Podcast
Questions and Answers
Short-term financial planning involves preparing strategic budgets.
Short-term financial planning involves preparing strategic budgets.
False
Translating financial statements is not a necessary step in preparing consolidated financial statements.
Translating financial statements is not a necessary step in preparing consolidated financial statements.
False
The difference in foreign exchange rates is a problem of long-term financial planning.
The difference in foreign exchange rates is a problem of long-term financial planning.
False
Tax laws are the same in all countries.
Tax laws are the same in all countries.
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The rise in the general level of prices does not affect accounting data.
The rise in the general level of prices does not affect accounting data.
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Consolidated financial statements are prepared based on the idea of each subsidiary company being separate.
Consolidated financial statements are prepared based on the idea of each subsidiary company being separate.
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Short-term financial planning involves foreign subsidiaries' budgets.
Short-term financial planning involves foreign subsidiaries' budgets.
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Translation of financial statements is only necessary for domestic companies.
Translation of financial statements is only necessary for domestic companies.
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Different tax laws between countries are a challenge in international accounting.
Different tax laws between countries are a challenge in international accounting.
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Accounting data recorded at historical cost does not require adjustments for changes in price levels.
Accounting data recorded at historical cost does not require adjustments for changes in price levels.
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Study Notes
Theoretical Framework for International Accounting
- The concept of international accounting emerged in the beginning of the 20th century, with the first international conference of accountants held in 1904 in St. Louis, USA.
Dimensions and Concepts of International Accounting
- There are three dimensions and concepts of international accounting:
- Global accounting: directs international accounting to form and study a set of universally accepted accounting principles.
- Accounting for multinational corporations: focuses on the accounting practices of multinational companies.
- Comparative accounting: studies and understands international differences in accounting to evaluate the impact of differences in accounting practices on financial statements.
Factors that Contributed to the Emergence of International Accounting
- International business: the flow of goods, services, and capital between countries led to the emergence of new international markets and multinational companies.
- International companies: companies that carry out economic activities beyond the borders of one country, leading to problems in the traditional accounting environment.
- International accounting firms: companies that provide services and consulting in accounting, auditing, taxation, and financial and informational services.
- Need for international accounting standards: the increase in multinational companies led to the need for compatible international accounting standards.
International Accounting Problems
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Internal problems:
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Transfer rates: prices used in evaluating goods and services exchanged between group companies.
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Foreign exchange risk: risks of changing exchange rates of the local currency against foreign currency.
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Long-term financial planning: preparing capital budgets and estimating costs of foreign investment and expected returns.
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Short-term financial planning: preparing operational budgets and estimating revenues and expenses.
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External problems:
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Translating financial statements: translating financial statements of subsidiaries and branches to prepare consolidated financial statements.
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Tax laws differ from one country to another: differences in tax laws between countries.
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Rise in the general level of prices: adjustments must be made to accounting data recorded at historical cost to measure results of companies' business and financial positions.
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Consolidated financial statements: preparing consolidated financial statements based on the idea of considering the parent company and its subsidiaries as one company.
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Description
This quiz covers the theoretical framework for international accounting and entrance to international accounting. It tests your knowledge of the concepts and principles related to international accounting.
