1Chapter1IntroductionDiscussionQuestions1.Inthedomesticcase,accountingisaninformationservicethatprovidesfinancialinformationaboutadomesticentitytodomesticusersofthatinformation.Internationalaccountingisdistinctiveinthattheentitybeingreportedoniseitheramultinationalcompanywithoperationsandtransactionsthattranscendnationalboundariesorinvolvesanentiiywithreportingobligationstoreaderswhoarelocatedoutsidethereportingentity’scountryofdomicile.2.Advantage:Somemightarguethatmeasurement,disclosure,andexternalauditingarethreedistinct(althoughrelated)processes,involvingdifferentmembersofthecompany.Forexample,corporateattorneysoftenareinvolvedindisclosureissues,butseldominterveneinmeasurementissues.TheBoardofDirectorsworkswiththeexternalauditorsbutnotnecessarilywiththecomptrollersoffice.Thus,discussionofaccountingrequirementsandvoluntaryaccountingchoicesindifferentjurisdictionsissimplifiedbyfocusingonthethreecomponentsofaccounting.Disadvantage:measurement,disclosureandauditingareinterdependent,andshouldnotbeviewedinisolationofoneanother.Acompanychoosingtodiscloseaslittleaspossible,forexample,mayuseaccountingmeasurementapproachesthatreducetheinformationcontentoffinancialstatements,andselectanexternalauditorwhowillberelativelylenientinenforcingaccountingrequirements.Onealternativeclassificationmightincludeaccounting(measurementanddisclosure),andauditing.Asecondclassificationmightincludefinancialreporting(annualandinterimreporting,regulatoryfilings)andadhocdisclosure(pressreleases,analystmeetings,etc).Anyclassificationisarbitrary,andpotentiallyusefuldependingonitspurpose.3.Factorscontributingtotheinternationalizationofthesubjectofaccountinginclude:thegrowthandspreadofmultinationaloperationsaroundtheworld,thephenomenonofglobalcompetition,theincreasingnumberofcross-bordermergersandacquisitionsthatoccuralmostdaily,continuedadvancesininformationtechnology,andtheinternationalizationoftheworld’scapitalmarkets.4.Internationaltradeinvolvesimportingandexportingactivities.Themajoraccountingissueassociatedwithforeigntradeinvolvesaccountingforforeigncurrencytransactions.Foreigndirectinvestment,ontheotherhand,involvesconductingoperationsabroad.Thisactivityexposesaccountantstoanewsetofissuesthatrunthegamutfromhavingtoconsolidateforeigncurrencyaccountsbasedondiversemeasurementrulestoissuesofevaluatingtheperformanceofforeignsubsidiarymanagers.5.Studentswilloverwhelminglyargueinfavorofharmonization.Thisisprobablyagoodstartingpointforthecourse.AftertheyareintroducedtothechaptersleadinguptoChapter8,somemaynolongerfeelthatharmonizationisnecessarilytheanswertoalloftheirinternationalaccountingproblems.6.Recentdevelopmentssuchasthegrowthandspreadofmultinationaloperations,Internationalizationoftheworld’scapitalmarkets,increasedcrossbordermergersandacquisitions,thephenomenonofglobalcompetitionandfinancialinnovationhave2increasedreaderdependenceonforeignfinancialstatements.Anunderstandingofaccountingdifferencesandtheireffectonreportedmeasuresofprofitability,efficiency,solvencyandliquidityarecriticalifproperdecisionsaretobemade.Internationalaccountingissueshavebecomemorecomplexinrecentyearsforseveralreasons.Financialtransactionsarebecomingmorecomplex,affectingbothnationalandinternationalaccounting.Forexample,theuseofcomplexfinancialinstrumentsanddevelopingaccountingstandardsfortheseexoticinstrumentshasbeenpr...
