1. INTERNATIONAL ACCOUNTING Topic: INTRODUCTION OF INTERNATIONAL ACCOUNTING

2. INTRODUCTION
“Accounting is an art of recording, classifying and summarising in a significant manner and in terms of money; transactions and events which are, in part at least, of a financial character, and interpreting the results thereof.”
- American Institute of Certified Public Accountants
It originated as art of recording
Now a full fledged information system providing financial information
Fulfils queries of managerial personnel
Multinational corporations, expansion of foreign trade, e-commerce have resulted in recognition of international dimension of accounting

3. Historical Look Back
Accounting has always been international from time of its origin
Italy – birth place of modern accounting
In 20th century USA emerged as super power in the field of development of accounting theory and practices
USA holds dominating position in whole world in development of accounting literature
Institutes like American Accounting Association and American Institute of Certified Public Accountants played important role in spreading US accounting thoughts and practices to European countries

4. Approaches to the Definition of International Accounting
World accounting
Universal system of accounting
Acceptable in all countries
Generally accepted accounting principles will be established
Difficult in present scenario due to global imbalances
Comparative International Accounting
Descriptive and informative approach
Includes all varieties of accounting principles and methods
Operational International Accounting
Covers particular technical problem being faced by domestic and multinational corporations in foreign business
E.g.. Foreign currency translation, consolidation etc.
Politicised International Accounting
Emerged from involvement of political institutions such as United Nations, Organisation for Economic Cooperation and Development

5. Features of International Accounting
Aims at setting internationally accepted accounting and auditing standards
Aims at developing universal system of accounting
Aims at harmonising accounting standards and practices
Aims at collection of methods and standards of all countries
Aims at developing accounting for international transactions
Aims at comparative analysis of accounting principles and practices

6. Reasons for Emergence of International Accounting/ Importance
i) Rapid developments in foreign trade:
Change in volume and character of foreign trade
Accounting problems like foreign currency translation, fluctuations in exchange rates led to need of specialized branch of accounting
ii) Increased number of multinational companies:
These account for about one-third of world’s exports
Bring knowledge and world technology
Technical accounting problems faced due to their existence
E.g. accounting for currency translation, inter divisional
transfers, preparation of consolidated financial statements of
different subsidiaries

7. iii) Global capital market: It requires
uniform accounting principles and practices to provide reliable and comparable financial information to investors all over world
iv) Environmental awareness:
It has made global corporations sensitive towards environment
Environmental accounting is considered as a part of international accounting
v) Historical precedents:
Modern accounting is an outcome of historical process
Contribution of different countries in development of accounting theory, principles and concepts

8. vi) Divergent accounting practices:
Different social, political and legal environment prevalent in different countries
International accounting aims to harmonise divergent accounting practices
vii) Emergence of e- business on global scenario:
It has resulted in number of international problems which can be solved by international accounting
viii) Cross – border terrorism: It has resulted in
Seeking international cooperation by providing financial help
Transferring accounting technologies to other countries which has given recognition to international accounting

9. Scope of International Accounting
Covers vast area
Deals with unique technical accounting problems
Covers comparative study of accounting principles and practices prevalent in different countries
Includes both financial and management accounting aspect
Covers important managerial accounting issues
Concentrates on harmonisation of accounting practices
Deals with new emerging international accounting issues

10. Interaction Between Accounting and Its Environment
Accounting and Social Environment
Social environment includes culture, customers, rituals etc.
Social environment of every country is different
Accounting has to be in tune with social environment because accountants have to interact with society
Accounting and Economic Environment
Effects on accounting environment and on development of accounting theory and practices
Developed economies
Growing impact on accounting literature
Developing economies
Yet to initiate towards accounting developments
Undeveloped economies

11. Accounting and Political Environment
Accounting literature more developed in politically stable countries
E.g. Countries like Sri Lanka, Bangladesh lagging far behind in development of accounting literature
Accounting and Legal Environment
Corporate has to follow laws prevalent in the country
E.g. In India while preparing final accounts guidelines laid down in schedule VI of Company law is to be followed

12. Factors Responsible for Development of Accounting
Type of business enterprises
Type of business enterprises
Effect on economic development of country
Leads to development of accounting practices
E.g. Developed countries have large enterprises hence users of financial information have complex and complicated needs and vice versa.
Enforcement regulations
Gap between accounting regulation and accounting practices depends on level of enforcement
High level of enforcement compel to comply with accounting regulations and vice – versa
Business enterprises need adequate trained personnel to apply standards and regulatory bodies need adequate finance to monitor compliance

13. Level of inflation
Traditionally historical cost method was followed
This model fails to present true and fair view of financial statements due to impact of inflation on them
Therefore inflation adjusted models are being used in some countries
Whereas if traditional method is to be followed than proper check on rate of inflation should be kept
Quality of accounting education
Developed countries have long strong background in the institutions for imparting accounting education
Therefore contributes more in development of accounting
Nature of capital markets
Capital markets can be debt oriented or equity oriented
This nature of market affect financial reporting
Level of sophistication of financial instruments and level of globalisation also affects development of accounting

14. Reporting regime
There are two types of countries as far as reporting regime is concerned
Countries having dual set of rules for financial reporting and tax reporting e.g. USA
Countries having single set of rules for financial reporting and tax reporting e.g. Germany
Conceptual framework
Developed conceptual framework - similarity in accounting
Lack of conceptual framework - diversity in accounting

15. INTERNATIONAL ACCOUNTING IN INDIA
Some Indian universities have introduced international accounting as optional/compulsory subject only at post graduate level
Number of professional institutes have been established
Syllabus of Institute of Chartered Accountants of India has been revised by incorporating number of topics like foreign currency transactions, foreign exchange risk management etc.
Increase in economic reforms
Increase in global corporations, foreign collaborations and foreign reserves
Therefore need for management accountants increased to tackle typical problems in international businesses

16. Status of International Accounting at Global Level
Introduction of separate International Accounting course was proposed in by Mueller while addressing 2nd International Conference on Accounting Education in London
American Accounting Association formed 2 education committees:
1st in 1989 under chairmanship of Maureen Berry to collect and develop accounting course syllabus with an internationalized component
2nd in under chairmanship of Edward to conduct world wide survey on courses of International Accounting. This committee concluded that most of the institutes in USA were teaching management accounting and accounting for foreign exchange transactions and in case of international institutions, foreign exchange translation and international accounting standards had priority over management accounting issues
The year 2000 was a turning point as 2 significant events occurred:
Recommendation by International Organisation of Securities Commission to permit International Accounting Standards Committee standards in cross border listings

17. Approval for restructuring International Accounting Standards Committee and adoption of new constitution creating International Accounting Standards Board.
In 2002 saw announcement by European Union requiring IFRS for all listed companies while preparing consolidated financial statements from Jan 1, Many more countries announced adoption of IFRS from 2011
In 2007 another leap forward in the direction of convergence came with the Securities and Exchange Commission announcement dropping the requirement for reconciliation to US GAAP for foreign IFRS registrants
All these developments improved teaching of International Accounting in both developed and developing countries

18. International Accounting Environment
Accounting is highly adaptive discipline
During last decade international accounting environment has changed rapidly
International debt securities set a new record in 1998 (8678 billion) against merely (53 billion) dollars in 1980
This rapid change in international securities market has increased the importance of international accounting
Internationalisation of world capital market means an increasing role of reliable financial information
After terrorist attack on World Trade Centre in USA about companies lost their existence
It changed whole social, legal and political international environment throughout the globe
US dependence on underdeveloped economies has created a new international economic environment which is likely to change international accounting environment

19. THANK YOU