International accounting / 6th ed.

　　CHAPTER 1 Introduction 1
　　 Historical Perspective 1
　　 Contemporary Perspective 2
　　 Growth and Spread of Multinational Operations 4
　　 Financial Innovation 9
　　 Global Competition 10
　　 Cross-Border Mergers and Acquisitions 11
　　 Internationalization of Capital Markets 12
　　 Americas 13
　　 Western Europe 14
　　 Asia 15
　　 Cross-Border Equity Listing and Issuance 15
　　 Where Are We? 16
　　 Learning Objectives 17
　　 Appendix 1-1 'Changes in Financial Sector Policy in 34 Nations, 1973-1996 21
　　 Appendix 1-2 Stock Exchange Web Sites 24
　　 Appendix 1-3 Financial Statements and Selected Notes from the Annual Report of INFOSYS 26
　　CHAPTER 2 Development and Classification 27
　　 Development 27
　　 Classification 33
　　 Four Approaches to Accounting Development 33
　　 Legal Systems: Common Law vs. Code Law Accounting 34
　　 Practice Systems: Fair Presentation vs. Legal Compliance Accounting 35
　　CHAPTER 3 Comparative Accounting: Europe 37
　　 Some Observations about Accounting Standards and Practice 38
　　 IFRS in the European Union 39
　　 Five National Financial Accounting Systems 41
　　 France 41
　　 Germany 46
　　 Czech Republic 51
　　 The Netherlands 54
　　 United Kingdom 58
　　CHAPTER 4 Comparative Accounting: The Americas and Asia 64
　　 Five National Financial Accounting Systems 65
　　 United States 65
　　 Mexico 70
　　 Japan 74
　　 China 78
　　 India 83
　　CHAPTER 5 Reporting and Disclosure 88
　　 Development of Disclosure 88
　　 Voluntary Disclosure 89
　　 Regulatory Disclosure Requirements 90
　　 The US. SEC Financial Reporting Debate 91
　　 Reporting and Disclosure Practices 92
　　 Disclosures of Forward-Looking Information 93
　　 Segment Disclosures 94
　　 Social Responsibility Reporting 96
　　 Special Disclosures for Nondomestic Financial Statement Users and Accounting
　　 Principles Used 111
　　 Corporate Governance Disclosures 111
　　 lnternet Business Reporting and Disclosure 120
　　 Annual Report Disclosures in Emerging-Market Countries 121
　　 Implications for Financial Statement Users and Managers 122
　　CHAPTER 6 Foreign Currency Translation 124
　　 Results of Operations 124
　　 Reasons for Translation 127
　　 BackgrOund and Terminology 127
　　 The Problem 130
　　 Financial Statement Effects of Alternative Translation Rates 130
　　 Foreign Currency Transactions 132
　　 Single- Transaction Perspective 134
　　 Two- Transaction Perspective 134
　　 Foreign Currency Translation 135
　　 Multiple-Rate Methods 136
　　 Financial Statement Effects 138
　　 Which Is Best? 140
　　 Appropriate Current Rate 142
　　 Translation Gains and Losses 142
　　 Where Are We? 144
　　 Translation Accounting Development 144
　　 Pre-1965 144
　　 1965-1975 144
　　 1975-1981 145
　　 1981-Present 145
　　 Features of Standard No. 52/International Accounting Standard 21 145
　　 Translation When Local Currency Is the Functional Currency 146
　　 Translation When the Parent Currency Is the Functional Currency 146
　　 Translation When Foreign Currency Is the Functional Currency 146
　　 Measurement Issues 148
　　 Reporting Perspective 148
　　 What Happened to Historical Cost? 149
　　 Concept of lncome 149
　　 Managed Earnings 149
　　 Foreign Currency Translation and Inflation 150
　　 Foreign Currency Translation Elsewhere 151
　　 Appendix 6-1 Translation and Remeasurement Under FAS No. 52 151
　　CHAPTER 7 Financial Reporting and Changing Prices 157
　　 Changing Prices Defined 159
　　 Why Are Financial Statements Potentially Misleading During Periods of
　　 Changing Prices? 162
　　 Types of Inflation Adjustments 163
　　 General Price-Level Adjustments 163
　　 Price Indexes 163
　　 Current-Cost Adjustments 167
　　 General Price-Level Adjusted Current Costs 168
　　 National Perspectives On Inflation Accounting 170
　　 United States 170
　　 United Kingdom 171
　　 Brazil 173
　　 International Accounting Standards Board 176
　　 Inflation Issues 177
　　 Inflation Gains and Losses 177
　　 Holding Gains and Losses 178
　　 Foreign Inflation 178
　　 Avoiding the Double-Dip 179
　　 Appendix 7-1 Accounting for Foreign Inflation: A Case Analysis 181
　　CHAPTER 8 Global Accounting and Auditing Standards 184
　　 A Survey of International Convergence 184
　　 Advantages of International Convergence 184
　　 Criticisms of International Standards 186
　　 Reconciliation and Mutual Recognition I87
　　 Evaluation 187
　　 Some Significant Events in the History of International Accounting Standard
　　 Setting 188
　　 Overview of Major International Organizations Promoting Accounting Convergence 189
　　 International Accounting Standards Board 192
　　 1ASC's Core Standards and the IOSCO Agreement 193
　　 The New IASB Structure 194
　　 Recognition and Support for the IASB 196
　　 US. Securities and Exchange Commission Response to IFRS 196
　　 European Union (EU) 197
　　 Fourth, Seventh, and Eighth Directives 197
　　 Have EU Harmonization Efforts Been Successful? 198
　　 The EU's New Approach and the Integration of European Financial Markets 199
　　 International Organization of Securities Commissions (IOSCO) 200
　　 International Federation of Accountants (IFAC) 203
　　 United Nations Intergovernmental Working Group of Experts on International
　　 Standards of Accounting and Reporting (ISAR) 205
　　 Organization For Economic Cooperation and Development (OECD) 206
　　 Conclusion 206
　　CHAPTER 9 International Financial Statement Analysis 207
　　 Introduction 207
　　 Challenges And Opportunities In Cross-Border Analysis 207
　　 Business Analysis Framework 208
　　 International Business Strategy Analysis 209
　　 Information Availability 209
　　 Recommendations'for Analysis 210
　　 Accounting Analysis 211
　　 Suggestions for the Analyst 213
　　 International Financial Analysis 213
　　 Ratio Analysis 213
　　 Cash Flow Analysis 216
　　 Coping Mechanisms 216
　　 International Prospective Analysis 217
　　 Further Issues 219
　　 Information Access 219
　　 Timeliness of Information 222
　　 Foreign Currency Considerations 223
　　 Differences in Statement Format 226
　　 Language and Terminology Barriers 226
　　 Financial Statement Analysis and Auditing 227
　　 The Attest Function 227
　　 The Audit Report 228
　　 Auditing and Credibility 230
　　 Coping Mechanisms 232
　　 Internal Auditing 233
　　 Professional Organization 237
　　 Evolving Role of lnternal Auditing 237
　　 Appendix 9-1 Illustration of Restatement of Japanese GAAP Financial
　　 Statements to a U.S. GAAP Basis 238
　　 Appendix 9-2 International Ratio Analysis 242
　　CHAPTER 10 Managerial Planning and Control 245
　　 Business Modeling 245
　　 Planning Tools 246
　　 Capital Budgeting 247
　　 Financial Return Perspectives 248
　　 Measuring Expected Returns 249
　　 Multinational Cost of Capital 253
　　 Management Information Systems 254
　　 Systems Issues 255
　　 Information Issues 256
　　 Management Information and Hyperinflation 257
　　 Sales Revenue 258 '
　　 Issues In Financial Control 261
　　 Domestic Versus Multinational Control System 261
　　 Strategic Costing 269
　　 Performance Evaluation of Foreign Operations 270
　　 Consistency 271
　　 Performance Criteria 273
　　 Measurement Issues and Changing Prices in Evaluation 275
　　 Performance Evaluation Practices: ICI 275
　　 Foreign Currency Effects 277
　　 Performance Standards 278
　　 Value Reporting 279
　　CHAPTER 11 Financial Risk Management 281
　　 Essentials 283
　　 Why Manange Financial Risks? 284
　　 Role of Accounting 285
　　 Identifying Market Risks 285
　　 Quantify Tradeoffs 286
　　 Risk Management in a World of Floating Exchange Rates 286
　　 Accounting for Hedge Products 298
　　 Hedge of a Recognized Asset or Liability or an Unrecognized Firm
　　 Commitment 305
　　 Hedge of a Net Investment in a Foreign Operation 306
　　 Speculating in Foreign Currency 308
　　 Disclosure 308
　　 Financial Control 312
　　 Appropriate Benchmarks 313
　　 Reporting Systems 313
　　CHAPTER 12 International Taxation and Transfer Pricing 314
　　 Initial Concepts 314
　　 Diversity of National Tax Systems 315
　　 Types of Taxes 315
　　 Tax Burdens 316
　　 Tax Administration Systems 318
　　 Foreign Tax Incentives 319
　　 Harmful Tax Competition 320
　　 International Harmonization 320
　　 Taxation of Foreign-Source Income and Double Taxation 320
　　 Foreign Tax Credit 321
　　 Limits to Tax Credits 323
　　 Tax Treaties 324
　　 Foreign Exchange Considerations 324
　　 Tax-Planning Dimensions 325
　　 Organizational Considerations 325
　　 Controlled Foreign Corporations and Subpart F Income 325
　　 Offshore ltolding Companies 326
　　 Financing Decisions 326
　　 Pooling of Tax Credits 327
　　 Cost Accounting Allocations 327
　　 Location and Transfer Pricing 328
　　 Integrating International Tax Planning 328
　　 International Transfer Pricing: Complicating Variables 329
　　 Tax Considerations 329
　　 Tariff Considerations 331
　　 Competitive Factors 331
　　 Environmental Risks 332
　　 Performance Evaluation Considerations 333
　　 Accounting Contributions 333
　　 Transfer Pricing Methodology 333
　　 Market vs. Cost vs...? 334
　　 Arm's-Length Principle 334
　　 Comparable Uncontrolled Price Method 334
　　 Comparable Uncontrolled Transaction Method 335
　　 Resale Price Method 335
　　 Cost-Plus Pricing Method 336
　　 Comparable Profits Method 337
　　 Profit-Split Methods 337
　　 Other Pricing Methods 338
　　 Advance Pricing Agreements 339
　　 Transfer Pricing Practices 339
　　 The Future 341