Dosen Pengampu: Dra. Siti Nurlalela,SE,M.Si.,Ak., CA

1. Dosen Pengampu:Dra. Siti Nurlalela,SE,M.Si.,Ak., CA INTERNATIONAL ACCOUNTING AND INTERNATIONAL BUSINESS

2. Chapter 1 International Accounting and International Business International Accounting & Multinational Enterprises - Chapter 1 - Radebaugh, Gray, Black

3. National Differences in Accounting Standards • Many different systems throughout the world • Reconciliation is still a challenge • Accounting systems • Evolve • Reflect the environments they serve • Development of accounting influenced by • Educational systems • Legal systems • Political systems • Sociocultural characteristics International Accounting & Multinational Enterprises - Chapter 1 - Radebaugh, Gray, Black

4. Reasons for International Involvement • Expand sales • Excess capacity • Greater profit potential • Gain access to • Raw materials • Other factors of production (cheap labor) • Knowledge • New developments in technology International Accounting & Multinational Enterprises - Chapter 1 - Radebaugh, Gray, Black

5. Forms of International Involvement • Exports and imports of goods and services • Strategic alliances • Licensing agreement (intangible property) • Franchise agreement (Holiday Inn, McDonald’s) • Investment abroad • Direct investment • Joint venture International Accounting & Multinational Enterprises - Chapter 1 - Radebaugh, Gray, Black

6. Multinational Enterprises • Possess a worldwide view of • Production • Sourcing of raw materials and components • Final markets • Elite MNE • 10% of a company’s overall assets, earnings, and employees are abroad • Significant geographical spread • International experience of executives International Accounting & Multinational Enterprises - Chapter 1 - Radebaugh, Gray, Black

7. Multinational Enterprises • Small companies • Export and import • Manufacture products abroad or outsource production • Licensing agreements. Firm Size and Saturation of Domestic Market Probability of International Transactions International Accounting & Multinational Enterprises - Chapter 1 - Radebaugh, Gray, Black

8. Large Multinational Enterprises International Accounting & Multinational Enterprises - Chapter 1 - Radebaugh, Gray, Black

9. Large Multinational Enterprises International Accounting & Multinational Enterprises - Chapter 1 - Radebaugh, Gray, Black

10. Deciding to Become Global • Assessment of • External environment • Internal capabilities of the firm • Environmental constraints • Educational, sociological, political and legal, and economic • Country-specific advantages (cheap materials, labor) • Firm-specific advantages – intangible assets International Accounting & Multinational Enterprises - Chapter 1 - Radebaugh, Gray, Black

11. Environmental Influences on Accounting • Enterprise ownership • Broad ownership • State ownership • Family ownership • Business activities influence the nature of the accounting system • Sources of finance and pressure for accountability • External shareholders • Banks • Family sources • Taxation • Accounting systems influenced by state objectives (France) • Accounting systems separate from state objectives (U.S.) International Accounting & Multinational Enterprises - Chapter 1 - Radebaugh, Gray, Black

12. Environmental Influences on Accounting • Developed accounting profession • Judgmentally based accounting systems • Depends upon accounting education and research • Political system – accounting system reflects political philosophy • Social climate – level of employee awareness International Accounting & Multinational Enterprises - Chapter 1 - Radebaugh, Gray, Black

13. Environmental Influences on Accounting • Economic growth and development • Inflation leads to alternative approaches • Legal system and regulation of accounting • Civil codes (France and Germany) • Common law (U.S. and U.K.) • Culture (societal or national values) • International factors • Colonial influence • Regional trade blocs (European Union) International Accounting & Multinational Enterprises - Chapter 1 - Radebaugh, Gray, Black

14. Accounting Standards and Traditions • International Accounting Standards Board • Works for convergence • Former socialist economies are adjusting • Russia and Eastern Europe • British and continental European traditions are now being coordinated International Accounting & Multinational Enterprises - Chapter 1 - Radebaugh, Gray, Black

15. Major Development Factors • Corporations recognized as legal entities with limited liability • Protects shareholders and creditors • Professional management • A point of controversy • Emergence of securities markets • Fundamental element of the transition to a market economy • Shows need to attract foreign investment • Broadened disclosure International Accounting & Multinational Enterprises - Chapter 1 - Radebaugh, Gray, Black

16. Major Development Factors International Accounting & Multinational Enterprises - Chapter 1 - Radebaugh, Gray, Black

17. Corporate Disclosure • Disclosure to finance providers can be seen as a spectrum • Least disclosure – shareholders and investors • Varied disclosure – depends on the purpose of the disclosure and the power of the finance provider • Accounting disclosure • Used as a means of national economic planning and control (Examples – France and Sweden) • Accounting professionals • Played a key role in developing accounting systems (Examples – U.S. and U.K.) International Accounting & Multinational Enterprises - Chapter 1 - Radebaugh, Gray, Black

18. Trends in Securities Markets • Strong move to attract foreign companies to list on exchanges • 2004 – trading volume of non-U.S. firms listed on NYSE was 10.5% of the Exchange’s total trading volume • Consolidation of exchanges • Exchanges in developing countries are growing International Accounting & Multinational Enterprises - Chapter 1 - Radebaugh, Gray, Black

19. A Wider Audience • Increased disclosure to other groups • Employees, trade unions, consumers, government agencies, and the general public • Expectations of nonfinance providers • Not clearly defined • Techniques to measure them do not exist • Less developed countries have less accountability and disclosure International Accounting & Multinational Enterprises - Chapter 1 - Radebaugh, Gray, Black

20. Accountability and Multinational Enterprises • Demand for greater disclosure by the host country can be a bargaining tool • MNE view • Just a part of global operations • Some MNEs have acted in ways detrimental to a host country. • Host country’s view • Business activities of an MNE are of primary concern International Accounting & Multinational Enterprises - Chapter 1 - Radebaugh, Gray, Black

21. Accountability and Multinational Enterprises • Domestic Corporations • Primary operations in one country • Cross-frontier relationships with unrelated parties • Multinational Enterprises • Operate in many countries with different laws and currencies • Significant volume of transactions between units located in different countries International Accounting & Multinational Enterprises - Chapter 1 - Radebaugh, Gray, Black

22. Accounting Aspects of International Business • Exposure to International Accounting • Importing or exporting • Costs of outside expertise • Increase with increased trade • Should develop in-house experts • Separate organization to handle international trade • Establishment of a foreign unit • Awareness of international market conditions • Lower cost of capital International Accounting & Multinational Enterprises - Chapter 1 - Radebaugh, Gray, Black

23. The Field of International Accounting • Descriptive/comparative accounting • Important issues • Forces and conditions that create international differences • Trend toward convergence • International transactions/multinational enterprises • Important issues • Financial reporting problems • Translation of foreign currency financial statements, • Information systems • Budgets and performance evaluation • Audits • Taxes International Accounting & Multinational Enterprises - Chapter 1 - Radebaugh, Gray, Black