1. International Accounting and Multinational Enterprises 5/e
By Lee H. Radebaugh
and Sidney J. Gray
PowerPoint Presentation
by Kent W. Meyer, PhD

2. Copyright © 2002 John Wiley & Sons, Inc. All rights reserved
Copyright © 2002 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her use only and not for distribution or resale. The publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.

3. International Accounting and International Business
Chapter One

4. 1 World Capital Markets North America Asia Australia Europe
New York, San Francisco, Chicago, Toronto
Asia
Hong Kong, Tokyo
Australia
Sydney
Europe
London, Zurich, Frankfurt, Brussels, Milan, Paris, Amsterdam, Stockholm, Madrid
South America
Buenos Aires, Santiago, Mexico City
Africa
Johannesburg 1

5. Historical Development of Accounting
Ancient World
Mesopotamia, Egypt, India, China, Rome
Middle Ages
Genoa, Florence, Venice
New World
Maya, Inca, Aztec 2

6. 3 Luca Pacioli (1445-1514) Published Summa de Arithmetica in 1494
First published text on double-entry accounting
Introduced the “Memorandum Book,” “Journal,” and “Ledger” 3

7. National Differences in Accounting Systems
Historical developments did not lead to uniformity in international accounting practice
Despite similarities, no two systems are exactly alike
Reasons for Differences:
Economic,
Educational,
Legal,
Political, and
Social/ Cultural Factors 4

8. Implications of National Differences in Accounting
Acts as a barrier to the free-flow of international business information 5

9. Evolution and Significance of International Business
Greek Period
First international sales of mass-produced products through Greece in 5 B.C.
Roman Period
First open market with political stability, better transportation, and few tariffs or restrictions
Middle Ages
Banking, Insurance, and trade fairs in Byzantium 6

10. The Preindustrial Period
Europe: Rise of Mercantilism
Right to trade regulated by the state,
Colonialism driven by state’s direct investment in colonies and near-monopolistic control of trade, and
Dominated by Western European Nations. 7

11. The Industrialization Period: 1780-1945
Technological inventions led to unprecedented mass production and standardization,
Implementation of large-scale infrastructure between historically separate markets, and
Birth of large multinational corporations such as: Singer, Ford, Dunlop, and Lever Brothers. 8

12. The Post-World War II Period
Great Depression and WWII stunted international trade
Following the end of the war, demand for products and services, trade and investment sharply increased. 9

13. The Multinational Era
Involvement in International trade is essential for developing nations, and
For the continued economic growth of developed nations. 10

14. What is International Business?
All business transactions involving two or more countries. 11

15. Reasons for International Involvement
Expand sales,
Gain access to raw materials and other factors of production, and
Obtain information, technical expertise (i.e. patents, licenses, “know-how”). 12

16. Forms of International Involvement
Exporting and Importing of goods and services,
Strategic alliances including licensing agreements, franchises, and joint ventures, (McDonalds, Holiday Inn, Pizza Hut), and
Direct investment. 13

17. 14 Global Enterprises Multinational enterprises are those which:
Have a world-wide view of production, materials, components and final markets;
Have over 10% of sales, assets, earnings, and employees abroad. 14

18. 15 Large MNE’s Indicators: Sales and Market Value,
Profits and Return on Shareholders Equity, and
Worldwide stock market valuations. 15

19. The Decision to Become Global: External Environment v
The Decision to Become Global: External Environment v. Internal Capabilities
Environmental Constraints-International:
May differ from domestic constraints and mostly concerned with nationalism
Environmental Constraints-Domestic:
Educational,
Sociological (Socioculteral),
Political/ Legal, and
Economic. 16

20. Firm Specific Advantages
Intangibles that provide a unique firm advantage,
Examples include market-niche capabilities and personnel advantages. 17

21. Accounting Aspects of International Business
Accounting requirements differ with each successive stage of international involvement,
For example, import-export stage would require investigation of potential buyer or seller for purposes of determining credit-worthiness and capacity to perform.
Initial Issues may include: statements written in foreign language, amounts in foreign currencies, and information produced using different standards. 18

22. Establishing an Internal International Accounting Capability
Increased international involvement requires:
Internal accounting resources,
Creation of separate organization to handle international trade, and
Creation of a foreign operation of some kind.
Degrees of Involvement:
International accounting knowledge may be necessary even with no direct international business involvement (I.e. company needs to borrow money or sell stock internationally). 19

23. The Field of International Accounting
Increased need for accountants who understand the international accounting environment,
International certification possibilities, and
Fascinating career opportunities. 20