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Solutions for International Accounting, 6th Edition by Timothy Doupnik
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Complete Solutions Manual for International Accounting, 6th Edition 6e by Timothy Doupnik, Mark Finn, Giorgio Gotti and Hector Perera. ISBN-13: 6991 Full Chapters Solutions are included - End of Chapters exercises answers. Chapter 1:Introduction to International Accounting  Chapter 2:Wor...

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  • July 18, 2023
  • 236
  • 2022/2023
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  • International Accounting
  • International Accounting

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Chapter 01 - Introduction to International Accounting



CHAPTER 1
INTRODUCTION TO INTERNATIONAL ACCOUNTING
Chapter Outline

I. International accounting is an extremely broad topic.
A. At a minimum, it focuses on the accounting issues unique to multinational corporations,
especially with respect to international transactions and foreign investments.
B. At the other extreme, it encompasses the study of the various functional areas of
accounting in all countries of the world, as well as the activities of a number of
supranational organizations.
C. This book provides an overview of the broadly defined area of international accounting,
including certain supranational guidelines, but focusing on the accounting issues related
to international business activities and foreign investments. In other words, this book
focuses on international accounting issues at the company level that are specifically
relevant to multinational corporations.

II. There are several accounting issues encountered by companies involved in international
trade.
A. One issue is the accounting for foreign currency-denominated export sales and import
purchases. An important issue is how to account for changes in the value of the foreign
currency-denominated account receivable (payable) that occur as exchange rates
fluctuate.
B. A related issue is the accounting for derivative financial instruments, such as forward
contracts and foreign currency options, used to hedge the foreign exchange risk
associated with foreign currency transactions.

III. There is an even greater number of accounting issues encountered by companies that have
made a direct investment in a foreign operation. These issues primarily result from the fact
that accounting rules, tax laws, and other regulations differ across countries, and include:
A. Figuring out how to make sense of the financial statements of a foreign acquisition target
prepared in accordance with an unfamiliar GAAP when making a foreign direct
investment decision.
B. Determining the correct amounts to include in consolidated financial statements for the
assets, liabilities, revenues, and expenses of foreign operations. The consolidation of a
foreign subsidiary involves a two-step process: (1) restate foreign GAAP financial
statements into parent company GAAP and (2) translate foreign currency amounts into
parent company currency. Determining the appropriate translation method and deciding
how to report the resulting translation adjustment are important questions.
C. Complying with host country income tax laws, as well as home country tax laws related
to income earned in a foreign country (foreign source income). Double taxation of
income is a potential problem, and foreign tax credits are the most important relief from
this problem.
D. Establishing prices for intercompany transactions that cross national borders
(international transfer prices) to achieve corporate objectives and at the same time
comply with governmental regulations.
E. Evaluating the performance of both a foreign operating unit and its management.
Decisions must be made with respect to issues such as the currency in which a foreign
operation should be evaluated and whether foreign management should be held
responsible for items over which they have little control.
1-1
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