International Accounting, 6/e Frederick D.S. Choi Gary K. Meek Chapter 1: Introduction Choi/Meek, 6/e

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超越 national borders? What is meant by the term, global capital markets, and what does development mean for capital market participants? Choi/Meek, 6/e

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. Choi/Meek, 6/e

What Does International Accounting Diversity Entail? Measurement principles Financial disclosure (corporate transparency) Auditing practices Choi/Meek, 6/e

Measurement is the process of identifying, categorizing, and quantifying economic activities or transactions. ——These measurements provide insights into the profitability of a firm's operations and the strength of its financial position. Disclosure is the process by which accounting measurements are communicated to their intended users. ——This area focuses on such issues as what is to be reported, when, by what means, and to whom. Auditing is the process by which specialized accounting professionals (auditors) attest to the reliability of the measurement and communication process. ——Whereas internal auditors are company employees who answer to management, external auditors are nonemployees who are responsible for attesting that the company's financial statements are prepared in accordance with generally accepted standards. Choi/Meek, 6/e

Differences in culture, business practices, political and regulatory structures, legal systems, currency values, local inflation rates, business risks, and tax codes all affect how the multinational company (MNC) conducts its operations and financial reporting around the world. Financial statements and other disclosures are impossible to understand without an awareness of the underlying accounting principles and business culture. Choi/Meek, 6/e

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. Choi/Meek, 6/e

Contributing Factors (contin) Paradox悖论 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. Choi/Meek, 6/e

Contributing Factors (contin) Growth and spread of multinational operations Choi/Meek, 6/e

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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 Choi/Meek, 6/e

Contributing Factors (contin) Global competition Competitive benchmarking标杆管理 necessitates international comparisons. 竞争性的标杆管理使国际比较成为必要 Choi/Meek, 6/e

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. Choi/Meek, 6/e

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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? Choi/Meek, 6/e

Other Chapter Exhibits Choi/Meek, 6/e

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Chapter Exhibits (contin) Choi/Meek, 6/e

Chapter Exhibits (contin) Choi/Meek, 6/e

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