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The International Accounting Environment

Chapter 9. The International Accounting Environment. 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 International Accounting Environment

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  1. Chapter 9 The InternationalAccounting Environment

  2. 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) C9

  3. The Need for International Accounting • Need for comparable data • Information to serve international capital markets C9

  4. The Focus of International Accounting Primary Areas of Interest Include: • Identification and understanding of the various organizations and their interests involved in the process of establishing international accounting and auditing principles and standards C9

  5. 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 C9

  6. 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 C9

  7. International AccountingClassification Systems • Help in understanding accounting differences between countries • Can center around various characteristics including cultural differences C9

  8. Classification Basedon Cultural Differences • Anglo-Saxon accounting • Germanic accounting • Nordic accounting • Latin accounting • Asian accounting C9

  9. 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 C9

  10. 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 C9

  11. 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 C9

  12. 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 C9

  13. 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 C9

  14. 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 C9

  15. Other Issues of International Importance • Transfer pricing strategies • Differences in tax systems C9

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