Study guide for international accounting CHAPTER 1 Introduction to international accounting LEARNING OBJECTIVES: 1. To identify and understand the importance of the eight factors that has a significant influence on accounting development. 2. To understand the definition of IA of this textbook. 3. To be familiar with the detailed contents of IA CHAPTER OUTLINE Development of IA Eight factors Sources of Finance – In countries with strong equity markets, Disclosures are extensive to meet the requirements of widespread public ownership. –in credit-based systems where bans are the dominant source of finance, accounting focuses on creditor protection through conservative accounting measurements. Development of IA Legal System. The legal system determines how individuals and institutions interact. Taxation . tax legislation effectively determines accounting standards because companies must record revenues and expenses in their accounts to claim them for tax purposes. Political and Economic Ties. Accounting ideas and technologies are transferred through conquest, commerce, and similar forces. Development of IA Inflation. Inflation distorts historical cost accounting and affects the tendency of a country to incorporate price changes into the accounts. Level of Economic Development. This factor affects the types of business transactions conducted in an economy and determines which ones are most prevalent. Development of IA Education Level. Highly sophisticated accounting standards and practices are useless if they are misunderstood and misused. Culture. Cultural variables underlie nations’ institutional arrangements (such as legal systems) Definition of IA International accounting can be viewed in terms of the accoun...
