Definition

  • INTERNATIONAL ACCOUNTING is the international aspects of
    accounting, such matters as accounting principles and reporting practices in
    different countries and their classification; patterns of accounting
    development; international and regional harmonization, foreign currency
    translation; foreign exchange risk; international comparisons of consolidation
    accounting and inflation accounting; accounting in developing countries;
    accounting in communist countries; performance evaluation of foreign
    subsidiaries.

What is international Accounting?

  • The term implies bookkeeping across national boarders.
  • Companies who have their headquarter in one country and
    subsidiaries in other countries need to incorporate the financial statements of
    their subsidiaries into the “principal” financial statement of the headquarter
    which is bookkeeping across national boarders.
  • Another part is the process of transforming differing
    national accounting standards into international standards that already are or
    will be relevant for every firm in the world.

Overview of the Issue

  • The criteria are gradually converging with international
    accounting standards, promoting international economic exchange and capital
    flows.
  • The deepening of economic globalization, national
    standards with international standards has become increasingly important
    convergence.
  • The world’s major capital markets are actively explored
    and strive to achieve the set of globally recognized accounting standards convergence.
  • To this end, the International Federation of Accountants
    Organization study on the adoption and implementation of international
    standards challenges encountered in the process and results are analyzed in
    detail.
  • Uniform accounting help to strengthen investor confidence
    in financial information, which prompted investors to invest abroad.

Major Development

  • The most important driving force in the development of
    international accounting standards is the International Accounting Standards
    Committee (IASC), an independent private-sector body formed in 1973.
  • The broad objective of the IASC is to further
    harmonization of accounting practices through the formulation of accounting
    standards and to promote their worldwide acceptance.
  • Shows the typical development of all fields of inquiry;
    it began with observation and is progressing toward abstraction and model
    building.

2009 Timeline: The year in review

January

Satyam scandal rocks Indian profession

  • India’s biggest ever corporate fraud erupts at Satyam
    Computer Services, shaking the corporate sector and audit profession. Satyam’s
    auditor, Price Waterhouse, is investigated and two partners
  • S Gopalakrishnan and Srinivas Talluri are arrested. The
    scandal leads to questions over audit firm registration, firm and partner
    rotation rules and the method used to select the auditors of large
    corporations.

BDO joins China’s ‘Top Five’

  • BDO International admits Shu Lun Pan Management Corp, one
    of China’s leading domestic firms, after it ends its affiliation with Horwath
    International. The addition makes BDO becomes the largest mid-tier professional
    services firm in China.

February

Madoff fraud leads to spate of lawsuits

  • Several prominent audit firms are being targeted in
    lawsuits against feeder funds to the largest Ponzi scheme in US history.
    Investors that lost money placed in Bernard L Madoff Investments Securities
    begin a spate of class actions against hedge funds and their auditors for
    failing to detect the fraud.
  • Firms being investigated include KPMG, Ernst & Young
    and PricewaterhouseCoopers.

“Those are big events and to us things like that shake
confidence in accounting firms and accounting standards, and probably even the
regulators themselves.” – Crowe Horwath International CEO Frank Arford on the
impact of the Madoff fraud and Lehman collapse

March

Deloitte, PwC put bid for BearingPoint practices

  • Bankrupt consultancy BearingPoint US sells off practices
    as part of a global reorganisation plan. Deloitte agrees to acquire the assets
    of BearingPoint’s North American practice valued at $350 million. PwC signs an
    agreement to acquire a portion of the North American commercial services
    practice ($25 million). PwC Japan’s advisory firm reaches an agreement to
    acquire and integrate with BearingPoint’s Japanese consulting business.

Networks strengthen presence across China

  • Three international mid-tier networks, BDO International,
    Grant Thornton International and RSM International, make significant inroads
    into the Chinese market by teaming up with large reputable Chinese firms. The
    consolidation rush by the nations’ largest accounting firms is in step with the
    Chinese government’s ambitious plans for the domestic accountancy profession.

Nally appointed PwC leader

  • Dennis Nally (pictured) is appointed to replace
    Samuel Di Piazza as the global chairman of Pricewaterhouse-Coopers, the largest
    accounting network in the world. Nally was the senior partner and chairman of
    PwC’s US firm.

April

Revenue growth plummets in Italy

  • The Italian profession takes a dive as the economic
    downturn strikes. Market growth of 3 percent is the worst result for Italian
    firms in the past five years. Only seven out of 29 firms surveyed achieve
    double-digit revenue growth, with some firms experiencing a decline in growth,
    including the second largest firm PricewaterhouseCoopers Italy.

BDO in Hong Kong merger

  • BDO McCabe Lo merges with Shu Lun Pan Horwath Hong Kong
    CPA Limited, creating the fifth largest firm on the island. The combined entity
    to operate as BDO Limited.

May

China reaffirms ‘Big 10’ plans

  • The Chinese Ministry of Finance publishes plans to
    develop 5 to 10 ‘super big’ domestic public accounting firms within the next
    decade to challenge the position of the Big Four firms in China. The proposal
    aims to create three different firm sizes ‘super big’, ‘big’ and ‘small to
    medium’.

June

KPMG and PwC face legal battles Down Under

  • Australia’s two largest audit firms face huge lawsuits
    following corporate collapses. Investors in the MFS Premium Income Fund launched
    a A$746 million ($671 million) claim against KPMG for failure to detect
    unsecured loans. Centro, once the second-largest shopping centre construction
    company in Australia, launches a cross-claim application in a bid to drag PwC
    into an A$1 billion class action.

BDO International ruling a good sign

  • Miami court clears BDO International of paying $352
    million in punitive damages and $170 million in compensatory damages awarded
    against its US member firm BDO Seidman in the Bankest case. The outcome is
    closely monitored by the accounting profession as it attempted to establish the
    legal line of control between network administration bodies and member firms.

“The biggest negative for me was the kneejerk reaction by
some to looking at chopping staff out almost immediately as their answer to the
crisis.” BDO International chief executive Jeremy Newman on reactions to the
downturn

July

McGladrey & Pullen threatens breakaway

  • McGladrey & Pullen (M&P) issues a formal notice
    of intent to terminate its administrative services agreement with H&R
    Block, threatening its relationship with RSM McGladrey. The notice period is
    210 days. H&R Block, the owner of RSM McGladrey, says the move is not in
    the best interest of M&P’s partners, employees or clients. Combined,
    McGladrey & Pullen and RSM McGladrey are the fifth-largest firm in the US.

August

Price Waterhouse comes under fire

  • Sunil Talati, a former president of the Institute of
    Chartered Accountants in India, says Price Waterhouse got off lightly and
    believes the firm should be held partly accountable for the actions of its
    partners in the Satyam scandal. Jailed Price Waterhouse auditors
  • S Gopalakrishnan and Srinivas Talluri await trial.

September

Mid-tier network expands in key markets

  • Crowe Horwath International accelerates its push into
    important emerging markets with the addition of Crowe Horwath RCS in Brazil,
    WanLongAsia in China and Crowe Horwath HK CPA in Hong Kong. These additions
    help Crowe Horwath maintain its position as the ninth largest network in the
    world.

E&Y reaches Akai settlement

  • Ernst & Young (E&Y) Hong Kong settles with the
    liquidator of Chinese consumer electronics company Akai Holdings for an
    undisclosed sum and suspends one of its partners after finding some of the
    firm’s Akai audit work could no longer be relied on. E&Y faced allegations
    it was negligent in its auditing of Akai from 1997 to 1999.

“If I had to point to one thing from 2009 from an
accounting standpoint, the greatest challenge for the profession was the whole
issue of market value accounting and the impact of that on the downturn of the
economy.” – Grant Thornton International chief executive Ed Nusbaum

October

Canadian mid-tier firms play musical chairs

  • Large Canadian firms reshuffle their global affiliations.
    The market’s seventh largest firm Meyers Norris Penny (MNP) joins the Praxity
    Global Alliance from Crowe Horwath International. The national association of
    firms Collins Barrow leaves Praxity to join Baker Tilly International. MNP
    sights benefits of the association model as one driver of the move. Crowe
    Horwath International is yet to reveal a new Canadian firm.

Kreston International on network trail

  • Kreston International outlines plans to become an
    accountancy network during the next three years. Kreston will implement a
    globally co-ordinated quality control monitoring programme and provide firms
    the option to use a common brand name to sign off assurance reports, which
    would satisfy the International Federation of Accountants’ definition of a ‘network’.
    In this year’s world survey, Kreston International is the 12th largest network
    with fee income of $1.64 billion.

November

Parmalat settlement a step closer

  • Deloitte Global and Deloitte US offer to pay $8.5 million
    and Grant Thornton International and Grant Thornton US offer $6.5 million to
    plaintiffs to settle the long-running Parmalat lawsuit. In September, a US
    judge dismissed claims against the networks – a victory for networks attempting
    to prove they do not control the actions of their member firms.

“From a network perspective, I would say that all these
discussions about the Deloitte or the Parmalat case were quite substantial
because it showed to what extent there is or there might be a general or
overall liability for the work that is done here or there, and we have to keep
and eagle eye on that.” – Nexia International chairman Norbert Neu on the
Parmalat ruling

December

Tenon and RSM Bentley Jennison tie the knot

  • Tenon Group acquires RSM Bentley Jennison to create the
    seventh largest firm in the UK.
  • RSM Tenon has 3,000 staff and generates annual fee income
    of £250 million ($409 million).
  • This combination helps RSM International leapfrog Grant
    Thornton International as the sixth largest accounting network in terms of fee
    income.

US firms mend differences

  • In other good news for RSM, US member firms RSM McGladrey
    and McGladrey & Pullen patch up their differences and agree to continue
    their alternative practice relationship.

Impact on the accounting profession

  • It would be hard for Canadians to go to other countries
    to work because the accounting standard is different in other countries.
  • It would be hard for accountants from other countries to
    come and work here.
  • For example in China the balance sheet they are less a
    tool of profit and loss, but an inventory of assets available to a company.
  • Also in a Chinese accounting standards do not include an
    accounting of the debts that a corporation holds.

Future Outlook

  • In the fragile state of the current U.S. economy, there
    may be no more important matter than investor confidence.
  • People will invest in the stock market because they are
    confident in making a return on investment, something that cannot be done
    unless there is quality assurance in the world of accounting.
  • Bankers, lenders, and stock brokers all rely on the
    information that is produced by corporations in the form of financial
    statements is reliable and accurate.
  • This is not possible, without sound accounting and
    enforcement from agencies such as the Securities and Exchange Commission and
    the Financial Accounting Standards Board.
  • But a more recent development in the world of accounting
    pertains to the convergence and gaining popularity of international accounting
    standards.
  • In Canada they might change the accounting standards.
  • Also they might be new principle and certain principle
    would change.
  • In the future it would be easier for Canadians to go to
    different countries and other accountant to come to Canada to work
  • Also there will be more way to prevent future accounting
    frauds and financial risks.

Work Cited List

International Accounting Standards: Encyclopedia of
Business and Finance. (n.d.). eNotes Literature Study Guides, Lesson Plans, and
More. Retrieved March 30, 2011, from http://www.enotes.com/business-finance-encyclopedia/international-accounting-standards

Annotated Bibliography: The Future of International
Accounting Standards. (n.d.). Home.             Retrieved
March 18, 2011, from http://wikibin.org/articles/annotated-bibliography-the-future-of-international-accounting-standards.html

China Accounting Standards. (n.d.). Wikipedia the free
encyclopedia. Retrieved April 1, 2011, from
http://en.wikipedia.org/wiki/China_Accounting_Standards

Editorial, I. (n.d.). 2009 Timeline: The year in review.
VRL Financial News – Home. Retrieved March 12, 2011, from
http://www.vrl-financial-news.com/accounting/intl-accountingbulletin/issues/iab-2010/iab-461/2009-timeline-the-year-in-rev.aspx

Global Economic Turndown: The Future Accounting Outlook.
(n.d.). Financial Meltdown – Crisis Of Governance?. Retrieved March 18, 2011,
from     www.icap.org.pk/userfiles/file/safa2009/article-5.pdf

Hausarbeit – International Accounting – an Overview.
(n.d.). Scribd. Retrieved March 30, 2011, from
http://www.scribd.com/doc/6722096/Hausarbeit-International-Accounting-an-Overview

 

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