International Accounting, 6/e

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International Accounting, 6/e

• Frederick D.S. Choi
• Gary K. Meek

Chapter 1 Introduction
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Learning Objectives

• How is international accounting distinct from
  domestic accounting?
• What does international accounting diversity
  entail?
• Does international accounting have a history?
• What factors are contributing to the importance
  of international accounting as a field of study?
• What external and internal reporting issues arise
  when business and investing transcend national
  borders?
• What is meant by the term, global capital
  markets, and what does development mean for
  capital market participants?

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What is International Accounting?

• Domestic accounting an information specialty
  providing information about a firm to users of
  that information as a basis for economic
  decisions.
• International accounting (defined) same as above
  except that the firm being reported on is a
  multinational company with operations and
  transactions that cross national boundaries or an
  entity with reporting obligations to non-domestic
  readers.

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What Does International Accounting Diversity
Entail?

• Measurement principles
• Financial disclosure (corporate transparency)
• Auditing practices

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Contributing Factors

• Accountings international heritage
• Double-entry originates in the Italian city
  states.
• Bookkeeping spreads to Germany and assists the
  spread of capitalism.
• Dutch enhance income measurement.
• French use accounting for governmental planning
  and control.
• Double entry assists the British in managing and
  controlling commercial interests in the colonies.
  
• Accounting plays a major role in the U.S.
  industrial revolution.

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Contributing Factors (contin)

• Paradox of international accounting
• In many countries, accounting remains a
  nationalistic affair.
• Accounting serves people and institutions whose
  decisions are international in scope.
• Accounting diversity creates a demand for
  harmonization.

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Contributing Factors (contin)

• Growth and spread of multinational operations

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Contributing Factors (contin)

• Reporting issues when business transcends
  national boundaries
• Consolidation of foreign accounts
• Accounting for foreign currency fluctuations
• Accounting for changing prices
• International planning and control
• Performance evaluation of foreign operations
• Financial risk management
• International taxation and transfer pricing
• Financial innovation
• Identifying potential market risks
• Quantifying trade-offs associated with
  alternative risk reduction strategies
• Measuring risk exposures
• Accounting for specific hedge products
• Evaluating the effectiveness of hedging programs

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Contributing Factors (contin)

• Global competition
• Competitive benchmarking necessitates
  international comparisons.

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Contributing Factors (contin)

• Cross-border mergers and acquisitions
• Corporate valuation is a function of accounting
  measurements that vary from country to country.
• E.g., the e in p/e valuation multiples.
• Internationalization of capital markets
• Raising external finance abroad means that
  financial reports must increasingly travel
  internationally.

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Contributing Factors (contin)

• Reporting issues associated with
  internationalization of capital markets
• How to analyze and interpret foreign accounts?
• How to report to foreign readers?
• How to harmonize reporting standards
  internationally?

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Other Chapter Exhibits
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