Title: International Accounting, 6/e
1International Accounting, 6/e
- Frederick D.S. Choi
- Gary K. Meek
Chapter 1 Introduction
2Learning 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?
3What 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.
4What Does International Accounting Diversity
Entail?
- Measurement principles
- Financial disclosure (corporate transparency)
- Auditing practices
5Contributing 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.
6Contributing 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.
7Contributing Factors (contin)
- Growth and spread of multinational operations
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9Contributing 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
10Contributing Factors (contin)
- Global competition
- Competitive benchmarking necessitates
international comparisons.
11Contributing 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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13Contributing 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?
14Other Chapter Exhibits
15Chapter Exhibits (contin)
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