the international accounting environment chapter 9
TRANSCRIPT
The International
Accounting Environment
Chapter 9
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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)
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The Need for International Accounting• Need for comparable data
• Information to serve international capital markets
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The Focus of International Accounting
• Identification and understanding of the various organizations and their interests involved in the process of establishing international accounting and auditing principles and standards
Primary Areas of Interest Include:
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International Accounting Focus, continued• Identification and understanding of principles
of financial, managerial, and taxation accounting used in different nations, especially how they differ between those nations
• Special accounting valuation and recognition principles associated with foreign currency transactions
• The translation of financial statements to different currencies
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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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International AccountingClassification Systems• Help in understanding accounting differences
between countries
• Can center around various characteristics including cultural differences
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Classification Basedon Cultural Differences
• Anglo-Saxon accounting
• Germanic accounting
• Nordic accounting
• Latin accounting
• Asian accounting
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Harmonization of Accounting Principles• The goal is a flexible approach to improving
comparability of financial information, including the adoption of international accounting standards
• The benefits of harmonization would extend to a variety of users including governments, regulatory agencies (SEC), individual investors, and trading partners
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Approaches to Harmonization
• Bilateral agreements between two or more countries
• Single economic trading environments, such as the European Union
• International standard setting involving professional accounting organizations
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The International Accounting Standards Committee (IASC)
• An independent private organization founded in 1973
• Taking a global approach to standard setting
• Membership consists of professional accountancy organizations representing over 100 countries
• Business is conducted by a Board and a consulting group
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Major Objectives of the IASC
• Formulate and publish standards on financial accounting and reporting and to promote their worldwide acceptance
• Work for the harmonization of accounting standards and procedures relating to the presentation of financial statements
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International Accounting Standards (IAS)• Issued by the IASC
• In some instances the standards differ from U.S. GAAP
• Promulgated standards are being accepted by a number of countries and organizations
• Standards serve as a benchmark against which developing and established accounting principles may be evaluated
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International Federation of Accountants (IFAC)
• A private organization whose membership is the same as that of the IASC
• Concerned with aspects of the professional practice of accountancy
• The leading organization for the international accounting profession
• Not involved in the establishment of international financial accounting standards to the same degree as the IASC
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Other Issues of International Importance• Transfer pricing strategies
• Differences in tax systems