Lecture International business (9e): Chapter 20 - Charles W.L. Hill - Trường Đại học Công nghiệp Thực phẩm Tp. Hồ Chí Minh

firms because of differences in accounting standards from country to country2.  differences make it difficult for investors, creditors, and governments to evaluate firms.[r]

International Business

9e 

By Charles W.L Hill

Chapter 20

Accounting and Finance in the International

20­3

What Is Accounting?

 Accounting is the language of business

it is the way firms communicate their financial positions

 Accounting is more complex for international

firms because of differences in accounting standards from country to country

differences make it difficult for investors, creditors, and governments to evaluate firms

 It is difficult to compare financial reports from

country to country because of national

What Determines National  Accounting Standards?

 Accounting standards are rules for preparing

financial statements

 variables influencing accounting systems include  the relationship between business and the

providers of capital

 political and economic ties  the level of inflation

 the level of economic development  the prevailing culture in a country

 Auditing standards specify the rules for

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Why Are International 

Accounting Standards Important?

 The growth of transnational financing and

transnational investment has created a need for transnational financial reporting

many companies obtain capital from foreign providers who are demanding greater consistency

 Standardization of accounting practices across

national borders is probably in the best interests of the world economy

 The International Accounting Standards Board

How Does Accounting Influence  Control Systems?

 The control process in most firms is usually

conducted annually and involves three steps

1 Subunit goals are jointly determined by the head office and subunit management

2 The head office monitors subunit performance throughout the year

3 The head office intervenes if the subsidiary fails to achieve its goal, and takes corrective actions if

necessary

 Budgets and performance data are usually

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How Do Exchange Rates  Influence Control?

 The Lessard-Lorange Model

- firms can deal with the problems of exchange

rates and control in three ways

1 The initial rate

 the spot exchange rate when the budget is adopted

1 The projected rate

 the spot exchange rate forecast for the end of the budget picture

1 The ending rate