INTRODUCTION TO

INTERNATIONAL ACCOUNTING

By : Joicenda N.

Accounting provide infomation to be used in making economic decisions

Decision makers use both qualitative & quantitative information from various sources

Accounting provides quantitative information that is primarily financial in nature

Accounting role

Linkage between decision makers & Accounting:

Information Needs

Information Communication

Information is provided by the accountant in the form of reports

The reports are based on collecting and processing data from economic events of the entity

AccountingDecision Makers

GlobalizationIn the age which economy is becoming global, natural, human and financial resources often can be shifted from one part of the world to another part conveniently, efficiently, and at great speed. International Accounting provides pertinent information in decision makers in the age of a global economy, helping them make resources allocation decisions that maximaze the benefit to humankind

Another reason ( a student’s prespective )????

Why Study International Accounting

International Accounting is defined as :

Accounting for international transactions, comparisonsof accounting principles in different countries, andharmonization of diverse accounting standard worldwide ( Iqbal , 1997 )

DEFINITION

Some characteristics of the age of the Global Economy are :

1. International business2. Blurring Boundaries3. Dependencies on

international trade

Characteristics of the age of the Global Economy

The survey which is done by Delloite Touche Tomatsu International informs several reasons for 400 companies in 20 developed countries to get engaging in international operations. They are :

a) Growth Opportunitiesb) Less dependence on domestic economyc) Customer demandd) Lower Costs

Go International Operations

The theories which generally support the involvement of a company in international business

1. Theory of Comparative Advantage2. Imperfect Market Theory3. Product Cycle Theory4. Transfer of Technology and Strategic Alliances

International business creates economic interdependencies between countries. This condition increase new significant topics that listed below :1. Foreign currency transactions2. Foreign currency translations3. Taxation of Internal operations4. Consolidation of financial statements of foreign

and affiliaties5. Multinational transfer pricing6. Comparative Disclosure requirements

Challenges facing International Accounting

NAFTA ( The North American Free Trade Agreement ) 3 countries: Canada,Mexico, USA + Chile ; Eff: Jan 1, 1994

EU ( European Union ) 12 countries of Western Europe; eff ; Jan 1, 1993,

GATT ( General Agreement on Tariffs and Trade ) – ( late 1993 )

The (Asian) Pacific Rim Region : Japan & some other Pasific Rim Countries have emerged as fastest economic region in the world, although they are not rich in natural resources ( The 4 Tigers of Asia, ASEAN )

Asia Pasific Economic Corporation ( APEC ) 18 countries, Nov 1993

International Trading Agreement

The New Topics above create new challenges for accountant in facing International accounting. Those are :

a) Skills and competencies of accountantsb) Understanding the cross-functional linkagesc) Financial analysis and comparability d) Global Information system development

Five Major environmental influences on Accounting :

1) Economic System2) Political System3) Legal System4) Educational system5) Religion

Environmental Influences on Accounting

A. Trading BlocsB. International Governmental OrganizationsC. Professional OrganizationsD. Global Capital MarketsE. Multinational CorporationsF. Technological AdvantagesG. Worlwide Political Developments and

TrendsH. Management Accounting – relevance

regained

International Agents For Change in Accounting

1. Iqbal, M. Zafar ; Melcher Trini U. dan Elmallah, Amin A., 1997, International Accounting , A Global Prespective. International Thompson Publishing

2. Heti Triaswati, Arif Wasisto dan Mahfud Sholihin, Akuntansi Internasional, Edisi 2005/2006. BPFE Yogyakarta

References