1. International Accounting and Multinational Enterprises*
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International Accounting and Multinational Enterprises
上海金融学院会计学院
财务管理系 王纯
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2. Global Harmonization of Accounting and Reporting*
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Global Harmonization of Accounting and Reporting
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Chapter Six *

3. *
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Introduction
International pressures for improvement in the comparability of accounting and information disclosures arise from the diverse interests and concerns of participant groups and organizations. Underlying these pressures is the fundamental belief that improved comparability will facilitate more informed international comparisons of corporate performance and prospects, with consequent economic benefits. 1
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4. Harmonization vs. Standardization*
Harmonization vs. Standardization
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Harmonization:
Flexible;
Allows for “domestic” financial culture; and
Foreign Direct Investment (FDI).
Standardization:
Tendency to view financial data from a “home country” perspective;
Necessary familiarity with foreign accounting principles; and
Comparability and harmonization. 2
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5. Major Participant Groups*
Major Participant Groups
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Governments
Trade Unions and Employees
Investors and Financial Analysts
Bankers and Lenders
Accountants and Auditors 3
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6. Environmental Influences on Accounting*
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Environmental Influences on Accounting
International trade unions organizations
International intergovernmental organizations
Foreign host countries: National influences
Multinational Corporations: Ac counting and Information Disclosure Practices
Home country:
National influences
International professional accounting organizations 4
International banking, financial, and business organizations
International investors, financial analysts, and stock exchanges
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7. 5 Governments Involvement can be comprehensive*
Governments
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Involvement can be comprehensive
i.e. France and Germany
Authority can be delegated to private professional bodies
i.e. Anglo-American
Influenced by:
Planning and regulation
Extent of subsidiary operations
MNE trade and development
Availablity of information to the public 5
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8. 6 United Nations Commission on Transnational Activities (1976)*
United Nations
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Commission on Transnational Activities (1976)
Identified a lack of financial and nonfinancial information
International Standards of Accounting and Reporting (1983)
Conclusions on Accounting and Reporting by Transnational Corporations (1988, revised 1994)
Objectives and Concepts Underlying Financial Statements (1989)
Little direct influence, but helpful endorsement of desirable international standards
Recent involvement in accounting education and development (especially in Russia and Africa). 6
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9. Organization for Economic Cooperation and Development*
Organization for Economic Cooperation and Development
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OECD:
Limited member countries, mostly Western group of nations
Guidelines for Multinational Enterprises (1976, revised 1979)
Encourage positive contribution of MNE’s
Concerned with information disclosure by MNE as a group
Asses the diversity of practice and potential of harmonization 7
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10. 8 European Union Fifteen Nations: Treaty of Rome (1957)*
European Union
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Fifteen Nations:
Treaty of Rome (1957)
Involved in international harmonization since 1960’s
European economic integration
Remove competitive disadvantages between member countries
Issue Directives 8
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11. 9 Fourth Directive Approved in 1978 Information disclosure,*
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Fourth Directive
Approved in 1978
Information disclosure,
Classification and presentation of information
Methods of valuation
Harmonize existing legal requirements
Treatment of:
Historical cost accounting
Inventory Valuation and Depreciation
Goodwill
Current replacement cost
Revaluations to market value
Price level adjustments 9
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12. 10 Seventh Directive Approved in 1983 Consolidated Accounts*
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Approved in 1983
Consolidated Accounts
Defined “group” (U.K. vs. German)
Measurement of Performance and Financial Position
Harmonize existing legal requirements
Treatment of:
Historical cost accounting
Inventory Valuation and Depreciation
Goodwill
Current replacement cost
Revaluations to market value
Price level adjustments 10
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13. Trade Unions and Employees*
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Trade Unions and Employees
Trade Union
Number of different, related organizations;
Include:
ITUC
ETUC
ICFTU
WCL
Issued their own accounting/ disclosure requirements (1977); and
Goal is public accountability of MNE’s, not interfirm comparisons. 11
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14. *
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Investors
“Outsiders” to the MNE (investors and financial analysts);
Represented by international financial organizations, including IOSCO and ICCFAA;
Primary concern is lack of interfirm comparability;
Support trend toward harmonization;
Geographical segmentation, including LOB, is relevant to risk and return analysis of MNE’s; and
Harmonization is necessary to determining the validity and effect of MNE measurement practices and international comparisons. 12
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15. *
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Bankers and Lenders
Interested in corporate financial position, performance, and future prospects;
Conservative influence in countries where bankers and lender are more significant than shareholders (France, Germany, Japan);
As creditors, better access to non-public corporate information;
Include:
Asian Development Bank
European Investment Bank
European Bank for Reconstruction and Development
World Bank
International Finance Corporation 13
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16. Accountants and Auditors*
Accountants and Auditors
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Preparers and users of information;
Auditors and verifiers for third parties;
Active in developing harmonization;
Include:
International Accounting Standards Board*
International Federation of Accountants
*Formerly, International Accounting Standards Committee (IASC) 14
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17. International Accounting Standards Board (IASB)*
International Accounting Standards Board (IASB)
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Established in 1973, now includes the professional organizations of 104 member countries;
Responsible for the Development of international accounting standards;
Founding members retained significant influence, including:
Australia
Canada
Germany
Japan
Mexico
The Netherlands
United Kingdom
United States 15
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18. International Accounting Standards Board (IASB)*
International Accounting Standards Board (IASB)
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Objective:
“(a) to formulate and publish in the public interest accounting standards to be observed in the presentation of financial statements and to promote their worldwide acceptance and observance, and (b) to work generally for the improvement and harmonization of regulations, accounting standards, and procedures relating to the presentation of financial statements.”
Goal is to achieve comparability for investors while reducing the costs to MNE’s of preparing multiple sets of information. 16
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19. International Accounting Standards Board (IASB)*
International Accounting Standards Board (IASB)
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Recently:
IASB endorsed by International Organization of Securities Commissions (1988);
European Union will require all EU listed companies to prepare consolidated returns based on International Accounting Standards by 2005,
SEC reviewing endorsement of IAS for cross-border listings; and
Gap between IAS and GAAP is narrowing. 17
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20. International Harmonization and Disclosure Debate*
International Harmonization and Disclosure Debate
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Final Issues:
Whether accounting harmonization will reduce competitive balance between MNE’s and host-country domestic corporations or help host governments;
Whether regional trends, such as in the European Union, will be able to move to the international level; and
Whether adequate reporting systems exist to match the growing complexity of MNE operations. 18
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