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International Accounting


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International Accounting

  1. 1. International Accounting, 7/e Frederick D.S. Choi Gary K. Meek Chapter 1: Introduction
  2. 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. 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. 4. What Does International Accounting Diversity Entail?  Measurement principles  Financial disclosure (corporate transparency)  Auditing practices
  5. 5. Contributing Factors  Accounting’s 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. 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. 7. Contributing Factors (contin)  Growth and spread of multinational operations
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  9. 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. 10. Contributing Factors (contin)  Global competition  Competitive benchmarking necessitates international comparisons.
  11. 11. Contributing Factors (contin)
  12. 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.
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  15. 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. 16. Other Chapter Exhibits
  17. 17. Chapter Exhibits (contin)
  18. 18. Chapter Exhibits (contin)
  19. 19. Chapter Exhibits (contin)
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