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International Accounting, 7/e

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International Accounting, 7/e Frederick D.S. Choi Gary K. Meek Chapter 1: Introduction Learning Objectives How is international accounting distinct from domestic ... – PowerPoint PPT presentation

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Title: International Accounting, 7/e


1
International Accounting, 7/e
  • Frederick D.S. Choi
  • Gary K. Meek

Chapter 1 Introduction
2
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?

3
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.

4
What Does International Accounting Diversity
Entail?
  • Measurement principles
  • Financial disclosure (corporate transparency)
  • Auditing practices

5
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.

6
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.

7
Contributing Factors (contin)
  • Growth and spread of multinational operations

8
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9
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

10
Contributing Factors (contin)
  • Global competition
  • Competitive benchmarking necessitates
    international comparisons.

11
Contributing Factors (contin)
12
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.

13
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14
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15
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?

16
Other Chapter Exhibits
17
Chapter Exhibits (contin)
18
Chapter Exhibits (contin)
19
Chapter Exhibits (contin)
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