CHAPTER 1 Introduction
Discussion Questions
1> Explain how international accounting differs from purely domestic accounting.
2> Accounting may be viewed as having three components: measurement,disclosure, and
auditing.What are the advantages and disadvantages of this classification? Can you suggest alterative classifications that might be useful?
3> What contemporary factors are contributing to the internationalization of the subject
of accounting.
4> Describe in two short paragraphs how foreign direct-investment activities differ from
international trade and the implications of this difference for accounting.
5> Given the international heritage of accounting,do you feel that efforts to harmonize
global accounting standards is a good thing? Why or why not?
6> Why have international accounting issues grown in importance and complexity in
recent years?
7> Identify several intenal and external reporting issues that arise when business and
investments transcend national borders.
8> Explian the term “global capital markets”.This chapter primarily discusses global
equity markets.What other types of financial instruments are traded in these markets?How important are global capital markets in the world economy?
9> Some have advocated that a single widely spoken language be designated as the
formal international accounting language.Write a two-paragraph statement in favor of choosing English as the designated language.
10>Capital markets often are grouped into two categories: those in developed countries and those in emerging market countries.Given your own definitions of developed and emerging market countries.Which stock exchanges shown in Appendix 1-3 are in emerging market countries?What characteristics do they share?
11>Appendix 1-1 shows that over time,national governments in many countries sold shares in state-owned financial institutions to nongovernmental entities.Discuss how these privatizations might affect the capital markets as well as the accounting systems of these companies.
12>Outsourcing,especially from vendors located abroad, has become a politically sensitive issue,especially in the United States.Do you think this argument has merit? What are the consequences of this debate for international accounting?
Exercises
1> Re-examine Exhibit 1-1,which describes the outsouring process for HP’s production
of the Proliant ML150.Foreach leg of the production chain,identify the various accounting and related issues that might arise.
2> Revisit Appendix 1-1,which chronicles the trend toward privatization of state-owned
enterprises and reductions in national barriers to cross-border investments.From an investor’s perspective,prepare a country index in which you would assign a numerical rating of 1 for the countries that appear most receptive to investors,2 for the countries that appear receptive but where the risks of reimposing controls appear to be non-zero,and 3 for countries that you would not find attractive at the present time.
3> Examine Exhibit 1-2 and compute the compounded annual growth rate of
merchandise trade versus the global trade in services.What implication does your finding have for accounting as a service activity?
4> Examine the Web sites of five of the exchanges listed in Appendix 1-2 that you feel
would be most attractive to foreign listers.Which exchange in your chosen set proved most popular during the last two years? Provide possible explanations for your observation.
5> Does the geographic pattern of merchandise exports in Exhibit 1-2 correlate well with
the pattern of Heineken’s geographic distribution of sales shown in Exhibit 1-3? What might explain any differences you observe?
6> What international reporting issues are triggered by AKZO NOBEL’s foreign
operations disclosure in Exhibit 1-4 for investors?For managerial accountants?
7> Exhibit 1-5 lists the number of majority-owned foreign affiliates in each country that
Nestle includes in its consolidated results.What international accounting issues are triggered by this exhibit?
8> Revisit Exhibit 1-6 and show how the ROE statistics of 7.1 percent and 6.2 percent for
2005 were derived. Which of the two ROE statistics is the better performance measure to use when comparing Electrolux’s performance with that of Maytag, the U.S. parent company of Hoover, which makes vacuum cleaners and other household products?
9> The World Wide Web provides low-cost access to a vast amount of information about
financial reporting requirements and practices worldwide.
Required: Refer to Appendix 1-2,which provides Web site addresses for stock exchanges in more than 50 countries/regions.Select a stock exchange and do a Web search for information about the financial reporting requirements for listed companies in that market.(Many stock exchange Web sites provide information on their own financial reporting requirements, such as those related to annual and interim reporting,and links to national securities regulatory bodies.) Present a brief overview of financial reporting regulation of the stock exchange you select.(Note:The IASB Web site,at www.iasb.org, also presents information about accounting-principle requirements at stock exchanges around the world.)
10>Stock exchange Web sites vary considerably in the information they provide and their ease of use.
Required:Select any two of the stock exchanges presented in Appendix 1-2. Explore the Web sites of each of these stock exchanges.Prepare a table that compares and contrasts the sites for type and quality of information presented and ease of using the Web site. AreEnglish-language press releases of listed companies available? Links to listed co,mpanies’Web sites? Listing requirements?Price and volume data for listed securities? Helpful information for investors?
11>Referring to Exhibit 1-7,which geographic region is experiencing the most activity in foreign listings:the Americans,Asia-Pacific, or Europe-Africa-Middle East?Do you expect this pattern to persist in the future? Explain.
12>If you had a nontrivial sum of money to invest and decided to invest it in a country index fund, in which country or countries identified in Exhibit 1-8 would you invest your money?What accounting issues would play a role in your decision?
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