International Accounting
Sue Haka
Ernst & Young Professor
Department of Accounting
and Information Systems
Michigan State University
Environmental Influences
Examples
 Political/legal
 statutory audits-accounting reports
 Economic
 sources of capital
 Cultural
 budgetary control
 Infrastructure
 communication infrastructure
 education of population
Topics
 External Accounting
Reports
– Standard Setters, Preparers and Users
– Underlying Institutional Structures
– Required reports
 Internal Accounting
Reports
– Decision Rights Assignment
– Planning and Control
– Performance Measurement and Evaluation
Topics-Environment Matrix
External
Internal
Accounting Accounting
Political
Regulatory
Structure
Market Entry
Choice
Economic
Capital
Acquisition
Risk
Management
Secrecydisclosure
Budgeting
Availability of
Auditors
Cost Drivers
Cultural
Infrastructure
External AccountingInstitutional Structures
 Capital
Market Requirements
– Market Structure -- www.iosco.org/
– Other Means of Raising Capital-debt market

Standard Setting Processes
– Private vs. Public control
– Accountability
 Compliance
External Accounting-Environment
 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

/www.iasb.org.uk/
 Users
of Statements
– legal/cultural driven
 Compliance
- Culture driven
– www2.mrbrklyn.com/liz/cultural_dimensions/Web_site
External Accounting-Topics
 External
Reporting Differences
– U.S., U.K. -- Tax  Financial
– Japan, Germany -- Tax = Financial
 Differences
in Debt and Equity
Classifications --Korea vs. U.S.
 Differences in goodwill treatment
– U.S. vs. Japan
 Differences
in asset revaluation
– US. Vs. Brazil
Internal Accounting
 Decision
Rights Assignment
(http://www.myworktools.com/company/overview.html)
 Planning
and Control
 Complications
of Global Operations
 Co-location of Knowledge and Rights
 Performance
 Multiple
Evaluation
Currency Issues
 Cross-border Decision Rights Issues
Internal Accounting-Environment
 Economic/Political-Planning
and Control
– International Taxes and Treaties
 NAFTA
(www.nafta-sec-alena.org/)
 Foreign Trade Zones (www.naftz.org)
– Transfer Pricing
 Decision
Rights
issues(www.irs.gov/businesses/international/)
 Political/economic (www.state.gov/r/pa/bgn/)
– www.cia.gov/cia/publications/factbook/
Internal Accounting-Environment
 Economic/Political
Continued
– Risk Management
 Financial
-- ewrisk.ifci.ch/index.htm
 Operational -http://www.worldbank.org/fandd/english/0397/articles/
050397.htm
– Corruption
 Foreign
Corrupt Practices Act -http://www.usdoj.gov/criminal/fraud/fcpa/dojdocb.htm
 Corruption index--http://www.transparency.org/
Internal Accounting-Topics
 Performance
pp.49-70)
Evaluation (Inter.J. of Acct., 34, #1,
– Japan ROA < U.S. ROA
 low
margins,
 focus on market share, emphasize target cost
– Japan ROE > U.S. ROE
 high
debt levels
 keiretsu organization
Internal Accounting
 Performance
Measurement & Evaluation
– Multiple Currency Issues (France,Germany,
U.K., U.S.)
– Transfer Pricing Issues (U.K. to Germany)
 Decision
Rights Assignment
– Knowledge Distribution (Mergers/Acquisition)
– Control System (Conflict with Culture)
Summary
 Key
to Understanding International
Accounting
– Political, Economic, Cultural and Infrastructure
Influences on:
 External
Reporting
– Taxes/Capital Markets/Gov. Regulation/Standard
Setting/Reporting Requirements
 Internal
Reporting
– Planning and Decision Making
– Control Differences
– Performance Evaluation Differences
Where to get more information
 Journals
- International
– International Journal of Accounting
– Advances in International Accounting
– Journal of International Business Studies
 Journals
- AAA
– Accounting Horizons
– Issues in Accounting Education
 Other
– Management Accounting
– Journal of Accountancy
– Economist
Where to get more information
 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
Where to get more information
 Case
Books
– International Accounting: A Case Approach
edited by Schweikart, Gray and Roberts,
McGraw-Hill
 Cases
- AICPA (www.aicpa.org)