Managerial Accounting Overview

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Introduction Part II - Review of Financial and
International Accounting Principles
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Introduction Part II

• Normal Accounting Balance Problem
• Accounting/Working Trial Balace Example
• What determines, how and when transactions are
  recorded
• Generally Accepted Accounting Principles
• International Accounting Standards
• Sample Annual Report

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Accounting /Working Trial Balance Problem

• Journal Entries for month
• Working Trial Balance
• Financial Statements

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ILLUSTRATION 1-1 THE ESSENTIAL CHARACTERISTICS OF
ACCOUNTING AND FINANCIAL REPORTING
Source Kieso, Weygandt, and Warfield,
Intermediate Accounting, 10th Edition
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ILLUSTRATION 1-2 HOUSE OF GAAP
Source Kieso, Weygandt, and Warfield,
Intermediate Accounting, 10th Edition
SEC
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ILLUSTRATION 1-3 ORGANIZATIONAL STRUCTURE FOR
SETTING ACCOUNTING STANDARDS
Source Kieso, Weygandt, and Warfield,
Intermediate Accounting, 10th Edition
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ILLUSTRATION 1-4 STEPS TAKEN IN THE EVOLUTION OF
A FASB STATEMENT OF THE FINANCIAL ACCOUNTING
STANDARDS BOARDS
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ILLUSTRATION 1-5 USER GROUPS THAT INFLUENCE THE
FORMULATION OF ACCOUNTING STANDARDS
Source Kieso, Weygandt, and Warfield,
Intermediate Accounting, 10th Edition
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The International Accounting Environment
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Scope of International Business Activity

• Can range from export/import activity to
  operations of a multinational enterprise
• Growth of the European Union (EU)
• North American Fair Trade Agreement (NAFTA)
• Emerging Capital Markets (EMCs)

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Examples of Internationalization

• CNN
• Amoco Oil/BP British
• Kimberly Clark Dallas, Czech Republic, Neenah
• UBS/Paine Webber Swiss
• Shell Oil Dutch
• Daimler-Benz-Chrysler German
• Ray-O-Vac/Varda German subsidiary

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Current International Acctg Environment

• US GAAP is dominant reporting method of global
  companies
• However, each country has its own GAAP
• Therefore, amounts, formats, disclosures and EPS
  may vary substantially

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The Need for International Accounting

• Companies are becoming increasingly globalized
• Need for comparable data from company to company
  in different countries to manage
• Need comparable information to serve
  international capital markets trading activities

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Factors Influencing the Development of Accounting

• Social and cultural values
• Political and legal systems
• Types of business activities and economic
  conditions
• Standard setting processes
• Forms of ownership and capital markets
• Cooperative efforts between nations

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Classification Based on Cultural Differences

• Anglo-Saxon accounting
• Germanic accounting
• Nordic accounting
• Latin accounting
• Asian accounting

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Harmonization of Accounting Principles

• Goal is flexible approach to improving
  comparability of financial information, including
  adoption of international accounting standards
• Benefits of harmonization would extend to users
  including
• governments
• regulatory agencies (SEC, IRS etc.)
• stock exchanges
• financial institutions
• individual investors
• trading partners, and

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The International Accounting Standards Board
(IASB)

• Independent private organization founded in 1973
  London
• Membership represents over 100 countries
• Promotes harmonization of acctg principles
  between countries
• Promulgates issues acctg standards (36 are
  operative)
• Generally accepted world-wide
• SEC allows with reconciliation to US GAAP

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International Accounting Standards (IAS)

• Issued by the IASB
• In many instances the standards have differed
  from U.S. GAAP
• Promulgated standards are being accepted by a
  number of countries organizations
• Recently the IASB and the FASB have been WORKING
  TOGETHER to reduce differences between
  international and US GAAP. New pronouncements are
  being issued jointly. Goal is to standardize
  all the principles.

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International Federation of Accountants (IFAC)

• Membership is the same as that of the IASB
• Concerned with professional practice of
  accountancy
• Analogous to AICPA

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Additional Source of International Acctg

• International Accounting - A User Perspective,
  Shahrokh M. Saudagaran, Southwestern Publishing
  Co. , 2001
• On reserve at our Library