Colombias Generally Accepted Accounting Principles Analysis

Colombias Generally Accepted Accounting Principles AnalysisColumbian in the main accepted score principlesAccording to the Constitution of Colombia, merely Congress has the dresser to issue generally accepted accounting principles. Through economy, however, Congress can delegate this authority to the executive branch as well as to other institutions. The aboriginal Board of Accountancy was formed to regulate the accounting profession (Colombia, 2010). under(a) this board, the Technical Council for ordinary Accounting was created. The Technical Council was designed to issue counselor-at-law 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 global Accounting Standards (IAS). It is important to none, however, that Colombias accounting standards have not been updated since 1993, so they do not reflect any updates or a dvancements in international or US standards (Colombia, 2009).The Colombian Congress also allowed regulatory agencies to issue their experience accounting standards to help them perform their jobs (Accounting Standards Update by Jurisdiction, 2010). Because the nation has several(prenominal) agencies that from each one issue different accounting rules for the faces under their jurisdiction, the World till criticizes Colombia for not having general-purpose financial reporting. There argon currently 43 different sets of accounting standards in the nation. The World Bank is also touch on that the Central Board of Accountancy is not receiving enough funding to exhaust its job thoroughly and efficiently. Moreover, the World Bank is relate that Colombias code of stick out for accountants is not consistent with the code of the global Federation of Accountants (IFAC). (Colombia, 2009). There atomic number 18 no auditing standards that atomic number 18 enforceable by law in Colom bia. Additionally, in that respect is no law mandating the independent audit of financial statements ( revenue enhancementes-Accounting, 2010).Accounting for the Public Sector content General Accounting contributionAccounting standards and principles for the in the public eye(predicate) sector of Colombia are get outd 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 make to be produced by the public sector (Contaduria General de la Nacion, 2009). mandatory accounting reports include balance 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 make full (Contaduria General de la N acion, 2009).Accrual BasisColombias public sector accounting standards are currently and successfully in the process of cope withnce with the accrual-based global Public Sector Accounting Standards (IPSAS). Because Colombias public sector standards were already to begin with 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 understood the motif for standardization with economic globalization continuing to intensify (Benavides, 2010).Tax purlieuValue Added TaxColombia has a rank added revenue enhancement of sixteen share as its form of consumption impose (Taxes-Accounting, 2010). Differing from a sales tax where except the end consumer is supercharged, a value-added tax is charged at each stage of the production process (value-added tax). There are lower value added taxes for commercial air transportation and food products at ten share and seven perc ent respectively. Insurance products and medical care products are alone exempt. Colombia has two other forms of consumption tax, including an excise duty that is levied on intoxicant 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 bodily tax rates of Colombia are about 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 turn up in the free-trade zone. Those companies are only charged fifteen percent. A alone(predicate) aspect of Colombias corporate tax agreement is that most capital gains are charged at the ordinary rate. Capital gains that are exempt or taxed at a special rate are in the minority. not uncommon, depreciation and depletion expenses are deducti ble. Net operating losses, expenses abroad, and specific taxes are some of the other commonly deductible items.For individuals, Colombia has a progressive tax system that ranges from zero 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, 19 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 get intos International fiscal Reporting Standards in their entirety and that the nation creates a High Council to execute 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 government note that would mandate all large companies in the nation to fully shoot IFRS by 2010. The bill would also stipulate that small to 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 bankers acceptance 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 respectfulness with international standards. The nation is successful with data transparency and macroeconomic constitution compliance but needs to work on remedying the transparency of its fiscal policy. Columbia has struggled with the latter because of difficulties managing the budget both regionally a nd municipally. The nations weakness in financial regulation and oversight has had the greatest negative impact on the Standards Compliance Index (Colombia, 2009). This is clearly a result of the neediness of auditing standards and the lack of required independent financial audits (Accounting Standards Update by Jurisdiction, 2010). Columbia scored comparatively well in accounting and auditing standards because of the evolution of legislation that dedicates the country to intersection 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 Fund also strand that Columbia did not comply with international auditing standards. Furthermore, the World Bank was fed up(p) that external audits are not mandatory and that the concept of independence does not even exist in Columbia. The World Bank concluded tha t, in Colombia, the legislative requirements on auditing contradict the modern concept of financial statements audits (Colombia, 2009). In 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 amend 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, o r lack thereof, with international requirements.