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International Accounting

by ;
Edition:
1st
ISBN13:

9780072507751

ISBN10:
0072507756
Format:
Hardcover
Pub. Date:
9/22/2005
Publisher(s):
McGraw-Hill/Irwin

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Summary

Doupnik and Perera'sInternational Accountingtakes in the whole realm of international accounting, while paying particular focus on the accounting issues related to international business activities and foreign operations.

Author Biography

Hector Perera is a Professor of Accounting at Massey University, where he has been on the faculty since 1986. Timothy S. Doupnik is a Professor of Accounting at the University of South Carolina, where he has been on the faculty since 1982.

Table of Contents

About the Authors iv
Preface v
Introduction to International Accounting
1(25)
What Is International Accounting?
1(1)
Evolution of a Multinational Corporation
2(8)
Sales to Foreign Customers
2(2)
Hedges of Foreign Exchange Risk
4(1)
Foreign Direct Investment
4(2)
Financial Reporting for Foreign Operations
6(1)
International Income Taxation
6(1)
International Transfer Pricing
7(1)
Performance Evaluation of Foreign Operations
8(1)
International Auditing
8(1)
Cross-Listing on Foreign Stock Exchanges
9(1)
International Harmonization of Accounting Standards
10(1)
The Global Economy
10(4)
International Trade
10(1)
Foreign Direct Investment
11(1)
Multinational Corporations
12(2)
International Capital Markets
14(1)
Outline of the Book
14(1)
Summary
15(1)
Questions
16(1)
Exercises and Problems
16(3)
Case 1-1: Besserbrau AG
19(1)
Case 1-2: Vanguard International Growth Fund
19(2)
Case 1-3: Nestle Group
21(4)
References
25(1)
Worldwide Accounting Diversity
26(48)
Introduction
26(1)
Evidence of Accounting Diversity
27(4)
Magnitude of Accounting Diversity
31(1)
Reasons for Accounting Diversity
32(3)
Legal System
32(1)
Taxation
33(1)
Providers of Financing
33(1)
Inflation
34(1)
Political and Economic Ties
34(1)
Correlation of Factors
34(1)
Problems Caused by Accounting Diversity
35(2)
Preparation of Consolidated Financial Statements
35(1)
Access to Foreign Capital Markets
35(1)
Comparability of Financial Statements
36(1)
Lack of High-Quality Accounting Information
37(1)
Accounting Clusters
37(3)
A Judgmental Classification of Financial Reporting Systems
38(1)
An Empirical Test of the Judgmental Classification
39(1)
The Influence of Culture on Financial Reporting
40(5)
Hofstede's Cultural Dimensions
41(1)
Gray's Accounting Values
41(3)
Religion and Accounting
44(1)
A Simplified Model of the Reasons for International Differences in Financial Reporting
45(2)
Examples of Countries with Class A Accounting
46(1)
Recent Changes in Europe
46(1)
Further Evidence of Accounting Diversity
47(17)
Financial Statements
47(1)
Format of Financial Statements
47(5)
Level of Detail
52(1)
Terminology
52(2)
Disclosure
54(6)
Recognition and Measurement
60(4)
Summary
64(1)
Appendix to Chapter 2 The Case of Damiler-Benz
65(2)
Questions
67(1)
Exercises and Problems
68(2)
Case 2-1: The Impact of Culture on Conservatism
70(1)
Case 2-2: SKD Limited
71(2)
References
73(1)
International Harmonization of Financial Reporting
74(43)
Introduction
74(1)
What Is Harmonization?
75(1)
Arguments for and against Harmonization
76(1)
Arguments for Harmonization
76(1)
Arguments against Harmonization
76(1)
Major Harmonization Efforts
77(4)
International Organization of Securities Commissions
77(1)
International Federation of Accountants
78(1)
European Union
79(2)
The International Accounting Standards Board
81(7)
Early Harmonization Efforts
81(1)
The Comparability Project
82(1)
The IOSCO Agreement
82(1)
U.S. Reaction to International Accounting Standards
83(1)
Restructuring of the IASC/Creation of the IASB
84(1)
The Structure of the IASB
84(4)
A Principles-Based Approach to International Financial Reporting Standards
88(1)
International Financial Reporting Standards
89(3)
The IASB Framework
92(2)
Objective of Financial Statements and Underlying Assumptions
92(1)
Qualitative Characteristics of Financial Statements
92(1)
Elements of Financial Statements: Definition, Recognition, and Measurement
93(1)
Concepts of Capital Maintenance
93(1)
IAS 1, Presentation of Financial Statements
94(3)
Compliance with International Financial Reporting Standards
96(1)
IFRS 1, First-Time Adoption of International Financial Reporting Standards
97(1)
Use of International Financial Reporting Standards
98(2)
GAAP Convergence
100(3)
Convergence with IFRSs
100(1)
The Norwalk Agreement
101(2)
The IASB as a Global Standard Setter
103(1)
Summary
104(1)
Appendix to Chapter 3 What Is This Thing Called Anglo-Saxon Accounting?
105(2)
Questions
107(1)
Exercises and Problems
107(3)
Case 3-1: Jardine Matheson Group (Part 1)
110(1)
Case 3-2: Comments on the IASB's ED 4, Disposal of Non-current Assets and Presentation of Discontinued Operations
110(2)
Case 3-3: The European Perspective on International Financial Reporting Standards
112(2)
References
114(3)
International Financial Reporting Standards
117(43)
Introduction
117(1)
Types of Differences between IFRSs and U.S. GAAP
118(1)
Recognition and Measurement Standards
119(21)
IAS 2, Inventories
119(1)
IAS 16, Property, Plant, and Equipment
120(5)
IAS 40, Investment Property
125(1)
IAS 38, Intangible Assets
125(6)
IAS 36, Impairment of Assets
131(5)
IAS 23, Borrowing Costs
136(1)
IAS 17, Leases
137(3)
Other Recognition and Measurement Standards
140(1)
Disclosure and Presentation Standards
140(2)
IAS 7, Cash Flow Statements
140(1)
IAS 8, Accounting Policies, Changes in Accounting Estimates, and Errors
140(1)
IAS 10, Events After the Balance Sheet Date
141(1)
IAS 14, Segment Reporting
141(1)
IAS 24, Related Party Disclosures
141(1)
IAS 33, Earnings per Share
141(1)
IAS 34, Interim Financial Reporting
142(1)
IFRS 5, Non-current Assets Held for Sale and Discontinued Operations
142(1)
Summary
142(1)
Appendix to Chapter 4 Other Recognition and Measurement Standards
143(11)
Questions
154(1)
Exercises and Problems
154(5)
Case 4-1: Jardine Matheson Group (Part 2)
159(1)
References
159(1)
Comparative Accounting
160(73)
Introduction
160(2)
People's Republic of China
162(10)
Background
162(1)
Accounting Profession
163(3)
Accounting Regulation
166(1)
Accounting Principles and Practices
167(5)
Germany
172(15)
Background
172(1)
Accounting Profession
173(1)
Accounting Regulation
173(2)
Accounting Principles and Practices
175(12)
Japan
187(14)
Background
187(1)
Accounting Profession
188(1)
Accounting Regulation
189(3)
Accounting Principles and Practices
192(9)
Mexico
201(9)
Background
201(1)
Accounting Profession
202(1)
Accounting Regulation
202(1)
Accounting Principles and Practices
203(7)
United Kingdom
210(11)
Background
210(1)
Accounting Profession
210(1)
Accounting Regulation
211(4)
Accounting Principles and Practices
215(6)
Summary
221(1)
Questions
222(1)
Exercises and Problems
223(1)
Case 5-1: Toyota Signs an Engine Joint Venture in China
224(1)
Case 5-2: China Petroleum and Chemical Corporation
225(6)
References
231(2)
Foreign Currency Transactions and Hedging Foreign Exchange Risk
233(62)
Introduction
233(1)
Foreign Exchange Markets
234(4)
Exchange Rate Mechanisms
234(1)
Foreign Exchange Rates
235(1)
Spot and Forward Rates
236(1)
Option Contracts
237(1)
Foreign Currency Transactions
238(4)
Accounting Issue
239(1)
Accounting Alternatives
239(1)
Balance Sheet Date before Date of Payment
240(2)
Hedging Foreign Exchange Risk
242(1)
Accounting for Derivatives
243(3)
Fundamental Requirement of Derivatives Accounting
244(1)
Determining the Fair Value of Derivatives
245(1)
Accounting for Changes in the Fair Value of Derivatives
245(1)
Hedge Accounting
246(1)
Nature of the Hedged Risk
246(1)
Hedge Effectiveness
247(1)
Hedge Documentation
247(1)
Hedging Combinations
247(1)
Hedges of Foreign-Currency-Denominated Assets and Liabilities
248(1)
Forward Contract Used to Hedge a Recognized Foreign-Currency-Denominated Asset
249(7)
Forward Contract Designated as Cash Flow Hedge
251(3)
Forward Contract Designated as Fair Value Hedge
254(2)
Foreign Currency Option Used to Hedge a Recognized Foreign-Currency-Denominated Asset
256(5)
Option Designated as Cash Flow Hedge
258(2)
Spot Rate Exceeds Strike Price
260(1)
Option Designated as Fair Value Hedge
260(1)
Hedges of Unrecognized Foreign Currency Firm Commitments
261(5)
Forward Contract Used as Fair Value Hedge of a Firm Commitment
261(2)
Option Used as Fair Value Hedge of Firm Commitment
263(3)
Hedge of Forecasted Foreign-Currency-Denominated Transaction
266(2)
Option Designated as a Cash Flow Hedge of a Forecasted Transaction
266(2)
Use of Hedging Instruments
268(2)
The Euro
269(1)
Foreign Currency Borrowing
270(2)
Foreign Currency Loan
271(1)
Summary
272(1)
Appendix to Chapter 6 Illustration of the Accounting for Foreign Currency Transactions and Hedging Activities by an Importer
272(12)
Questions
284(1)
Exercises and Problems
285(7)
Case 6-1: Zorba Company
292(1)
Case 6-2: Portofino Company
293(1)
Case 6-3: Better Food Corporation
294(1)
References
294(1)
Translation of Foreign Currency Financial Statements
295(46)
Introduction
295(1)
Two Conceptual Issues
296(4)
Example
296(3)
Balance Sheet Exposure
299(1)
Translation Methods
300(6)
Current/Noncurrent Method
300(1)
Monetary/Nonmonetary Method
300(1)
Temporal Method
301(1)
Current Rate Method
302(1)
Translation of Retained Earnings
303(2)
Complicating Aspects of the Temporal Method
305(1)
Disposition of Translation Adjustment
306(1)
U.S. GAAP
307(3)
SFAS 52
307(1)
Functional Currency
308(1)
Highly Inflationary Economies
309(1)
International Financial Reporting Standards
310(1)
The Translation Process Illustrated
311(2)
Translation of Financial Statements: Current Rate Method
313(2)
Translation of the Balance Sheet
314(1)
Computation of Translation Adjustment
315(1)
Remeasurement of Financial Statements: Temporal Method
315(3)
Remeasurement of Income Statement
316(2)
Computation of Remeasurement Gain
318(1)
Comparison of the Results from Applying the Two Different Methods
318(2)
Underlying Valuation Method
319(1)
Underlying Relationships
319(1)
Hedging Balance Sheet Exposure
320(2)
Disclosures Related to Translation
322(3)
Translation in Other Countries
325(1)
Summary
326(1)
Questions
327(1)
Exercises and Problems
328(7)
Case 7-1: Columbia Corporation
335(2)
Case 7-2: Palmerstown Company
337(2)
Case 7-3: BellSouth Corporation
339(1)
References
340(1)
Additional Financial Reporting Issues
341(44)
Introduction
341(1)
Accounting for Changing Prices (Inflation Accounting)
342(12)
Impact of Inflation on Financial Statements
342(1)
Purchasing Power Gains and Losses
343(1)
Methods of Accounting for Changing Prices
343(2)
General Purchasing Power (GPP) Accounting
345(1)
Current Cost (CC) Accounting
346(1)
Inflation Accounting Internationally
347(4)
International Financial Reporting Standards
351(3)
Business Combinations and Consolidated Financial Statements
354(9)
Determination of Control
354(3)
Scope of Consolidation
357(1)
Full Consolidation
357(4)
Proportionate Consolidation
361(1)
Equity Method
362(1)
Segment Reporting
363(12)
International Financial Reporting Standards
364(1)
Example: Application of IAS 14 Significance Tests
365(2)
Required Disclosures
367(1)
Segment Reporting in the United States
368(6)
Segment Reporting Internationally
374(1)
IASB-FASB Convergence
375(1)
Summary
375(1)
Questions
376(1)
Exercises and Problems
377(7)
References
384(1)
Analysis of Foreign Financial Statements
385(58)
Introduction
385(1)
Reasons to Analyze Foreign Financial Statements
385(2)
Foreign Portfolio Investment
386(1)
International Mergers and Acquisitions
386(1)
Other Reasons
386(1)
Potential Problems in Analyzing Foreign Financial Statements
387(16)
Data Accessibility
387(1)
Language
388(2)
Currency
390(1)
Terminology
391(1)
Format
392(1)
Extent of Disclosure
393(3)
Timeliness
396(1)
Differences in Accounting Principles
397(4)
International Ratio Analysis
401(2)
Restating Financial Statements
403(22)
Step 1: Reformatting the Financial Statements
407(12)
Step 2: Restating the Financial Statements to U.S. GAAP
419(6)
Comparison of UK GAAP and U.S. GAAP Amounts
425(1)
Summary
425(1)
Appendix to Chapter 9 Morgan Stanley Dean Witter: Apples to Apples
426(3)
Questions
429(1)
Exercises and Problems
430(9)
Case 9-1: Swisscom AG
439(3)
References
442(1)
International Taxation
443(45)
Introduction
443(1)
Investment Location Decision
443(1)
Legal Form of Operation
444(1)
Method of Financing
444(1)
Types of Taxes and Tax Rates
444(6)
Income Taxes
444(3)
Tax Havens
447(1)
Withholding Taxes
447(1)
Tax-Planning Strategy
448(1)
Value-Added Tax
449(1)
Tax Jurisdiction
450(2)
Worldwide versus Territorial Approach
450(1)
Source, Citizenship, and Residence
450(2)
Double Taxation
452(1)
Foreign Tax Credits
452(7)
Credit versus Deduction
453(1)
Calculation of Foreign Tax Credit (FTC)
454(1)
Excess Foreign Tax Credits
455(1)
FTC Baskets
456(1)
Indirect Foreign Tax Credit (FTC for Subsidiaries)
457(2)
Tax Treaties
459(3)
Model Treaties
459(1)
U.S. Tax Treaties
460(1)
Treaty Shopping
461(1)
Controlled Foreign Corporations
462(2)
Subpart F Income
463(1)
Determination of the Amount of CFC Income Currently Taxable
463(1)
Safe Harbor Rule
463(1)
Summary of U.S. Tax Treatment of Foreign Source Income
464(3)
Example: U.S. Taxation of Foreign Source Income
465(2)
Translation of Foreign Operation Income
467(3)
Translation of Foreign Branch Income
467(1)
Translation of Foreign Subsidiary Income
468(1)
Foreign Currency Transactions
469(1)
Tax Incentives
470(4)
Tax Holidays
470(1)
U.S. Export Incentives
471(3)
Summary
474(1)
Appendix to Chapter 10 U.S. Taxation of Expatriates
475(2)
Questions
477(1)
Exercises and Problems
478(8)
Case 10-1: U.S. International Corporation
486(1)
References
487(1)
International Transfer Pricing
488(33)
Introduction
488(1)
Decentralization and Goal Congruence
489(1)
Transfer Pricing Methods
490(1)
Objectives of International Transfer Pricing
491(5)
Performance Evaluation
492(1)
Cost Minimization
493(1)
Other Cost-Minimization Objectives
494(2)
Survey Results
496(1)
Government Reactions
496(1)
Section 482 of the U.S. Internal Revenue Code
497(10)
Sale of Tangible Property
497(5)
Licenses of Intangible Property
502(3)
Intercompany Loans
505(1)
Intercompany Services
505(1)
Arm's-Length Range
505(1)
Correlative Relief
506(1)
Penalties
507(1)
Advance Pricing Agreements
507(2)
Reporting Requirements in the United States
509(1)
Enforcement of Transfer Pricing Regulations
510(2)
Worldwide Enforcement
511(1)
Summary
512(1)
Questions
513(1)
Exercises and Problems
513(5)
Case 11-1: Litchfield Corporation
518(1)
Case 11-2: Global Electronics Company
519(1)
References
520(1)
Strategic Accounting Issues in Multinational Corporations
521(53)
Introduction
521(1)
Strategy Formulation
522(13)
Capital Budgeting
522(2)
Capital Budgeting Techniques
524(3)
Multinational Capital Budgeting
527(2)
Illustration: Global Paper Company
529(6)
Strategy Implementation
535(3)
Management Control
535(3)
Operational Budgeting
538(1)
Evaluating the Performance of Foreign Operations
538(20)
Designing an Effective Performance Evaluation System for a Foreign Subsidy
540(1)
Performance Measures
540(1)
Financial Measures
540(1)
Nonfinancial Measures
541(1)
Financial versus Nonfinancial Measures
542(1)
The Balanced Scorecard: Increased Importance of Nonfinancial Measures
543(3)
Responsibility Centers
546(1)
Foreign Operating Unit as a Profit Center
546(1)
Separating Managerial and Unit Performance
547(1)
Examples of Uncontrollable Items
548(1)
Choice of Currency in Measuring Profit
549(1)
Foreign Currency Translation
550(1)
Choice of Currency in Operational Budgeting
550(4)
Incorporating Economic Exposure into the Budget Process
554(2)
Implementing a Performance Evaluation System
556(2)
Culture and Management Control
558(1)
Summary
559(1)
Questions
560(1)
Exercises and Problems
561(2)
Case 12-1: Canyon Power Company
563(2)
Case 12-2: Lion Nathan Limited
565(6)
References
571(3)
Comparative International Auditing and Corporate Governance
574(47)
Introduction
574(1)
International Auditing and Corporate Governance
575(3)
International Diversity in External Auditing
578(8)
Purpose of Auditing
578(2)
Audit Environments
580(2)
Regulation of Auditors and Audit Firms
582(3)
Audit Reports
585(1)
International Harmonization of Auditing Standards
586(5)
Additional International Auditing Issues
591(7)
Auditor's Liability
591(1)
Limiting Auditor's Liability
592(1)
Auditor Independence
593(4)
Audit Committees
597(1)
Internal Auditing
598(6)
The Demand for Internal Auditing in MNCs
599(1)
The Foreign Corrupt Practices Act of 1977 (FCPA)
600(4)
Future Directions
604(3)
Consumer Demand
605(1)
Reporting on the Internet
605(1)
Increased Competition in the Audit Market
605(1)
Continued High Interest in the Audit Market
606(1)
Increased Exposure of the International Auditing Firms
606(1)
Tendency Toward a Checklist Approach
606(1)
Auditing No Longer Only the Domain of the External Auditor
606(1)
Summary
607(1)
Appendix to Chapter 13 Examples of Audit Reports from Multinational Corporations
608(4)
Questions
612(1)
Exercises and Problems
613(2)
Case 13-1: Honda Motor Company
615(1)
Case 13-2: Harmonization of the Audit Report and the Big Four
616(3)
References
619(2)
List of Some Useful Web Site 621


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