International
Accounting
and Multinational
Enterprises
上海金融学院会计学院
财务管理系
王纯
2016/3/18
Global Harmonization of
Accounting and Reporting
2016/3/18
Chapter Six
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.
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Harmonization vs. Standardization
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.
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Major Participant Groups
Governments
 Trade Unions and Employees
 Investors and Financial Analysts
 Bankers and Lenders
 Accountants and Auditors

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Environmental Influences
on Accounting
International trade
unions organizations
International
intergovernmental
organizations
Home country:
National influences
Multinational Corporations: Ac
counting and Information
Disclosure Practices
International banking,
financial, and business
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organizations
Foreign host
countries: National
influences
International professional
accounting organizations
International investors, financial
analysts, and stock exchanges
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Governments

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
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United Nations







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).
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Organization for Economic
Cooperation and Development
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
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European Union
Fifteen Nations:





Treaty of Rome (1957)
Involved in international harmonization since 1960’s
European economic integration
Remove competitive disadvantages between member
countries
Issue Directives
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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
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Seventh Directive






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
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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.
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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.
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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
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 International Finance Corporation
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Accountants and Auditors
Preparers and users of information;
 Auditors and verifiers for third parties;
 Active in developing harmonization;
 Include:

International Accounting Standards Board*
International Federation of Accountants
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*Formerly, International Accounting Standards
Committee (IASC)
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International Accounting Standards Board (IASB)
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
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 United States

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International Accounting Standards Board (IASB)
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.
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International Accounting
Standards Board (IASB)
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 crossborder listings; and
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
Gap between IAS and GAAP is narrowing.
International Harmonization
and Disclosure Debate
Final Issues:
 Whether accounting harmonization will reduce
competitive balance between MNE’s and hostcountry 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
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match the growing complexity of MNE
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operations.