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com semester 4
Presented Click to edit Master subtitle style By Ashish Siddiqui, Assistant professor, Sanskriti School of Business, AICTE Approved
compiled by Ashish
guidelines. managerial accounting. the Organization for Economic Cooperation and Development. Defined broadly. the accounting in international accounting encompasses the functional areas of financial accounting. auditing.Introduction v Most accounting students are familiar with financial accounting and managerial accounting. auditing. and the International Federation of Accountants 3/25/12 compiled by Ashish . taxation. and taxation issued by supranational organizations. and accounting information systems. which denotes standards. but many have only a vague idea of what international accounting is. and rules of accounting.1 The first level is supranational accounting. The word international in international accounting can be defined at three different • • levels. Such organizations include the United Nations.
international accounting can be viewed as the study of the standards. and taxation that exist within each country as well as comparison of those items across countries. auditing. (2) income and other tax rates. v At the second level. Examples would be cross-country comparisons of (1) rules related to the financial reporting of plant. guidelines. 3/25/12 compiled by Ashish • • . and equipment. international accounting can be viewed in terms of the standards. The company level. These would include standards for accounting for transactions denominated in a foreign currency and techniques for evaluating the performance of foreign operations v At the third and broadest level. property.Introduction cont. and rules of accounting. and (3) the requirements for becoming a member of the national accounting profession. guidelines.. and practices that a company follows related to its international business activities and foreign investments.
patterns of accounting development. 3/25/12 compiled by Ashish . international and regional harmonization. foreign exchange risk. accounting in communist countries. performance evaluation of foreign subsidiaries. international comparisons of consolidation accounting and inflation accounting. foreign currency translation.INTERNATIONAL ACCOUNTING DEFINITION • INTERNATIONAL ACCOUNTING is the international aspects of accounting. including such matters as accounting principles and reporting practices in different countries and their classification. accounting in developing countries.
development of world trade. The efforts that accountant has to put in preparing consolidation of financial statements if accounts all around the world are prepared on uniform basis. Internationalization of capital markets. Development of world trade: In recent times international trade has increased to enormous figure and these lead to setting the transfer pricing for sale or transfer of raw materials between two international units § § 3/25/12 compiled by Ashish .. Emergence of MNC: Emergence of MNC on the international scène is one of the most important factors that has increased importance of international accounting. Expansion of European union All these have emphasized the importance of International accounting recent years. growth of multinational corporation.Importance of of International Accounting q Emergence of globalization. MNC contribution is 1/3rd of the world exports and also the contribution to the world GDP is Approx 10 %.
The combined EU generates an estimated 30% share of world’s nominal GDP later to implement financial reporting strategy adopted the international.Importance of of International Accounting § Expansion of European union European union has come long way now a political and economic union of 27 independent sovereign states. financial reporting standard and insisted companies registered on regulated to prepare consolidated financial statements on the international reporting standard § Internationalization of capital markets: There has been tremendous increase in cross border financial transaction in the recent decade of two which has given rise to international capital market. All these development has given rise to application of international accounting. 3/25/12 compiled by Ashish . This growth in size has also increased the EU economic dominance . The estimated value of the world’s outstanding bonds equities and banking assets stood at whooping USD 190 trillion at the end of 2006.
environmental accounting . forex risk management . segment reporting and preparation of multi financial reporting. Analysis of new financial market issues and their managmetn through international derivative products. Derivative accounting . integration of ethics and global joint ventures etc… v v v 3/25/12 compiled by Ashish .performance evaluation of foreign subsidiaries. Financial accounting coverage extends to problems foreign currency transactions and translation . The management accounting coverage includes muitinational transfer.global corporate governance.international taxation. budgeting .accounting foreign inflation and consolidated financial reporting and its disclosure.Scope of International Accounting v it covers a comparative study of financial accounting practices and principles in important countries of the world and similarities and diversities prevailing therein. foreign investment analysis .
v v v v v v 3/25/12 compiled by Ashish . Submission of reports as per requirement of foreign securities exchanges. Rapid growth in international capital market Increase of cross border merger and acquisition Predominance of MNC Reporting to existing and new investors spread world wide.v NEED FOR TRANSNATIONAL REPORTING AND DISCLOSURE The expanding horizon of business activity in recent years particularly as a consequences of opening up of economies has resulted in expansion in world trade. Companies entering in to foreign capital market to list their securities in to foreign stock exchanges.
Some of the complexities encountered during transnational reporting are as follows. Language and currency Accounting principles Disclosure requirement Audit requirement § § § § 3/25/12 compiled by Ashish .Transnational reporting -complexities q Reporting financial statements across he border is not an easy task it requires lot of efforts and cost.
3/25/12 compiled by Ashish . In short local investors would find difficult to understand financial statement of other country’s companies. In the same way reporting companies also finds difficulties since every has unique currency. Similarly a companies listed on as stock exchanges which have different language than the companies reporting have to send translated version of their financial statement reports.Transnational reporting -complexities • Language and currency An enterprise would generally prepare its financial reporting in the language that its local investors would understand for eg a Japanese company would prepare its financial statement in Japanese language and similarly in India few would like to have a translated version of non-indian companies financial statement in Hindi script.
For eg indian company would prepare its financial statement in accordance ti indian coimpanies act 1956 and in accordance Indian GAAP. 3/25/12 compiled by Ashish .S investors would find difficult to understand further certain information would be lacking as required by US GAAP. Therefore U.Transnational reporting -complexities • Accounting principles The more serious problem the reporting company faces is in contemplating the accounting principles of the another country.
Transnational reporting -complexities • Disclosure requirement Disclosure requirement is essential ingredient of proper functioning of capital market. However the problem is that every nation has different disclosure requirement and so reporting company finds it difficult to cope up with different disclosure requirement . Therefore it is utmost requirement of the company to disclose all required information in the financial statement to enable the investors to take appropriate decision. 3/25/12 compiled by Ashish .
In order to do so auditing professionals itself need a set of well defined audit standards. A great deal of diversity prevails in the international audit environment. 3/25/12 compiled by Ashish .Transnational reporting -complexities • Audit requirement The function of audit is to lend credibility to financial statement. This is particular so when financial statements are prepared in one country and used by users in another country. However as we move towards harmonization and as international standard acquires authority auditors will have to conform the requirement of international standards of auditing.
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