Exam 14: International Accounting

In the United Kingdom, the Accounting Standards Board (ASB) of the Financial Reporting Council (FRC) set the standards for UK companies for recording international transactions.

In the United States, the Securities and Exchange Commission (SEC) has usually accepted the guidelines established by the FASB for recording international transactions.

Most countries use December 31 as the year-end closing of their books.

The United States taxes the dividends of U.S. companies that are located abroad

By U.S. generally accepted accounting principles (GAAP), an order received today from overseas will be recorded in foreign currency on the date of the order.

Withholding taxes are usually applied to the following except:

Under the temporal method, monetary accounts such as cash, accounts receivables, and debt are translated at the current exchange rate when accounts of overseas subsidiaries are consolidated.

What do the accounting scandals of Enron, Parmalat, and WorldCom have in common? What is the likelihood of preventing such scandals in the future?

Assume a U.S. company purchases €200,000 worth of goods on January 1, 2009 when the exchange rate was $1.50/€. When the payment is made three months later, the exchange rate is $1.75/€.

How does Europe and the United States differ in the tax treatment of dividends received by parent companies from their overseas subsidiaries?

The Organization for Economic Cooperation and Development (OECD) listed the following benefits to companies if IFRS is implemented, except

When a company goes global, the preparation of financial statements must address the following:

The approach known as "playing-field taxes" adopts the stance that all businesses in a country, whether they operate domestically or overseas, should face the same level of minimum taxation.

In the Citigroup study, the main differences between IFRS and U.S. GAAP occurred because of the differences in treatment of the following, except

Geographic proximity, rather than culture, seems to play an important role in the development of accounting standards.

What are two major differences between domestic and international accounting?

The new global accounting standards, termed the International Financial Reporting Standards (IFRS) does not consider gains and losses related to exchange rate changes as unrealized till the company is sold, similar U.S. GAAP accounting standards.

Another tax that most companies face overseas is the value-added tax (VAT) or the sales tax, both of which are considered direct taxes.

Withholding taxes are additional taxes imposed by countries when subsidiaries repatriate money to their parent companies.

Multinationals have to convert the financial statements from one currency to another and reconcile the different accounting standards and formats between countries.