Colombias Generally Accepted Accounting Principles Analysis

Colombias Gener bothy Accepted account statement Principles AnalysisColumbian GAAPAccording to the Constitution of Colombia, only relative has the authority to thin generally accepted write up principles. Through legislation, however, Congress can delegate this authority to the executive branch as well as to other institutions. The of the essence(p) Board of Accountancy was formed to regulate the accounting profession (Colombia, 2010). Under this board, the Technical Council for Public Accounting was occasiond. The Technical Council was designed to issue guidance on accounting standards, and it was this council that issued Colombias generally accepted accounting principles (GAAP) (Accounting Standards Update by Jurisdiction, 2010). Colombian GAAP is based on US GAAP and Inter body political Accounting Standards (IAS). It is important to note, however, that Colombias accounting standards have not been updated since 1993, so they do not reflect any updates or advancements in fo reign or US standards (Colombia, 2009).The Colombian Congress alike allowed regulatory agencies to issue their own accounting standards to help them perform their jobs (Accounting Standards Update by Jurisdiction, 2010). Because the nation has several agencies that each issue different accounting rules for the organizations under their jurisdiction, the World posit criticizes Colombia for not having general-purpose financial reporting. There are currently forty-three different sets of accounting standards in the nation. The World Bank is overly concerned that the Central Board of Accountancy is not receiving enough funding to complete its job thoroughly and efficiently. More everywhere, the World Bank is concerned that Colombias calculate of conduct for accountants is not consistent with the code of the International Federation of Accountants (IFAC). (Colombia, 2009). There are no auditing standards that are enforceable by law in Colombia. Additionally, there is no law mandatin g the independent audit of financial statements (Taxes-Accounting, 2010).Accounting for the Public SectorNational General Accounting OfficeAccounting standards and principles for the public vault of heaven of Colombia are provided by the National General Accounting Office. Furthermore, the Office standardizes and consolidates accounting information and is ultimately responsible for preparing the Nations Consolidated Balance Sheet. The National General Accounting Office is also responsible for outlining what financial statements need to be produced by the public sphere (Contaduria General de la Nacion, 2009). Required accounting reports include proportion sheets, income statements, operational balances, and annexes (Taxes-Accounting). The Office will provide the public sector with explanations on the timing and standards that the financial statements must satisfy (Contaduria General de la Nacion, 2009).Accrual dry landColombias public sector accounting standards are currently and successfully in the process of convergence with the accrual-based International Public Sector Accounting Standards (IPSAS). Because Colombias public sector standards were already primarily accrual-based, the nation did not have to undergo tremendous reform to converge with IPSAS. Colombia was extremely eager to align its accounting standards because the nation mute the need for standardization with economic globalization continuing to intensify (Benavides, 2010).Tax EnvironmentValue Added TaxColombia has a value added tax of sixteen partage as its form of consumption tax (Taxes-Accounting, 2010). Differing from a sales tax where only the end consumer is charged, a value-added tax is charged at each portray of the production process (value-added tax). There are lower value added taxes for commercial air transportation and food products at ten percent and seven percent respectively. Insurance products and medical care products are completely exempt. Colombia has two other forms o f consumption tax, including an excise duty that is levied on alcohol and cigarettes. The nations custom service also charges a tax of 1.2% on imports from other countries. Nations that have signed trade agreements with Colombia are exempt from the import tax (Taxes-Accounting, 2010).Corporate and Personal Income TaxesThe personal and merged tax rates of Colombia are some of the highest in Latin America (Department of State). The nation charges a corporate income tax of thirty-three percent on all companies except for those located in the free-trade zone. Those companies are only charged fifteen percent. A unique aspect of Colombias corporate tax system is that most not bad(p) gains are charged at the ordinary rate. Capital gains that are exempt or taxed at a special rate are in the minority. non uncommon, depreciation and depletion expenses are deductible. Net operating losses, expenses abroad, and specific taxes are some of the other commonly deductible items.For various(preno minal)s, Colombia has a progressive tax system that ranges from goose egg to thirty-three percent. Colombias tax system measures individual income using Tax Value Units (UVT) (Taxes-Accounting, 2010) one Tax Value Unit is equal to 24,555 Colombian Pesos (Colombia Tax Rates, 2010). The individual income tax progresses through four levels zero percent, nineteen percent, twenty-eight percent, and thirty-three percent. All taxpayers that have greater than 4,100 UVT are charged a thirty-three percent income tax rate (Taxes-Accounting, 2010).IFRSCompliance with IFRSColombian GAAP has not been updated since 1993, so the World Bank recommends that Colombia adopts International Financial Reporting Standards in their entirety and that the nation creates a High Council to manage and oversee this process. Furthermore, the World Bank would like Colombia to create a body that enforces these accounting and auditing standards. From 2007 to 2009, the Colombian Congress has been agonizing over a bil l that would mandate all large companies in the nation to fully adopt IFRS by 2010. The bill would also stipulate that small to mass medium companies adopt IRS by 2012 (Colombia, 2009). However, in 2009, the Colombian Congress enacted a bill that only calls for the convergence of Colombian GAAP with IFRS, as opposed to the complete credence of IFRS.Standards Compliance IndexCurrently, according to the Financial Standards Foundations Standards Compliance Index, Columbia has only obtained a score of 40.83 out of 100 and ranks 48 among other countries for compliance with international standards. The nation is successful with data transparency and macroeconomic policy compliance but needs to work on remedying the transparency of its fiscal policy. Columbia has struggled with the last mentioned because of difficulties managing the budget both regionally and municipally. The nations weakness in financial regulation and oversight has had the greatest negative impact on the Standards Com pliance Index (Colombia, 2009). This is understandably a result of the lack of auditing standards and the lack of required independent financial audits (Accounting Standards Update by Jurisdiction, 2010). Columbia scored relatively well in accounting and auditing standards because of the exploitation of legislation that dedicates the country to converging its present auditing standards with international standards (Colombia, 2009).Auditing StandardsIn the World Banks assessment of Columbia, the institution was concerned over the nations lack of auditing standards. The International Monetary broth also found that Columbia did not comply with international auditing standards. Furthermore, the World Bank was disturbed that external audits are not mandatory and that the concept of liberty does not even exist in Columbia. The World Bank concluded that, in Colombia, the legislative requirements on auditing contradict the modern concept of financial statements audits (Colombia, 2009). I n this nation, auditors also act as controllers, and the latter role should only be assumed by management to follow suit with international principles. As a result, the World Bank recommended that Columbia adopt International Standards on Auditing (ISA) and develop new legislation that will create regulations for auditors and improve auditing requirements. The legislation should also create an organization that would oversee auditors and enforce auditing standards. To further improve the strength of its auditing profession, Columbia should improve the licensing requirements for auditors and provide training programs on International Standards on Auditing. The nation should also create a professional organization that encourages the independence of auditors (Colombia, 2009). Columbia is currently in the process of converging its auditing standards, or lack thereof, with international requirements.