International accounting Corporate reporting regulation: Understanding differences ? USA/ Europe

Résumé du document

Throughout the globe, U.S.A. has been famous for their notion of freedom, their way of life, and their entrepreneurship, stemming back to its very origins. This is a legacy from the very first pioneer, which still affects them nowadays either in their private or business life. It's a country where you can strive to be someone by your work and on your own. It was true for pioneers, and it remains the crux of their economic leadership. The Silicon Valley is a perfect example with so many people who started from almost nothing and emerging as near legends. Apple inc. is a perfect illustration of this. The two Steves changed the computer industry only with their work, their passion, and their love for the well-done work and good products. In this way, they are really like The Fountainhead's main character, and in line with Ayn Rand's Philosophy as we will see further. Of course, a systematic and strict application of Rand's principle could lead, as we will underlie, to unethical behaviors. Moreover, recent cases of fraud, as we will focus on, have led to cast doubt on financial reporting rules and standards. Thus, the convergence movements and the adoption of new accounting standards speed up during the very last years or months.

Henceforth, we will at first focus on this essay on Rand's philosophy and thereby how it could sometimes lead to such difficulties. Then, a closer look at how it had induced a revision and convergence movement of accounting standards as well as some emerging fears from businessmen like T.J. Rodgers.

Published in 1943, The Fountainhead has as the main theme the dualism between individualism and collectivism. The main character is the architect Howard Roark who, as the author explains, “breaks with tradition, recognizes no authority but that of his own independent judgement, struggles for the integrity of his creative work against every form of social opposition - and wins” (Rand, 1961).This sentence highlights the two key points of Objectivism, i.e. the concepts of “independent judgement” and of “integrity”.

The term “objectivism” refers to the belief that valid concepts are objective and therefore based on direct experience with reality (Rand 1964). This philosophy is funded on two axioms. First, reality exists independent from consciousness. Second, human beings possess the capacity to choose among alternative courses of action (Becker 1998).

With respect to ethics, Objectivism stresses that the aim of human life is the pursuit of one's own happiness. According to Rand (1964), the “basic social principle of the Objectivist ethics is […] that man must live for his own sake, neither sacrificing himself to others nor sacrificing others to himself. To live for his own sake means that the achievement of his own happiness is man's higher moral purpose”.

Another fundamental concept of Rand's philosophy is “integrity”, defined as fidelity to rational principles and values (Rand 1964). Integrity is not identified with honesty and in particular, Objectivists affirm that honesty is a necessary but not sufficient condition for integrity (Becker 1998).

Extraits

[...] According to Meek (2002) it can be said that through his actions, Fastow applied Rand's belief that capitalism is a virtue in and of itself, and a corporation has no other obligations except to run its business and make the most money. It is clear that the perception of Rand's ideas as being the "utopia of greed" allowed Enron's Executives to keep doing what they were doing. Rand's vision of entrepreneurs can be likened to the philosophy of Enron's Executives in that they believed making money wasn't just good for them; it was good for society as a whole. [...]

[...] Skousen (2001) points out that Rand's ideal man misconceives the very nature and logic of capitalism, i.e. to fulfil the needs of customers and thereby advance their general welfare. An undermined vision by recent activities of companies Rand's vision of the US entrepreneur has correlation with the recent activities of companies like Enron and those companies' relations with the Wall St. Securities Industry. Many fault Rand for her view of capitalism on the failure to anticipate CEO's and CFO's such as Enron's Ken Lay and Andrew Fastow who would loot their firms. [...]

[...] Points of tension remain between US GAAP and IASB One of the major points of contention even today is the treatment of Employee Share Options. Whereas US GAAP recommends valuing employee stock options on the date they are granted using the intrinsic value accounting method with there being no need to book expenses, if the exercise price of options is fixed at the prevailing market price on the date of the grant, the IASB recommends that options be measured at fair value on the date they vest with employees, and that the compensation expense be accrued over the vesting period of the options. [...]

[...] the concepts of “independent judgement” and of “integrity”. Ayn Rand's philosophy: objectivism and integrity The term “objectivism” refers to the belief that valid concept are objective and therefore based on direct experience with reality (Rand 1964). This philosophy is funded on two axioms. First, reality exists independent from consciousness. Second, human beings possess the capacity to choose among alternative courses of action (Becker 1998). With respect to ethics, Objectivism stresses that the aim of human life is the pursuit of one's own happiness. [...]

[...] Another fundamental concept of Rand's philosophy is “integrity”, defined as fidelity to rational principles and values (Rand 1964). Integrity is not identified with honesty and in particular Objectivists affirm that honesty is a necessary but not sufficient condition for integrity (Becker 1998). Ayn Rand's economical vision Rand's economic philosophy is based on a capitalistic model where governments do not intercede in marketplace activities. She supports a complete abolition of welfare systems and completes adoption of the ethics of capitalism. But this vision contradicts a basic element on which Rand built her philosophy. [...]