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International Accounting

International Accounting. Sue Haka Ernst & Young Professor Department of Accounting and Information Systems Michigan State University. Environmental Influences Examples. Political/legal statutory audits-accounting reports Economic sources of capital Cultural budgetary control

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International Accounting

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  1. International Accounting Sue Haka Ernst & Young Professor Department of Accounting and Information Systems Michigan State University

  2. Environmental InfluencesExamples • Political/legal • statutory audits-accounting reports • Economic • sources of capital • Cultural • budgetary control • Infrastructure • communication infrastructure • education of population

  3. Topics • External Accounting Reports • Standard Setters, Preparers and Users • Underlying Institutional Structures • Required reports • Internal Accounting Reports • Decision Rights Assignment • Planning and Control • Performance Measurement and Evaluation

  4. Topics-Environment Matrix

  5. External Accounting-Institutional Structures • Capital Market Requirements • Market Structure -- www.iosco.org/ • Other Means of Raising Capital-debt market • Standard Setting Processes • Private vs. Public control • Accountability • Compliance

  6. External Accounting-Environment • Standard Setting Process • U.S. -- FASB - Private-www.accounting.rutgers.edu/raw/fasb/ • Japan -- Ministry of Finance -www.jicpa.or.jp/ • International Accounting Standards Board • /www.iasb.org.uk/ • Users of Statements • legal/cultural driven • Compliance - Culture driven • www2.mrbrklyn.com/liz/cultural_dimensions/Web_site

  7. External Accounting-Topics • External Reporting Differences • U.S., U.K. -- Tax  Financial • Japan, Germany -- Tax = Financial • Differences in Debt and Equity Classifications --Korea vs. U.S. • Differences in goodwill treatment • U.S. vs. Japan • Differences in asset revaluation • US. Vs. Brazil

  8. Internal Accounting • Decision Rights Assignment (http://www.myworktools.com/company/overview.html) • Planning and Control • Complications of Global Operations • Co-location of Knowledge and Rights • Performance Evaluation • Multiple Currency Issues • Cross-border Decision Rights Issues

  9. Internal Accounting-Environment • Economic/Political-Planning and Control • International Taxes and Treaties • NAFTA (www.nafta-sec-alena.org/) • Foreign Trade Zones (www.naftz.org) • Transfer Pricing • Decision Rights issues(www.irs.gov/businesses/international/) • Political/economic (www.state.gov/r/pa/bgn/) • www.cia.gov/cia/publications/factbook/

  10. Internal Accounting-Environment • Economic/Political Continued • Risk Management • Financial -- ewrisk.ifci.ch/index.htm • Operational --http://www.worldbank.org/fandd/english/0397/articles/050397.htm • Corruption • Foreign Corrupt Practices Act --http://www.usdoj.gov/criminal/fraud/fcpa/dojdocb.htm • Corruption index--http://www.transparency.org/

  11. Internal Accounting-Topics • Performance Evaluation (Inter.J. of Acct., 34, #1, pp.49-70) • Japan ROA < U.S. ROA • low margins, • focus on market share, emphasize target cost • Japan ROE > U.S. ROE • high debt levels • keiretsu organization

  12. Internal Accounting • Performance Measurement & Evaluation • Multiple Currency Issues (France,Germany, U.K., U.S.) • Transfer Pricing Issues (U.K. to Germany) • Decision Rights Assignment • Knowledge Distribution (Mergers/Acquisition) • Control System (Conflict with Culture)

  13. Summary • Key to Understanding International Accounting • Political, Economic, Cultural and Infrastructure Influences on: • External Reporting • Taxes/Capital Markets/Gov. Regulation/Standard Setting/Reporting Requirements • Internal Reporting • Planning and Decision Making • Control Differences • Performance Evaluation Differences

  14. Where to get more information • Journals - International • International Journal of Accounting • Advances in International Accounting • Journal of International Business Studies • Journals - AAA • Accounting Horizons • Issues in Accounting Education • Other • Management Accounting • Journal of Accountancy • Economist

  15. Where to get more information • Books • Introductory - Accounting: An International Perspective by Gernon and Meek, 5th edition, Irwin/McGraw-Hill, 2001 • Financial and Managerial Accounting: The Basis for Business Decisions,Williams, Haka, Bettner 13th edition, Irwin/McGraw-Hill, 2003 • Upper level - International Accounting: A User Perspective, 2ed. by S. Saudagaran, South-Western, 2004

  16. Where to get more information • Case Books • International Accounting: A Case Approach edited by Schweikart, Gray and Roberts, McGraw-Hill • Cases - AICPA (www.aicpa.org)

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