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International Accounting: Disusun Oleh: Meiliani Luckieta, SE., Ak., CA., Acpa., MM., BKP

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Margareth Silviana
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29 views11 pages

International Accounting: Disusun Oleh: Meiliani Luckieta, SE., Ak., CA., Acpa., MM., BKP

Uploaded by

Margareth Silviana
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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INTERNATIONAL

ACCOUNTING
INTRODUCTION
Disusun oleh : Meiliani Luckieta, SE., Ak., CA.,
ACPA., MM., BKP
LEARNING OBJECTIVES
1. Discuss the nature and scope of international accounting
2. Describe accounting issues confronted by companies involved in international trade ( import and
export transactions ).
3. Explain reasons for, and accounting issues associated with, foreign direct investment
4. Describe the practice of cross-listing on foreign stock exchanges
5. Explain the importance of international trade, foreign direct investment, and multinational
corporations in the global economy
WHAT IS INTERNATIONAL
ACCOUNTING?
Defined broadly, the accounting in international accounting encompasses the functional areas of
financial accounting, managerial accounting, auditing, taxation, and accounting information
systems.
The word international in international accounting can be defined at three different levels :
1. Supranational accounting
2. The company level
3. Broadest level
EVOLUTION OF A MULTINATIONAL CORPORATION
 Example : Evolution of Magnum Corporation, a fictional auto parts manufacturer
headquartered in Detroit, Michigan, produce and sell rearview mirrors to automakers in the
United States.
 Raw materials and machinery and equipment were purchased from suppliers located across the
United States, finished products were sold to US automakers, loans were obtained from banks
in Michigan and Illinois, and the common stock was sold on the New York Stock Exchanges.
 SALES TO FOREIGN CUSTOMER

In 1980, Normal Motors Inc., (NMI) required Magnum to bill the sales to NMUK (Normal
Motors UK) in British Pounds (£), thus creating foreign currency sales for Magnum. The first
shipment of mirrors to NMUK was invoiced at £100,000 with credit terms of 2/10, net 30. If
Magnum were a British company, the journal entry to record this sale would have been :
Dr Account Receivable £100,000
Cr Sales Revenue £100,000
EVOLUTION OF A MULTINATIONAL CORPORATION
 However, Magnum is a US Based company that keeps its accounting records in USD.
Assuming that the exchange rate between the £ and USD at the time of this transaction was £ 1
= USD 1.60, the journal entry would have been :
Dr Account Receivable USD 160,000
Cr Sales Revenue USD 160,000

By the time NMUK paid its account to Magnum , the value of £ had fallen to £
1 = USD 1.50, and the amount received by Magnum was converted into USD 150,000.
The partial journal entry to record this would have been :
Dr Cash USD 150,000
Cr Account Receivable USD 150,000
How should the difference of USD 10,000 between the original USD value of the
receivable and the actual number of USD received be reflected in the accounting records ?
EVOLUTION OF A MULTINATIONAL CORPORATION
 Two possible answers would be :

1. To treat the difference as a reduction in sales revenue or


2. To record the difference as a separate loss resulting from a change in the foreign exchange
rate.
HEDGES OF FOREIGN EXCHANGE RISK
Companies can use a variety of techniques to manage, or hedge, their exposure to foreign
exchange risk.
A popular way to hedge foreign exchange risk is through the purchase of a foreign currency
option that gives the option owner the right, but not the obligation, to sell foreign currency at a
predetermined exchange rate known as the strike price.
EVOLUTION OF A MULTINATIONAL CORPORATION
 FOREIGN DIRECT INVESTMENT

Reasons for Foreign Direct Investment :


1. Increase Sales and Profit
2. Enter Rapidly Growing or Emerging Markets
3. Reduce Costs
4. Protect Domestic Markets
5. Protect Foreign Markets
6. Acquire Technological and Managerial Know How
EVOLUTION OF A MULTINATIONAL CORPORATION
 FINANCIAL REPORTING FOR FOREIGN OPERATIONS

Magnum Corp is required to prepare consolidated financial statements in which the assets,
liabilities, and income of its subsidiaries (domestic and foreign) are combined with the parent
company.
INTERNATONAL INCOME TAXATION
Each country also has a unique set of tax regulations.
INTERNATIONAL TRANSFER PRICING
Some companies with foreign operations attempt to minimize the amount of worldwide taxes they
pay through the use of discretionary transfer pricing.
PERFORMANCE EVALUATION OF FOREIGN OPERATIONS
INTERNATIONAL AUDITING
CROSS LISTING ON FOREIGN STOCK EXCHANGE
GLOBAL ACCOUNTING STANDARD
THE GLOBAL ECONOMY
 INTERNATIONAL TRADE

International trade (export and import) constitutes a significant portion of the world economy. In
2008, companies worldwide exported more than USD 16.0 trillion worth of merchandise
( World Trade Organization, International Trade Statistics 2009)
FOREIGN DIRECT INVESTMENT (Growth in FDI 1982-2008)
Item 1982 1990 2007 2008
FDI Inflows $ 58 $207 $1,979 $1,697
FDI Outflows $ 27 $239 $2,147 $1,858
FDI inward stock $ 790 $1,942 $15,660 $14,909
FDI Outward Stock $ 579 $1,786 $16,227 $16,206
Sales of foreign affiliates $2,530 $6,026 $31,764 $30,311

Assets of foreign affiliates $2,036 $5,938 $73,457 $69,771


Employment by foreign affiliates $19,864 $24,476 $80,396 $77,386
THE GLOBAL ECONOMY
 MULTINATIONAL CORPORATIONS

The company that is headquartered in one country but has operations in other countries.
INTERNATIONAL CAPITAL MARKETS
Many multinational corporations have found it necessary, for one reason or another, to have
their stock cross-listed on foreign stock exchanges.
THANK YOU

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