CHAPTER 1 Financial Reporting in The Global Area 1 Introduction 2 Interaction Between Accounting and Its Environment Nature of Capital Markets 3 Type of Reporting Regime 6 Type of Business Entities 6 Type of Legal System 7 Level of Enforcement of Regulations 7 Level of Inflation 8 Political and Economic Ties 8 Status of the Accounting Profession 9 Existence of a Conceptual Framework 9 Quality of Accounting Education 11 Diverse Roles of Accounting in Countries 11 Policy Choices in Accounting 13 Effects of Diversity on Capital Markets 17 Classification of Financial Accounting and Reporting Systems 20 Review of Selected Classification Studies 21 Major Challenges Facing Accounting Globally 23 Global Harmonization 23 Financial Reporting in Emerging Economies 24 Social and Environmental Reporting 24 Financial Reporting in the High Technology Era 25 Summary 25 Questions 26 Exercises 26 Cases 27 References 28 CHAPTER 2 Harmonizing Financial Reporting Standards Globally 31 Rationale for Harmonization 32 Pressures for Harmonization 33 Obstacles to Harmonization 36 Measuring Harmonization 37 Supranational Organizations Engaged in Accounting Harmonization 38 Harmonization Scenarios 42 Current Evidence on Harmonization 45 Global 46 Regional 48 Summary 53 Questions 54 Exercises 54 Cases 55 References 56 CHAPTER 3 Accounting for Currency Exchange Rate Changes 59 Overview of Foreign Currency Markets and Exchange Rates 60 Foreign Exchange Exposure 62 Accounting for Exchange Rate Fluctuations 63 Foreign Currency Transaction vs. Translation 63 Translation Methods 66 Foreign Currency Translation in the United States 69 FASB Statement No. 8 SFAS No. 8 70 FASB Statement No. 52 SFAS No. 52 72 SFAS No. 52 and the Functional Currency Concept 75 SFAS No. 52 Translation in Highly Inflationary Economies 76 SFAS No. 133- Accounting for Derivatives and Hedging Activities 77 The International Accounting Standard on Foreign Currency Translation 78 Accounting lssues Related to the Euro 79 Issues Related to the Euro''s Transition Period 80 Issues Related to Financial Reporting and Disclosure 80 Summary 81 Questions 82 Exercises 82 Cases 84 References 85 CHAPTER 4 Selected Financial Reporting and Disclosure lssues in the Global Context 87 Accounting for Changing Prices 88 Inflation-Adjusted Accounting Models 90 General Price Level Adjusted GPLA Model 91 Current Cost-Adjusted CCA Model 95 Evaluating the CCA Model 96 Accounting for Goodwill and Intangible Assets 97 Goodwill 98 Brands, Patents, and Trademarks 99 Research and Development 101 Geographic Segment Reporting 102 Research Evidence on Geographic Segment Reporting 103 Current Developments in Geographic Segment Reporting 105 Environmental and Social Disclosures 108 Environmental Disclosures 108 Employee Disclosures 111 Value Added Statement 116 Summary 120 Questions 120 Exercises 121 Cases 123 References 124 CHAPTER 5 US1NG CORPORATE FINANCIAL REPORTS ACROSS BORDERS 127 Corporate Responses to Foreign Users of Financial Statements 128 Coping With Transnational Financial Reporting 140 Preparer Response to Transnational Financial Reporting 141 User Response to Transnational Financial Reporting 142 International Financial Statement Analysis 144 Additional lssues in International Financial Statement Analysis 149 Availability of Data 149 Reliability of Data 149 Timeliness of Data 150 Language, Terminology, and Format 150 Summary 152 Questions 152 Exercises 153 Cases 158 References 159 CHAPTER 6 FINANCIAL REPORTING 1N EMERGING CAPITAL MARKETS 161 The Nature and Importance of Emerging Capital Markets 163 The Role of Financial Reporting in Emerging Capital Markets 165 Characteristics of Financial Reporting in Emerging Capital Markets 166 Availability 166 Reliability 169 Comparability 173 Financial Reporting Policy Issues in Emerging Capital Markets 177 Information Availability 178 Strengthening Enforcement Capability 180 Harmonization of Accounting Standards 181 Summary 183 Questions 184 Exercises 185 Cases 186 References 187 CHAPTER 7 MANAGERIAL ISSUES IN INTERNATIONAL ACCOUNTING 191 Budgeting and Performance Evaluation 192 Using Appropriate Performance Measures 192 Using Appropriate Currencies 193 Transfer Pricing Policies 194 Other Considerations 194 Distinguishing Between Manager Performance and Subsidiary Performance 195 Some Comparative Evidence on Budgets and Performance Evaluation Systems 195 Global Risk Management 196 Multinational Capital Budgeting 196 Managing Foreign Exchange Risk 198 Transfer Pricing 200 Major Constituents Affected by Transfer Pricing Choices 201 Internal Constituents 202 External Constituents 202 Transfer Pricing Methods 204 Advanced Pricing Agreements 206 Research Evidence on Determinants of International Transfer Pricing Methods 207 Information Technology 207 Complexities Involving IT Systems for MNCs 209 Global IT Challenges and Strategies 209 Summary 211 Questions 211 Exercises 212 Cases 213 References 214 LIST OF ABBREVIATIONS 217 SUBJECT INDEX 219
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