Post on 21-Dec-2015
transcript
Agenda
• Must Have a Maryville Email Address• How to Use Web Page• Syllabus• IMA CASE – Only if you want an A (88%
to 100% will be a B+)• Industry Presentation – you must fill out
form or EMAIL ME• International Accounting Overview
INTERNATIONAL ACCOUNTING
ANCIENT INFLUENCES
• CHINA• INDIA• MESOPOTAMIA• BIBLICAL REFERENCES
EARLY ITALIAN INFLUENCE
• ITALY CENTER OF TRADE ROUTES• GENOA• FLORENTINE
– GOLD FLORIN (EURO OF ITS DAY?)
• VENICE– PACIOLI
SUBSEQUENT DEVELOPMENTS
• Decline of Italy• France• Britain• Scale of enterprises
Accounting systems
Accounting systems evolve from and reflect the environments they serve.
International Business Grows
• Evolution of International Business• Pre-Industrial Revolution• Industrialization• post-World War II• Multinational Era
Why International Business Today?
• Expand Sales• Gain Access to raw materials• Gain Access to specialized labor• Gain Access To knowledge &
intangibles• Gain Right to Trade• Gain natural, comparative and
specific advantages
Forms of International Involvement
• Export/Import• Strategic alliance
– licensing– franchising– custom contracts
• Direct Investment/Joint Venture
Accounting Aspects of International Business
• Import/Export - what do you need to know?
• May create an internal international accounting department
• Establish foreign operations• Wholly owned subsidiaries• Joint ventures
Field of International Accounting
• Descriptive/Comparative– attempt to understand the nature of
accounting in different countries– we cannot know it all, but we can
understand the forces that create differences
• Accounting issues for international transactions
Accounting issues for a Global Strategy
• Develop financial statements in each country where the MNE operates
• Prepare consolidated financial statements including operations from around the world
• Account for foreign currency transactions• Establish management control system• Pay taxes• Audit financial statements & internal control
Models for explaining:
•Accounting systems evolve from and reflect the environments they serve.
Farmer-Richman Model
• Environmental variables– way business is conducted– explain differences
• Corporations can modify environment
• Cultural Relativism
Major Influences
• Environment - Culture• Recognition of Corporations as
legal entities with public ownership• Growth of professional
management• Emergence of securities markets• Role of Government
Pressure for Accounting Change
• Growing international economic and political interdependence
• New trends in foreign direct investment• changes in multinational corporate strategy• Accountability to employees• Technology• Environmental Impact• Growth of financial markets • Expansion of business services• Actions of international regulatory organizations
Hofstede / Gray
• Business and managerial behavior is strongly influenced by culture– Individualism– Power/distance– uncertainty avoidance– masculinity
• Culture strongly influences accounting
Classifications
• Individualism v. Collectivism• Large v. small power distance• Strong v. weak uncertainty
avoidance• masculinity v. femininity• short v. long term orientation
Accounting values
• Professionalism v. statutory control• uniformity v. flexibility• conservatism v. optimism• secrecy v. transparency
• Macroeconomic v. Microeconomic– US is Microeconomic
• Independent discipline approach v. uniform accounting approach– US is independent
• Uniform accounting Approach
United States
• Regulation & Enforcement– no general legal requirement to
publish periodic statements (each state can do its own thing)
• SEC - companies listed on stock exchanges
• FASB - conceptual framework• AICPA
Accounting Measurement
• Assume the company is a going concern• Accrual method is widely used• Historic cost is the basis for valuing
assets• Goodwill is capitalized IMPAIRMENT IS
EXPENSED• Depreciation is economically based (can
be differences between book & tax)
United States Continued
• Research and Development is expensed when incurred
• Business Combinations: no pooling of interest, only purchase method FOR FUTURE
• LIFO is used but must be same for book and tax
• Financial leases are capitalized• NO RESERVE FOR INCOME SMOOTHING
Around the World
• Business Combinations• Goodwill• Affiliated Companies• Asset Valuations• Depreciation• Inventory Valuation• Finance Leases• Deferred Taxes Reserves for Income
Smoothing
International Accounting Importance
• Growth of multinational operations• Global Competition• Internationalization of Capital
Markets• Cross Border Mergers &
Acquisitions• Advances in Financial Technology
Environmental influences on Accounting
• Legal System• Economic Systems• Nature of business
ownership• Fiscal legislation• Stages of
economic development
• Inflation• Theory
• Speed of Business Innovations
• Size and complexity of business organizations
• Status of Professional Education & Organization