International Accounting

by Choi, Frederick D.; Meek, Gary K.

• ISBN13: 9780131480971
• ISBN10: 0131480979
• Edition: 5th
• Format: Hardcover
• Copyright: 2008-01-01
• Publisher: Prentice Hall

Summary

Clear writing and a focus on the essentials of international accounting make this award-winning bookthequintessential source for international accounting. This 5th edition doesn't overwhelm users with too much detail, yet provides enough to give essential coverage of accounting, financial reporting, and financial control. Capital markets and financial/managerial analysis underpin the "theme" of the book. The authors realize that international aspects of accounting are becoming more important as they become more common.Topics include comparative accounting, foreign currency translation, accounting for changing prices, international accounting harmonization, international financial statement analysis, managerial planning and control, financial risk management, and international taxation and transfer pricing.For practicing accounting, financial executives, investment managers, university educators, and professional administrators around the world.

Table of Contents

Preface	xiii
CHAPTER 1 Introduction	1	(47)
Historical Perspective	2	(1)
Contemporary Perspective	3	(1)
Growth and Spread of Multinational Operations	4	(8)
Global Competition	12	(1)
Cross-Border Mergers and Acquisitions	13	(1)
Financial Innovation	14	(1)
Internationalization of Capital Markets	14	(3)
North America	15	(1)
Asia	15	(1)
Western Europe	16	(1)
European Equity Markets-A Closer Look	17	(2)
Continental Europes New Equity Culture	17	(1)
Cross-Border Equity Listing and Issuance	18	(1)
Where Are We?	19	(1)
Learning Objectives	20	(4)
Appendix 1-1	24	(4)
Appendix 1-2 Financial Statement and Auditor's Report from Nikken Chemical Co. Ltd.'s 2000 Annual Report	28	(12)
Appendix 1-3 Stock Exchange Web Sites	40	(1)
Selected References	41	(1)
Discussion Questions	42	(1)
Exercises	43	(3)
Case 1-1 E-centives, Inc.-Raising Capital in Switzerland	46	(1)
Case 1-2 Nikken Chemicals Co., Ltd.	47	(1)
CHAPTER 2 Development and Classification	48	(20)
Development	49	(6)
Classification	55	(4)
Four Approaches to Accounting Development	55	(1)
Legal Systems: Common Law versus Code Law Accounting	56	(1)
Practice Systems: Fair Presentation versus Legal Compliance Accounting	57	(2)
Selected References	59	(1)
Discussion Questions	60	(1)
Exercises	61	(3)
Case 2-1 Are Classifications of Accounting Outmoded?	64	(1)
Case 2-2 Volkswagen Group	65	(3)
CHAPTER 3 Comparative Accounting I	68	(49)
Six National Financial Accounting Systems	70	(29)
France	70	(5)
Germany	75	(5)
Japan	80	(5)
The Netherlands	85	(4)
United Kingdom	89	(4)
United States	93	(6)
Selected References	99	(1)
Discussion Questions	99	(1)
Exercises	100	(4)
Case 3-1 Standing on Principles	104	(1)
Case 3-2 What Difference Does It Really Make?	105	(12)
CHAPTER 4 Comparative Accounting II	117	(28)
Reasons for Choosing These Four Countries	117	(1)
Some Observations About the Four Countries and Their Accounting	118	(2)
Four National Financial Accounting Systems	120	(16)
Czech Republic	120	(4)
China	124	(4)
Taiwan	128	(4)
Mexico	132	(4)
Selected References	136	(1)
Discussion Questions	137	(1)
Exercises	138	(3)
Case 4-1 Does Secrecy Pay?	141	(2)
Case 4-2 Casino Capital	143	(2)
CHAPTER 5 Reporting and Disclosure	145	(39)
Development of Disclosure	146	(4)
Voluntary Disclosure	146	(1)
Regulatory Disclosure Requirements	147	(2)
The US. SEC Financial Reporting Debate	149	(1)
Reporting and Disclosure Practices	150	(25)
Disclosures of Forward-Looking Information	150	(2)
Segment Disclosures	152	(3)
Cash Flow and Funds Flow Statements	155	(1)
Social Responsibility Disclosures	155	(10)
Special Disclosures for Nondomestic Financial Statement Users and Accounting Principles Used	165	(1)
Corporate Governance Disclosures	166	(1)
Internet Business Reporting and Disclosure	166	(9)
Annual Report Disclosures in Emerging Market Countries	175	(2)
Implications for Financial Statement Users and Managers	177	(1)
Selected References 178 Discussion Questions	178	(1)
Exercises	179	(3)
Case 5-1 Information Access in Mexico	182	(1)
Case 5-2 Tele2 AB	183	(1)
CHAPTER 6 Foreign Currency Translation	184	(48)
Reasons for Translation	187	(1)
Background and Terminology	187	(2)
The Problem	189	(2)
Financial Statement Effects of Alternative Translation Rates	191	(2)
Foreign Currency Transactions	193	(4)
Single-Transaction Perspective	195	(1)
Two-Transaction Perspective	195	(2)
Foreign Currency Translation	197	(10)
Single Rate Method	197	(1)
Multiple Rate Methods	198	(2)
Financial Statement Effects	200	(2)
Which Is Best?	202	(2)
Appropriate Current Rate	204	(1)
Translation Gains and Losses	204	(1)
Deferral	205	(1)
Deferral and Amortization	205	(1)
Partial Deferral	206	(1)
No Deferral	206	(1)
Where Are We?	206	(1)
Translation Accounting Development	207	(1)
Pre-1965	207	(1)
1965-1975	207	(1)
1975-1981	207	(1)
1981-Present	208	(1)
Features of Standard No. 52	208	(4)
Translation When Local Currency Is the Functional Currency	209	(1)
Translation When the U.S. Dollar Is the Functional Currency	209	(1)
Translation When Foreign Currency Is the Functional Currency	209	(3)
The Debate	212	(2)
Reporting Perspective	212	(1)
What Happened to Historical Cost?	213	(1)
Concept of Income	213	(1)
Managed Earnings	213	(1)
Foreign Currency Translation and Inflation	214	(1)
Foreign Currency Translation Elsewhere	215	(1)
Current Trends	216	(1)
Appendix: Translation and Remeasurement Under FAS No. 52	216	(5)
Current Rate Method	217	(2)
Temporal Method	219	(2)
Selected References	221	(1)
Discussion Questions	222	(1)
Exercises	223	(4)
Case 6-1 Regents Corporation	227	(1)
Case 6-2 Managing Offshore investments: Whose Currency?	227	(5)
CHAPTER 7 Financial Reporting and Changing Prices	232	(43)
Changing Prices Defined	235	(2)
Why Are Financial Statements Potentially Misleading During Periods of Changing Prices?	237	(1)
Types of Inflation Adjustments	238	(1)
General Price-Level Adjustments	238	(4)
Price Indexes	238	(2)
Object of General Price-Level Adjustments	240	(2)
Current Cost Adjustments	242	(1)
Which Method Is Best?	243	(2)
International Perspective on Inflation Accounting	245	(7)
United States	245	(2)
United Kingdom	247	(1)
Brazil	248	(4)
International Accounting Standards Board	252	(1)
Inflation Issues	252	(6)
Inflation Gains and Losses	252	(1)
Holding Gains and Losses	253	(1)
Accounting for Foreign Inflation	254	(2)
Avoiding the Double-Dip	256	(2)
Appendix 7-1 Supplementary Current Cost Disclosures	258	(5)
Appendix 7-2 Accounting for Foreign Inflation: A Case Analysis	263	(3)
Selected References	266	(1)
Discussion Questions	267	(1)
Exercises	268	(4)
Case 7-1 Kashmir Enterprises	272	(1)
Case 7-2 Icelandic Enterprises, Inc.	273	(2)
CHAPTER 8 International Accounting Harmonization	275	(42)
Introduction	275	(1)
A Survey of International Harmonization	276	(4)
Advantages of International Harmonization	276	(1)
Criticisms of International Standards	277	(1)
Reconciliation and Mutual Recognition	278	(1)
Evaluation	279	(1)
Applicability of International Standards	279	(1)
Some Significant Events in the History of International Accounting Standard Setting	280	(1)
Overview of Major International Organizations Promoting Accounting Harmonization	281	(1)
International Accounting Standards Board	282	(9)
IASC's Core Standards and the IOSCO Agreement	286	(2)
The New IASB Structure	288	(1)
Recognition and Support for the IASB	289	(1)
U.S. Securities and Exchange Commission Response to IFRS	290	(1)
Comparisons between IFRS and Other Comprehensive Bodies of Accounting Principles	290	(1)
European Union (EU)	291	(4)
Fourth, Seventh, and Eighth Directives	292	(1)
Have EU Harmonization Efforts Been Successful?	293	(1)
The EU's New Approach and the Integration of European Financial Markets	294	(1)
International Organization of Securities Commissions (IOSCO)	295	(2)
International Federation of Accountants (IFAC)	297	(2)
United Nations Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR)	299	(1)
Organization for Economic Cooperation and Development (OECD)	299	(1)
Conclusion	300	(1)
Appendix 8-1 Sinopec Shanghai Petrochemical Company Limited: Auditor's Report, Background, and Accounting Policies	301	(7)
Selected References	308	(1)
Discussion Questions	309	(1)
Exercises	310	(4)
Case 8-1 SIN OPEC Shanghai Petrochemical Company Limited	314	(1)
Case 8-2 Accounting Quality in East Asia	315	(2)
CHAPTER 9 International Financial Statement Analysis	317	(47)
Introduction	317	(1)
Challenges and Opportunities in Cross-Border Analysis	317	(1)
Business Analysis Framework	318	(1)
International Business Strategy Analysis	319	(2)
Information Availability	319	(1)
Recommendations for Analysis	320	(1)
Accounting Analysis	321	(3)
Suggestions for the Analyst	323	(1)
International Financial Analysis	324	(4)
Ratio Analysis	324	(3)
Cash Flow Analysis	327	(1)
Coping Mechanisms	327	(1)
International Prospective Analysis	328	(3)
Further Issues	331	(10)
Information Access	331	(3)
Timeliness of Information	334	(1)
Foreign Currency Considerations	335	(3)
Differences in Statement Format	338	(2)
Language and Terminology Barriers	340	(1)
Appendix 9-1 Illustration of Restatement of Japanese GAAP Financial Statements to a U.S. GAAP Basis	341	(5)
Appendix 9-2 International Ratio Analysis	346	(2)
Selected References	348	(1)
Discussion Questions	349	(1)
Exercises	350	(5)
Case 9-1A Accounting Quality Analysis	355	(1)
Case 9-1B Restatement of International Accounting Standards to U.S. GAAP	355	(1)
Case 9-2 Continental A.G.	356	(8)
CHAPTER 10 Managerial Planning and Control	364	(49)
Business Modeling	365	(1)
Planning Tools	365	(2)
Capital Budgeting	367	(1)
Financial Return Perspectives	368	(1)
Measuring Expected Returns	369	(3)
Multinational Cost of Capital	372	(2)
Management Information Systems	374	(3)
Systems Issues	374	(2)
Information Issues	376	(1)
Management Information and Hyperinflation	377	(4)
Sales Revenue	378	(3)
Issues in Financial Control	381	(10)
Domestic Versus Multinational Control System	382	(2)
Operational Budgeting	384	(4)
Analysis of Exchange Rate Changes	388	(3)
Strategic Costing	391	(2)
Performance Evaluation of Foreign Operations	393	(5)
Consistency	393	(1)
Unit Versus Managerial Performance	394	(1)
Performance Criteria	395	(3)
Measurement Issues and Changing Prices in Evaluation	398	(1)
Performance Evaluation Practices: ICI	398	(3)
Foreign Currency Effects	400	(1)
Performance Standards	401	(2)
Selected References	403	(1)
Discussion Questions	404	(1)
Exercises	405	(4)
Case 10-1 Foreign Investment Analysis: A Tangled Affair	409	(2)
Case 10-2 Assessing Foreign Subsidiary Performance in a World of Floating Exchange Rates	411	(2)
CHAPTER 11 Financial Risk Management	413	(43)
Essentials	413	(2)
Why Manage Financial Risks?	415	(1)
Role of Accounting	416	(16)
Identifying Market Risks	416	(2)
Quantify Tradeoffs	418	(1)
Risk Management in a World of Floating Exchange Rates	418	(2)
Translation Exposure	420	(12)
Accounting for Hedge Products	432	(10)
Disclosure	442	(7)
Reporting Systems	449	(1)
Selected References	449	(1)
Discussion Questions	450	(1)
Exercises	451	(3)
Case 11-1 Value at Risk: What Are Our Options?	454	(1)
Case 11-2 Exposure Identification	455	(1)
CHAPTER 12 International Taxation and Transfer Pricing	456	(39)
Initial Concepts	457	(1)
Diversity of National Tax Systems	457	(6)
Types of Taxes	457	(1)
Tax Burdens	458	(3)
Tax Administration Systems	461	(1)
Foreign Tax Incentives	462	(1)
Harmful Tax Competition	463	(1)
International Harmonization	463	(1)
Taxation of Foreign Source Income and Double Taxation	463	(5)
Foreign Tax Credit	464	(2)
Limits to Tax Credits	466	(1)
Tax Treaties	467	(1)
Foreign Exchange Considerations	467	(1)
Tax Planning Dimensions	468	(4)
Organizational Considerations	468	(1)
Controlled Foreign Corporations and Subpart F Income	468	(1)
Offshore Holding Companies	469	(1)
Foreign Sales Corporations	469	(1)
Financing Decisions	470	(1)
Pooling of Tax Credits	471	(1)
Cost Accounting Allocations	472	(1)
Location and Transfer Pricing	472	(1)
International Transfer Pricing: Complicating Variables	472	(6)
Tax Considerations	473	(2)
Tariff Considerations	475	(1)
Competitive Factors	476	(1)
Environmental Risks	477	(1)
Performance Evaluation Considerations	477	(1)
Accounting Contributions	477	(1)
Transfer Pricing Methodology	478	(6)
Market versus Cost versus...?	478	(1)
Arm's-Length Principle	479	(1)
Comparable Uncontrolled Price Method	479	(1)
Comparable Uncontrolled Transaction Method	479	(1)
Resale Price Method	479	(2)
Cost-Plus Pricing Method	481	(1)
Comparable Profits Method	482	(1)
Profit Split Methods	483	(1)
Other Pricing Methods	483	(1)
Advance Pricing Agreements	484	(1)
Transfer Pricing Practices	484	(2)
The Future	486	(1)
Selected References	486	(1)
Discussion Questions	487	(1)
Exercises	488	(4)
Case 12-1 Muscle Max: Your Very Own Personal Trainer	492	(1)
Case 12-2 Double Double: Tax Is Trouble	493	(2)
Index	495