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23/4/21
International Accounting
and Multinational Enterprises
上海金融学院会计学院财务管理系王纯
23/4/21
Global Harmonization of Accounting and Reporting
Chapter Six
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IntroductionInternational 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. 1
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Harmonization vs. StandardizationHarmonization: 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. 2
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Major Participant Groups
3
Governments Trade Unions and Employees Investors and Financial Analysts Bankers and Lenders Accountants and Auditors
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Environmental Influences
on Accounting
4
Multinational Corporations: Ac counting and
Information Disclosure Practices
International trade unions organizations
Foreign host countries: National influences
International professional accounting organizations
International investors, financial analysts, and stock exchanges
International banking, financial, and business organizations
International intergovernmental organizations
Home country:National influences
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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 5
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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).
6
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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 7
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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
8
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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 9
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Seventh Directive
10
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 EmployeesTrade 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.
11
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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. 12
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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 International Finance Corporation
13
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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
*Formerly, International Accounting Standards Committee (IASC)
14
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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 United States
15
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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. 16
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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 cross-border listings; and
Gap between IAS and GAAP is narrowing.17
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International Harmonization and Disclosure Debate
Final Issues: Whether accounting harmonization will reduce
competitive balance between MNE’s and host-country 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 match the growing complexity of MNE operations.
18