2. International Accounting Sue Haka Ernst & Young Professor Department of Accounting and Information Systems Michigan State University

3. Environmental Influences Examples u Political/legal F statutory audits-accounting reports u Economic F sources of capital u Cultural F budgetary control u Infrastructure F communication infrastructure F education of population

4. Topics u External Accounting Reports –Standard Setters, Preparers and Users –Underlying Institutional Structures –Required reports u Internal Accounting Reports –Decision Rights Assignment –Planning and Control –Performance Measurement and Evaluation

5. Topics-Environment Matrix

6. External Accounting- Institutional Structures u Capital Market Requirements –Market Structure -- www.iosco.org/ –Other Means of Raising Capital-debt market u Standard Setting Processes –Private vs. Public control –Accountability u Compliance

7. External Accounting-Environment u Standard Setting Process –U.S. -- FASB - Private- www.accounting.rutgers.edu/raw/fasb/ –Japan -- Ministry of Finance - www.jicpa.or.jp/ –International Accounting Standards Board F /www.iasb.org.uk/ u Users of Statements –legal/cultural driven u Compliance - Culture driven –www2.mrbrklyn.com/liz/cultural_dimensions/Web_site

8. External Accounting-Topics u External Reporting Differences –U.S., U.K. -- Tax  Financial –Japan, Germany -- Tax = Financial u Differences in Debt and Equity Classifications --Korea vs. U.S. u Differences in goodwill treatment –U.S. vs. Japan u Differences in asset revaluation – US. Vs. Brazil

9. Internal Accounting u Decision Rights Assignment (http://www.myworktools.com/company/overview.html)http://www.myworktools.com/company/overview.html u Planning and Control F Complications of Global Operations F Co-location of Knowledge and Rights u Performance Evaluation F Multiple Currency Issues F Cross-border Decision Rights Issues

10. Internal Accounting-Environment u Economic/Political-Planning and Control –International Taxes and Treaties F NAFTA (www.nafta-sec-alena.org/) F Foreign Trade Zones (www.naftz.org) –Transfer Pricing F Decision Rights issues(www.irs.gov/businesses/international/) F Political/economic (www.state.gov/r/pa/bgn/) –www.cia.gov/cia/publications/factbook/

11. Internal Accounting-Environment u Economic/Political Continued –Risk Management F Financial -- ewrisk.ifci.ch/index.htmewrisk.ifci.ch/index.htm F Operational -- http://www.worldbank.org/fandd/english/0397/articles/ 050397.htm –Corruption F Foreign Corrupt Practices Act -- http://www.usdoj.gov/criminal/fraud/fcpa/dojdocb.htm F Corruption index--http://www.transparency.org/

12. Internal Accounting-Topics u Performance Evaluation (Inter.J. of Acct., 34, #1, pp.49-70) –Japan ROA < U.S. ROA F low margins, F focus on market share, emphasize target cost –Japan ROE > U.S. ROE F high debt levels F keiretsu organization

13. Internal Accounting u Performance Measurement & Evaluation –Multiple Currency Issues (France,Germany, U.K., U.S.) –Transfer Pricing Issues (U.K. to Germany) u Decision Rights Assignment –Knowledge Distribution (Mergers/Acquisition) –Control System (Conflict with Culture)

14. Summary u Key to Understanding International Accounting –Political, Economic, Cultural and Infrastructure Influences on: F External Reporting –Taxes/Capital Markets/Gov. Regulation/Standard Setting/Reporting Requirements F Internal Reporting –Planning and Decision Making –Control Differences –Performance Evaluation Differences

15. Where to get more information u Journals - International –International Journal of Accounting –Advances in International Accounting –Journal of International Business Studies u Journals - AAA –Accounting Horizons –Issues in Accounting Education u Other –Management Accounting –Journal of Accountancy –Economist

16. Where to get more information u Books –Introductory - Accounting: An International Perspective by Gernon and Meek, 5th edition, Irwin/McGraw-Hill, 2001 –Financial and Managerial Accounting: The Basis for Business Decisions,Williams, Haka, Bettner 13th edition, Irwin/McGraw-Hill, 2003 –Upper level - International Accounting: A User Perspective, 2ed. by S. Saudagaran, South-Western, 2004

17. Where to get more information u Case Books – International Accounting: A Case Approach edited by Schweikart, Gray and Roberts, McGraw-Hill u Cases - AICPA (www.aicpa.org)