1. Bringing International Accounting Issues into the Classroom Sue Haka Ernst & Young Professor Department of Accounting and Information Systems Broad School of Business Michigan State University

2. Environmental Forces Impacting Globalization

3. Environmental Influences Examples u Political/legal F statutory audits-accounting reports/taxes u Economic F sources of capital/cost of capital u Cultural F budgetary control/performance evaluation u Infrastructure F communication and education infrastructure

4. Accounting Topics u External Accounting –Standard Setters, Preparers and Users –Underlying Institutional Structures –Required reports u Internal Accounting –Decision Rights Assignment –Planning and Control (internal controls) –Performance Measurement and Evaluation

5. Topics-Environment Matrix

6. External political environment- financial accounting

7. External Accounting- Institutional Structures u Capital Market Requirements –Market Structure -- www.iosco.org/ mergers in Europewww.iosco.org/ –Other Means of Raising Capital-debt market u Standard Setting Processes –Private vs. Public control- e.g. recent IASB (www.iasb.org ) initiative on standards for small and medium enterpriseswww.iasb.org –Accountability u Compliance & Enforcement –Varies widely around the world

8. External Accounting-Political/culture u Standard Setting Process –U.S. -- FASB – ‘Private’- http://www.fasb.org/http://www.fasb.org/ –China, Korea & Japan – varying levels of govt. control http://http://en.casc.gov.cn/internet/internet/en/ZZWJJ.h tml http://http://en.casc.gov.cn/internet/internet/en/ZZWJJ.h tml International Accounting Standards Board F /http://www.iasb.org/Home.htm Use of comment letters for current projectswww.iasb.org/Home.htm u Users of Statements –legal/cultural driven u Compliance - Culture driven –http://www.geert-hofstede.com/www.geert-hofstede.com

9. External Accounting-Topics u External Reporting Differences-IFRS adoption vs. convergence –Canada, Australia – have adopted, but… –China – has converged, but allows pooling and purchase methods u Differences in Debt and Equity Classifications –Korea vs. U.S. (short vs. long term) u Differences in asset revaluation – US. vs. Brazil or Mexico (or IFRS)

10. Motivating International Management Accounting Issues

11. Internal Accounting - examples u Decision Rights Assignment –Negotiating Joint Ventures – Mexico, China, or India u Planning and Control –Complications of Global Operations-foreign exchange issues –Cash flows, borrowing, tax minimization –Co-location of Knowledge and Rights=Joint ventures vs. wholly owned subsidiaries u Performance Evaluation –Multiple Currency Issues- operating risk managementoperating risk management –Cross-border Decision Rights Issues-FCPA –Transfer Pricing in International Settings

12. Internal Accounting-Environment u Economic/Political-Planning and Control –International Taxes and Treaties F NAFTA/ASEAN (www.nafta-sec- alena.org/en/view.aspx/ or www.aseansec.org/74.htm)www.nafta-sec- alena.org/en/view.aspx/www.aseansec.org/74.htm F Foreign Trade Zones (www.naftz.org)www.naftz.org –Transfer Pricing F Decision Rights Issues- APA agreements: (www.irs.gov/businesses/international/)www.irs.gov/businesses/international F Political/economic- treaties (www.state.gov/)www.state.gov/ F www.cia.gov/library/publications/the-world-factbook/ www.cia.gov/library/publications/the-world-factbook

13. Internal Accounting-Environment u Economic/Political Continued –Risk Management- e.g. threat of nationalization F Financial -- www.eiuresources.com/ras/help_about.aspwww.eiuresources.com/ras/help_about.asp F Operational – http://www.irmba.com/ http://www.irmba.com/ –Corruption F Foreign Corrupt Practices Act –ethics issues http://www.usdoj.gov/criminal/fraud/fcpa/www.usdoj.gov/criminal/fraud/fcpa/ F Corruption index-- http://www.transparency.org / http://www.transparency.org

14. Internal Accounting-Cultural u Performance Evaluation (Inter.J. of Acct., 34, #1, pp.49-70) –Japan ROA < U.S. ROA F low margins, F focus on market share, emphasize target cost –Japan ROE > U.S. ROE F high debt levels F keiretsu organization or chaebol (korea) keiretsu organizationchaebol

15. Internal Accounting- A pharmaceutical case example u Performance Measurement & Evaluation –Multiple Currency Issues ( U.K. to U.S.) –Transfer Pricing Issues (U.K. to Denmark) u Decision Rights Assignment –Knowledge Distribution (Mergers/Acquisition) –Control System (Conflict with Culture or operating environment)

16. Summary u Key to Understanding International Accounting –Political, Economic, Cultural and Infrastructure Influences on: F External Reporting –Taxes/Capital Markets/Gov. Regulation/Standard Setting/Reporting Requirements/Auditing/Users F Internal Reporting –Planning –budgeting, market entry, borrowing –Control – global value chain, treasury function –Performance Evaluation—currency choice, expectations

17. Where to get more information u Journals - International –The International Journal of Accounting –Advances in International Accounting –Journal of International Business Studies u Journals - AAA –Journal of International Accounting Research –Accounting Horizons –Issues in Accounting Education u Other –Management Accounting –Journal of Accountancy –Economist

18. Where to get more information u Books –Introductory - International Accounting and Multinational Enterprises, 6th Edition by L. Radebaugh, S. J. Gray, & E. Black –Integrated entry level - Financial and Managerial Accounting: The Basis for Business Decisions 15 th, or Financial Accounting 14 th,Williams, Haka, Bettner, & Carcello, McGraw-Hill/Irwin, 2010 –Upper level financial - International Accounting, 2 nd edition Doupnik & Perera, McGraw-Hill Irwin, 2009 OR International Accounting, 6 th edition, F. Choi and G. Meeks, Pearson, 2008

19. Where to get more information- AAACommons

20. 20 The Teaching of IFRS: Cyber-Guest Lecturers As a Pedagogical Resource Mark A. Holtzblatt, Ph.D., CPA Heller College of Business Roosevelt University May 9, 2009 Ohio Region, American Accounting Association, May 7-9, 2009

21. IFRS Cyber-Guest Lecturers

22. http://www.iasplus.com/index.htm http://www.iasplus.com/index.htm sponsored by Deloitte u Table about use (adoption or convergence or…) of IFRS by Jurisdiction: http://www.iasplus.com/country/useias.htmhttp://www.iasplus.com/country/useias.htm u Firms with web based IFRS material: –KPMG-http://www.kpmgifrsinstitute.com/www.kpmgifrsinstitute.com – Ernst & Young-a private password protected website at www.ey.com/us/ifrs. To request an account, please contact the EY ARC Program Director, Catherine Banks, at catherine.banks@ey.com. www.ey.com/us/ifrscatherine.banks@ey.com – PWC- www.pwc.com/extweb/aboutus.nsf/docid/70CCD8B601397905852574910075 A03D (IFRS Ready) www.pwc.com/extweb/aboutus.nsf/docid/70CCD8B601397905852574910075 A03D –Deloitte--www.deloitte.com/dtt/article/0,1002,cid%253D206187,00.htmlwww.deloitte.com/dtt/article/0,1002,cid%253D206187,00.html (Deloitte’s IFRS University Consortium)

23. Where to get more information u Case Books – International Accounting: A Case Approach edited by Schweikart, Gray and Roberts, McGraw-Hill u Cases-AAA –Issues in Accounting Education: (November 2007, vol. 22, no. 4) u Cases - AICPA (http://ceae.aicpa.org/Resources/)http://ceae.aicpa.org/Resources/) u suehaka@msu.edu suehaka@msu.edu