Unit 12 Reading Activities Plus Questions

Read the following text and then complete the activities that follow.

International accounting

Mary Pross: It's great to have you on the team John. I'm sure you will enjoy working with us. Have you settled in to the new house yet?

John Sinclair: Thank you, yes we finished unpacking last night.

Mary: Good. Now, I know that you worked in our London office for many years, but you will find a few things different here in the Boston office.

John: Yes, I have been studying the different practices here in the US. I do have a few questions though.

Mary: Of course, what would you like to know?

John: Firstly, I'd like to know when dividends should be recorded? In the UK we show them in the period they relate to.

Mary: Here, we show them in the period they are declared.

John: Ok, and can you tell me what an extraordinary item is? I don't really understand it.

Mary: Ah yes, you wouldn't have heard of this before as it is only in the US. Basically, it is something which is either very infrequent or rare.

John: Thank you.

Mary: Oh, and you do know about the exemptions for specific investments on cash flow statements?

John: Yes, I noticed that.

Mary: Ok, well if you have any more questions, just let me know.

John: There was something else. I wanted to clarify the position on tax deferrals. In the UK, we only allow for non-current treatment, but I read that in the US you can also treat the deferrals as current. Is this right?

Mary: Yes that is correct, but we don't really do that here.

John: Great, so I don't need to worry about it?

Mary: No, but you will have to pay attention to the convertible debt.

John: Don't you split it between equity and debt?

Mary: No, it is treated as a liability.

John: Looks like I still have some reading to do!

Mary: Don't worry, there are a lot of differences. I spent two years in the UK and had a really hard time trying to learn the way you do things.

John: What did you have difficulties with?

Mary: It may sound silly, but I just couldn't remember the different terms used.

John: Like what?

Mary: Well, for example - in the UK you say "stock" but here we say "inventory" or another, we say "allowance for uncollectable accounts" but you say "provision for bad debts"

John: Yes, I know what you mean - I was reading about income statements last night and it took me almost an hour before I realized that it is another term for profit and loss accounts.

Mary: Ha! Ha!

John: The good thing is that a lot of the same laws apply in both countries, so it is not all new. Mostly both systems follow IFRS to some extent.

Mary: Exactly, the most important thing is that you record everything accurately and then you can always amend the accounts at a later date.

John: And I am right in thinking that Mark will be overseeing me for the first month?

Mary: Yes, he will be able to assist you if you need any help, but I believe he is out of the office until Thursday.

John: Holiday?

Mary: He wishes, no. He is attending a training session on the new regulations for escrow accounting.

John: New regulations? I read the 2013 regulations last night, do you mean those?

Mary: No, they changed again and the new regulations supersede the 2013 rules.

John: Seems the law changes even faster here than in the UK.

Mary: Yes, it drives our comptroller crazy. He says he spends more time training on new regulations than actually working!

John: So it's not just me who needs to study up a bit? Thanks for the help.

Quiz: Reading Questions

1. In the US, dividends are recorded in the period they are declared.
2. Where IFRS laws applies, being accurate is important but accounts can be amended.
3. Comptrollers assist in regulating and overseeing current extraordinary item with no exception.
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