. This cultural dimension deals with the fact that individuals within society are not all equal.
As illustrated in the diagram under Appendix A, Britain is at the lower end of the power distance continuum. Australia shared a similar score on this cultural dimension. In regards to possible expansion opportunities in the United Kingdom, Carminho Building Products LTD does not have to concern themselves as Australia has a Power Distance of 36, similar to United Kingdom. Additionally, superiors within Carminho Building Products LTD Australia are easily sought by employees and communication is frequent to share expertise and ideas.
United Kingdom's individualism is at 89 (as shown in Appendix A); this indicates that United Kingdom is a highly individualistic society. Individualism is defined as a social pattern that consists of loosely linked individuals who view themselves as independent of collectives and who are primary motivated by their own preferences, needs, rights and contracts (London 2011). In a individualistic society, individuals within the society are mostly concerned about themselves and their direct family. Moreover, children are taught to think for themselves and how they can contribute through society under a individualistic culture.
Similarly, the Australian culture also shares a high score within this dimension at a 90. This can be interpreted as, in terms of business, it is expected from employers that employees display a trait of self-reliance and initiative. In addition, the merit of what an individual has done or can do is the basis to which employers decide whether to hire or promote the individual.
United Kingdom's masculinity is 66 (as shown in Appendix A); this indicates that UK "is driven by competition, achievement and success" (Hofstede, unknown) between colleagues. Therefore promoting motivational influence on behaviour, this is where individuals are guided by targets and are rewarded when specific targets are met. It encourages work goals to be set for specific tasks, evidently through high power distance where individuals need to be told what to do.
High masculinity produce outstanding results for the short run of the business, as individuals may tamper with financial reports and discloses to gain an edge on their colleagues or company. It haunts Carminho Building Products LTD in the long run if it were to choose United Kingdom, as these motivational behaviour cause dysfunctional behaviour without proper guidance and surveillance.
United Kingdom's uncertainty avoidance is 35; this indicates that the British "are comfortable with ambiguous situations" (Hofstede, unknown). Due to the low uncertainty, there is no need or effort put into searching for countless amount of unnecessary information is provided to prepare for the uncertain future.
Convergence between the accounting system of United Kingdom's GAAP and other accounting standards will be fast. Evidently through low uncertainty, the British do not mind change. This is when the Board for Research and Development of Financial Reporting Standards (CINIF) fully studies and then converges rather than take risks.
Cultural values between the United Kingdom and Australia share similar rankings in terms of cultural dimensions, with the only major difference of uncertainty avoidance. This goes to show that if Carminho Building Products LTD were to expand their core competencies in the United Kingdom, it will need to take into account of the British cultural influences on financial reporting as they differ to Australian influences as explained above.
Grays Accounting Values
According to Grays accounting values, United Kingdom is classified under Professionalism (shown in appendix B). This term describes the "presentation of financial reporting statements by different companies using the same accounting procedures, measuring concepts, classifications and methods of disclose" (Deegan 2009, pg 140).
Similarly, Australia is also classified under Professionalism (shown in appendix B). This allows Australians more flexibility in its financial reporting provided that it is in line within the framework. Professionalism is relatively comfortable with individuals using their own judgement to judge what is true and fair rather than follow a mindless rigid code of rules.
In conclusion, United Kingdom and Australia both are classified as Professionalism according to Gray's accounting values. This is illustrated by the higher ranks in terms of individualism and the lower ranks in terms of uncertainty avoidance. The higher the degree of professionalism, the greater the degree of professional self-regulation and the lower the need for government intervention.
Political influences on the setting of financial standards
Since 1973 when The International Accounting Standards Board (IASB) was established, harmonisation of international accounting standards became apparent. Under the Companies Act 1985, one of Financial Reporting Council's (FRC) responsibility is to issue accounting standards. In 1990 Accounting Standards Committee's task of setting accounting standards have been replaced by the Accounting Standards Board (ASB). Soon after it started its activities, the ASB adopted the standards issued by the ASC, so that they also fall within the legal definition of accounting standards. These are designated 'Statements of Standard Accounting Practice' (SSAPs). Whilst some of the SSAPs have been superseded by FRSs, some remain in force.
The UK FRC along with accounting standard-setters from several countries around the world, IASB both are part of the development of international standards. There are at most, ten part-time members who work for the Accounting Council.
Accounting standards apply to all companies, and otherÂ entities that prepare accounts that are intended to provide a true and fair view. The Foreword to Accounting Standards explains the authority, scope and application of accounting standards.
The UK ASB has incorporated some International Financial Reporting Standards (IFRS) into UK Generally Accepted Accounting Principles (GAAP). The ASB has issued an exposure draft of a standard that will amend corporate reporting for UK entities that are not currently applying EU-adopted IFRS. This excludes entities that are required to apply EU adopted IFRS under law, entities will have the choice of applying a UK-adopted IFRS for SMEs or IFRS. The exposure draft comment period ended on April 30, 2012. A final standard is expected at the end of 2012 and is expected to be effective for periods starting on or after January 1, 2015.
Summary of Alumasc's Annual Report
The Alumasc annual report contains an overview of the financial highlights, the chairman's statement, strategy and performance, governance and financial statements.
A number of financial highlights that occurred during the fiscal year of 2011 is that the revenue has increased by 4 million pounds. In addition, the order book value for the company increased by 9 million pounds. The price of dividends, however, have dropped by eight pence per share.
According to the chairman's statement, there has been a decline in construction activity in UK. To solve this, the chairman has propose some changes including making the Engineering division operate independently in hopes of restoring the profitability of Alumasc. Moreover, part of the Alumasc strategy is to introduce new product development activities to exploit new market opportunities.
Many of Alumasc's building products businesses are strongly focussed on providing effective solutions to enhance sustainability in the built environment. Leading positions in energy and water management have been established through the Alumasc group. Moreover the company does recognise the improvement of their energy consumption and this illustrates the concern for their carbon emissions.
The statement of income, financial position, cash flows, changes in equity and notes are found under the financial statements of the annual report.
Additional Reporting undertaken by Alumasc
As part of Alumasc's strategy, focus on the development of modern and sustainable building products businesses has increased and in effect reduces water use in built environment and improving energy efficiency. Moreover, products offered by Alumasc are made from recyclable materials such as aluminium, hard and soft woods and roofing horticulture.
The annual report also covers the duties of the Board, Remuneration, Nominations and Audit Committees and a descriptions of the board evaluation under the corporate Governance section. This section also describes many policies Alumasc upholds such as the whistleblowing, bribery and corruptions, business ethics, going concern, internal assurance and shareholder relations.
In terms of Corporate & Social Responsibility, Alumasc continues to be to provide a safe place of work for employees, and health and safety remains the first agenda item for all subsidiary and group board meetings. The majority of directors and many senior managers within the group have been trained to Institution of Occupational Safety and Health (IOSH) accreditation standard.
Many of Alumasc building products businesses are strongly focused on providing effective solutions to enhance sustainability in the built environment. The group has established leading positions in energy and water management, through brands such as Levolux, Elkington Gatic and our green roof operations, Blackdown and ZinCo. We are committed to complementing this leadership by adopting environmentally sound business practices throughout our operations.
In addition to the wider community benefits arising from our environmental programme, the group is committed to supporting local community initiatives and a number of charitable donations have been made throughout the year.
In essence, there is sufficient evidence to show that Carminho Building Products LTD may benefit if they choose to expand their core business competencies in UK. Other factors such as law, politics, individual values and such must be taken into account.
Hofstede's research of cultural values is indeed a great factor in which to consider for expansion, however it is a major stereotype on the particular cultures and not individually selected values. Furthermore, even with the similarities with Brithish FRS to IFRS there would still be some major difference in the accounting standards since British FRS originally came from US GAAP after all.