International accounting

Cover......Page 1
Title Page......Page 2
Copyright......Page 3
Contents......Page 8
Preface......Page 18
CHAPTER 1 Introduction......Page 20
Historical Perspective......Page 21
Contemporary Perspective......Page 22
Growth and Spread of Multinational Operations......Page 23
Financial Innovation......Page 29
Global Competition......Page 30
Internationalization of Capital Markets......Page 31
Western Europe......Page 34
Cross-Border Equity Listing and Issuance......Page 35
Where Are We?......Page 36
Learning Objectives......Page 38
Appendix 1-1 Changes in Financial Sector Policy in 34 Nations, 1973–1996......Page 42
Appendix 1-2 Stock Exchange Web Sites......Page 46
Appendix 1-3 Financial Statements and Selected Notes from the Annual Report of INFOSYS......Page 47
Discussion Questions......Page 48
Exercises......Page 49
Case 1-1 E-Centives, Inc.—Raising Capital In Switzerland......Page 51
Case 1-2 Global Benchmarks: Infosys Technologies Limited......Page 52
CHAPTER 2 Development and Classification......Page 54
Development......Page 55
Four Approaches to Accounting Development......Page 61
Legal Systems: Common Law vs. Code Law Accounting......Page 62
Practice Systems: Fair Presentation vs. Legal Compliance Accounting......Page 63
Selected References......Page 65
Discussion Questions......Page 66
Exercises......Page 67
Case 2-1 Are Classifications of Accounting Outmoded?......Page 70
Case 2-2 Volkswagen Group......Page 71
CHAPTER 3 Comparative Accounting: Europe......Page 74
Some Observations about Accounting Standards and Practice......Page 75
IFRS in the European Union......Page 76
France......Page 79
Germany......Page 84
Czech Republic......Page 89
The Netherlands......Page 93
United Kingdom......Page 97
Discussion Questions......Page 104
Exercises......Page 105
Case 3-1 Old Habits Die Hard......Page 107
Case 3-2A: What Difference Does It Really Make?......Page 108
Case 3-2B: Do the Differences Really Matter?......Page 125
CHAPTER 4 Comparative Accounting: The Americas and Asia......Page 134
United States......Page 135
Mexico......Page 141
Japan......Page 145
China......Page 150
India......Page 155
Discussion Questions......Page 161
Exercises......Page 162
Case 4-1 Standing on Principles......Page 166
Case 4-2 Casino Capital......Page 167
Development of Disclosure......Page 170
Voluntary Disclosure......Page 171
Regulatory Disclosure Requirements......Page 172
The U.S. SEC Financial Reporting Debate......Page 173
Disclosures of Forward-Looking Information......Page 175
Segment Disclosures......Page 176
Social Responsibility Reporting......Page 177
Special Disclosures for Nondomestic Financial Statement Users and Accounting Principles Used......Page 196
Corporate Governance Disclosures......Page 198
Internet Business Reporting and Disclosure......Page 206
Annual Report Disclosures in Emerging-Market Countries......Page 208
Implications for Financial Statment Users and Managers......Page 209
Selected References......Page 210
Exercises......Page 211
Case 5-2 Seeing Is Believing......Page 214
CHAPTER 6 Foreign Currency Translation......Page 216
Results of Operations......Page 217
Reasons for Translation......Page 219
Background and Terminology......Page 220
Financial Statement Effects of Alternative Translation Rates......Page 223
Foreign Currency Transactions......Page 225
Two-Transaction Perspective......Page 227
Foreign Currency Translation......Page 228
Multiple-Rate Methods......Page 230
Financial Statement Effects......Page 232
Which Is Best?......Page 234
Translation Gains and Losses......Page 236
Translation Accounting Development......Page 238
1981–Present......Page 239
Translation When Local Currency Is the Functional Currency......Page 240
Translation When Foreign Currency Is the Functional Currency......Page 241
Reporting Perspective......Page 243
Managed Earnings......Page 244
Foreign Currency Translation and Inflation......Page 245
Foreign Currency Translation Elsewhere......Page 246
Appendix 6-1 Translation and Remeasurement Under FAS No. 52......Page 247
Selected References......Page 251
Discussion Questions......Page 252
Exercises......Page 253
Case 6-1 Regents Corporation......Page 257
Case 6-2 Managing Offshore Investments:Whose Currency?......Page 258
CHAPTER 7 Financial Reporting and Changing Prices......Page 262
Changing Prices Defined......Page 265
Why Are Financial Statements Potentially Misleading During Periods of Changing Prices?......Page 267
Types of Inflation Adjustments......Page 268
Price Indexes......Page 269
Current-Cost Adjustments......Page 273
General Price-Level Adjusted Current Costs......Page 274
National Perspectives On Inflation Accounting......Page 276
United States......Page 277
United Kingdom......Page 278
Brazil......Page 279
International Accounting Standards Board......Page 283
Inflation Gains and Losses......Page 284
Foreign Inflation......Page 285
Avoiding the Double-Dip......Page 286
Appendix 7-1 Accounting for Foreign Inflation: A Case Analysis......Page 289
Selected References......Page 292
Discussion Questions......Page 293
Exercises......Page 294
Case 7-1 Kashmir Enterprises......Page 298
Case 7-2 Icelandic Enterprises, Inc......Page 299
CHAPTER 8 Global Accounting and Auditing Standards......Page 301
Advantages of International Convergence......Page 302
Criticisms of International Standards......Page 303
Reconciliation and Mutual Recognition......Page 304
Some Significant Events in the History of International Accounting Standard Setting......Page 305
Overview of Major International Organizations Promoting Accounting Convergence......Page 307
International Accounting Standards Board......Page 310
IASC\'s Core Standards and the IOSCO Agreement......Page 311
The New IASB Structure......Page 312
U.S. Securities and Exchange Commission Response to IFRS......Page 314
European Union (EU)......Page 315
Have EU Harmonization Efforts Been Successful?......Page 316
The EU\'s New Approach and the Integration of European Financial Markets......Page 318
International Organization of Securities Commissions (IOSCO)......Page 319
International Federation of Accountants (IFAC)......Page 322
United Nations Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR)......Page 324
Conclusion......Page 325
Selected References......Page 326
Exercises......Page 327
Case 8-2 Whither The Withering Standard Setters?......Page 331
Challenges And Opportunities In Cross-Border Analysis......Page 333
Information Availability......Page 335
Recommendations for Analysis......Page 336
Accounting Analysis......Page 337
Suggestions for the Analyst......Page 339
Ratio Analysis......Page 340
Coping Mechanisms......Page 343
International Prospective Analysis......Page 344
Information Access......Page 347
Foreign Currency Considerations......Page 350
Differences in Statement Format......Page 354
The Attest Function......Page 355
The Audit Report......Page 356
Auditing and Credibility......Page 358
Coping Mechanisms......Page 361
Internal Auditing......Page 362
Evolving Role of Internal Auditing......Page 366
Appendix 9-1 Illustration of Restatement of Japanese GAAP Financial Statements to a U.S. GAAP Basis......Page 368
Appendix 9-2 International Ratio Analysis......Page 372
Selected References......Page 374
Discussion Questions......Page 375
Exercises......Page 376
Case 9-1 Sandvik......Page 381
Case 9-2 Continental A.G.......Page 384
CHAPTER 10 Managerial Planning and Control......Page 392
Planning Tools......Page 393
Capital Budgeting......Page 395
Financial Return Perspectives......Page 396
Measuring Expected Returns......Page 397
Multinational Cost of Capital......Page 400
Management Information Systems......Page 402
Systems Issues......Page 403
Information Issues......Page 404
Management Information and Hyperinflation......Page 405
Sales Revenue......Page 406
Issues In Financial Control......Page 409
Domestic Versus Multinational Control System......Page 410
Strategic Costing......Page 418
Performance Evaluation of Foreign Operations......Page 420
Consistency......Page 421
Performance Criteria......Page 423
Performance Evaluation Practices: ICI......Page 425
Foreign Currency Effects......Page 427
Performance Standards......Page 428
Value Reporting......Page 430
Selected References......Page 431
Discussion Questions......Page 432
Exercises......Page 433
Case 10-1 Foreign Investment Analysis:A Tangled Affair......Page 437
Case 10-2 Assessing Foreign Subsidiary Performance In A World Of Floating Exchange Rates......Page 439
CHAPTER 11 Financial Risk Management......Page 441
Why Manange Financial Risks?......Page 444
Identifying Market Risks......Page 445
Risk Management in a World of Floating Exchange Rates......Page 447
Accounting for Hedge Products......Page 460
Hedge of a Recognized Asset or Liability or an Unrecognized Firm Commitment......Page 467
Hedge of a Net Investment in a Foreign Operation......Page 469
Speculating in Foreign Currency......Page 470
Disclosure......Page 471
Financial Control......Page 475
Reporting Systems......Page 476
Selected References......Page 477
Exercises......Page 478
Case 11-2 Value At Risk:What Are Our Options?......Page 481
Initial Concepts......Page 485
Types of Taxes......Page 486
Tax Burdens......Page 487
Tax Administration Systems......Page 490
Foreign Tax Incentives......Page 491
Taxation of Foreign-Source Income and Double Taxation......Page 492
Foreign Tax Credit......Page 493
Limits to Tax Credits......Page 495
Foreign Exchange Considerations......Page 496
Organizational Considerations......Page 497
Offshore Holding Companies......Page 498
Pooling of Tax Credits......Page 499
Location and Transfer Pricing......Page 500
International Transfer Pricing: Complicating Variables......Page 501
Tax Considerations......Page 502
Competitive Factors......Page 504
Environmental Risks......Page 505
Accounting Contributions......Page 506
Arm\'s-Length Principle......Page 507
Resale Price Method......Page 508
Cost-Plus Pricing Method......Page 509
Profit-Split Methods......Page 511
Advance Pricing Agreements......Page 512
Transfer Pricing Practices......Page 514
The Future......Page 515
Discussion Questions......Page 516
Exercises......Page 517
Case 12-1 The Shirts Off Their Backs......Page 520
Case 12-2 Muscle Max:Your Very Own Personal Trainer......Page 522
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Y......Page 529