1. The International Accounting Environment
Chapter 9
The International Accounting 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 Accounting Classification Systems
Help in understanding accounting differences between countries
Can center around various characteristics including cultural differences C9

8. Classification Based on 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