ACCOUNTING INTERNASIONAL ( CHAPTER 2 )

CHAPTER 2 DEVELOPMENT AND INTERNATIONAL ACCOUNTING CLASSIFICATION

* Preliminary
Accounting functions are so important in life and business finance, indicates that the accounting in the international community to do business or service functions. Accounting must be responsive to the changing needs of society and must reflect the cultural, economic, legal, social and political life of the communities in which it operates. Thus accounting should be fixed in its position that it is technically and socially useful.
International accounting is accounting for international transactions, the comparison between countries of different accounting principles and harmonization of accounting standards in the field of tax authorities, auditing and other accounting areas. Accounting must evolve in order to provide the information required in decision-making in the company in any business environment changes.
In the International Accounting, there are several characteristics of the era of global economy, among others:

1.. International business
2. Loss of boundaries between countries global economic era is often difficult to identify the country of origin of a product or company, this is the case in multinational companies
3. Dependence on international trade

The reasons for Go International company:
1. Theory of comparative advantage
2. Imperfect market theory
3. Product cycle theory
4. Technology transfer and Strategic Alliance

The challenge for the accounting profession in the development of accounting:
1. Skill and competency of

2. Understanding the Cross Functional Linkages, accountants are not only quite proficient in the techniques, procedures and accounting standards but should also be used to view the business as an integrated form. Such as: product quality, production flexibility and the ability to rapidly produce and export in order to win the global competition

3. Financial analysis and comparison
The development of International Accounting has been accompanied by the ability of individuals should be engaged in the field of accounting for advance accounting contribute. International Accounting is a liaison between states. Eight factors that influence the development of international accounting should be well understood in order to create harmony between countries that trade.

Development of International Accounting
International accounting is accounting for international transactions, the comparison between countries of different accounting principles and harmonization of accounting standards in the field of tax authorities, auditing and other accounting areas. Accounting must evolve in order to provide the information required in decision-making in the company in any business environment changes.

Here are the characteristics of the era of global economy:
1. International business
2. Loss of boundaries between States era of global economy is often difficult to identify the country of origin of a product or company, this is the case in multinational companies
3. Dependence on international trade

There are 8 (eight) factors that influence the development of international accounting:
1. Sources of funding
In countries with strong equity markets, accounting has focused on how well management runs the company (profitability), and is designed to help investors analyze the future cash flows and related risks. Instead, the credit-based system in which the bank is the main source of funding, accounting has focused on the protection of creditors through conservative accounting measurements.

2. Legal System
The western world has two basic orientations: the legal code (civil) and common law (case). In code law countries, law is a complete group that includes the provision of accounting rules and procedures that are incorporated in national law and tend to be very complete. In contrast, common law developed on a case by case basis without any attempt to cover all cases in which a complete code.

3. Taxation
In most countries, tax rules effectively set the standard because the company should record revenue and expenses in their accounts to claim it for tax purposes. While a separate tax and financial accounting, tax rules sometimes require the application of certain accounting principles.

4. Politics and Economics Association

5. Inflation
Inflation causes the distortion of historical cost accounting and affect the propensity (tendency) of a State to apply the changes to the accounts of the company.

6. Levels of Economic Development
These factors influence the types of business transactions are conducted in an economy and determine what is most important.

7. Level of Education
Standard accounting practices are highly complex would be useless if misunderstood and misused. Disclosures about the risks of derivative securities will not be informative unless it is read by the competent authorities.

8. Culture
Four dimensions of national culture, according to Hofstede: individualism, power distance, uncertainty avoidance, masculinity.

The dimensions in the Accounting Practices Affecting Accounting:
1. Professionalism versus control mandatory preference to the implementation of individual professional balance and regulation of their own professional circles as compared to the compliance with legal provisions that have been determined.

2. Uniformity versus flexibility preference for uniformity and consistency than the flexibility to react to specific circumstances.

3. Conservatism versus optimism.

4. Confidentiality versus transparency preference for confidentiality and restrictions on business in accordance with the basic information need to know than the willingness to disclose information to the public.

Factors Affecting Development of Accounting World


There are eight factors that have significant influence in the development of accounting:

A. Sources of funding
2. The legal system
3. Taxation
4. Political and economic ties
5. Inflation
6. Level of economic development
7. Level of education
8. Culture

Four dimensions of national culture according to Hofstede, namely:
a) Individualism vs. collectivism is the tendency towards a social order composed of loosely arranged compared to the strict order and interdependent.
b) Large vs. Small Powr Distance (distance power) is the extent to which hierarchy and division of power in a power-sharing institutions and agencies and organizations in an unfair acceptable.
c) Strong vs Weak Uncertainty Avoidance (avoidance ketidakpasian) is the extent to which people feel uncomfortable with ambiguity and an uncertain future.
d) Masculinity versus femininity is the degree to which gender roles are differentiated and the performance and achievement can be seen more emphasis and attention than the relationship.

Choi et. al (1998: 36) describes a number of environmental factors are believed to have a direct impact on the development of accounting, among others:
1. Legal System
Codification of standards and accounting procedures seemed natural and appropriate in countries that adhere to code law. In contrast, the formation of a non-legalistic accounting policies by the professional organizations which work in the private sector more in line with the prevailing system in common law countries (common law). In the law of war or other emergency situations nasonal, all aspects of accounting functions may be regulated by a court or government agency. An example is the period of Nazi Germany, when preparations for war intensified and then during World War II the national accounting system requires a very uniform to control all activities of the national economy in total.

2. Political System
The existing political system in a country, too, accounting coloring, because the political system is "importing" and "export" standards and accounting practices. For example, the existing UK accounting during the turn of the 20th Century, "exported" to the Commonwealth countries. The Netherlands did the same to the Philippines and Indonesia, France to countries in Asia da African colonies. The Germans used to influence the political sympathies, among others, accounting in Japan and Sweden.

3. The nature of Business Ownership
Public ownership of the shares of the company implies the principles of financial accounting reporting and disclosure are different from companies whose ownership is dominated by the family or the bank. For example, public ownership is very high on the shares in U.S. corporations has resulted in the so-called Sunshine accounting disclosure standards of wide open, while the absence of public participation in the ownership of shares in French companies have limited financial communication is effective only to the channels of communication "insider" only. Bank ownership is high in Germany also produces a response different accounting. In the U.S., AICPA standards make specific recommendations for certain financial and accounting practices used by non-public companies are smaller.

4. Differences in magnitude and complexity of Business Companies
Dichotomy between large and small companies continues, ranging from insurance, up to all the parent-child hierarchy, including the complexity of the problem. Large conglomerate that operates in a very diverse line of business requires financial reporting techniques that are different from small firms that produce a single product. Multinational companies are also requiring a different accounting system accounting system with domestic firms.

5. Social Climate
Social climate also contribute to the development of accounting in different parts of the world. In France, leading to social responsibility reporting, whereas in Switzerland is still very conservative so large Swiss firms to report their financial condition is relatively compact. The Italian is still very much oriented to the tax, even in some Eastern countries and South America, together with the bookkeeping and accounting is not considered socially appropriate.

6. Competency levels of Business Management and Finance Community
Competence or ability of the user business management and accounting output will largely determine the development of accounting. Because the output is as sophisticated and as powerful as any accounting, business management, and if users can not read, interpret, and understand it will not do any good.

7. Interference with a Business degree Legislature
Regulation of taxation may require certain accounting principles. As in Sweden, where certain tax concessions should be recorded in accounting before it can be claimed for tax purposes; this is also the situation for the LIFO method of inventory valuation in the U.S.. Social protection laws also affect the various accounting standards. An example is the obligation to pay severance dio several South American countries.

8. There are certain Accounting Legislation
In some cases, there are specific legislative regulations for the rules and certain accounting techniques. In the U.S., the SEC determines standards of disclosure and accounting for large companies, with reference to the FASB.

9. Speed ​​Business Innovation
Initially, merger and acquisition activity is not taken into account in accounting, but due to the incorporation of a business that is so popular in accounting erofa force also developed to meet the needs of those concerned.

10. Economic development stage
Countries still rely on the agricultural economy requiring different accounting principles in the advanced industrial countries. In agricultural countries, the level of dependence on credit and long-term business contracts may still be small. So sophisticated accrual accounting is not useful and what is needed is a simple cash accounting.

11. Economic growth patterns
Stable economic conditions encourage greater competition for existing markets that require a stable pattern of accounting and will be much different in countries where conditions are experiencing a prolonged war.

12. Status of Education and Professional Organizations
In the absence of an organized professional accounting and resource
local accounting authority of a country, the standards of another area or another country may be used to fill the vacancy. English adaptation of the factors accounting is a significant environmental impact in the accounting world until the end of World War II. Since then, international adaptation process to switch to U.S. sources. Development of accounting, both from the state itself or adapted from other countries, will not succeed unless the environmental conditions such as those listed above are fully considered.

Like the business world in general, and its accounting practices in corporate financial disclosure in different countries is influenced by various factors. Radebaugh and Gray (1997:47) mentions at least two dozen factors that affect the company's accounting system. Those factors are the nature of corporate ownership, business activities, funding sources and capital markets, tax system, the existence and importance of the accounting profession, accounting education and research, political systems, social climate, economic growth and development rates, inflation, regulatory systems regulations, and accounting rules.

More details, Radebaugh and Gray describes the relationship between the factors mentioned above with the following corporate accounting system.

1. Nature of corporate ownership
The need for disclosure of information and greater public accountability to be found on the company's publicly-owned companies compared with the family firm.

2. Business activities
The accounting system is influenced by the type of business activity, such as agribusiness which is different from manufacturing, or a different small companies with multinational companies.

3. Sources of funding
The need for disclosure of information and greater public accountability to be found in companies that get funding from external shareholders as compared to the company with funding from banks or from the fund family.

4. Tax system
Countries like France and Germany using the company's financial statements as a basis for determining income tax debt, while countries like the United States and Britain to use financial statements have been adjusted by the tax code as a basis for determining the tax debt and delivered separately to the financial statements to shareholders .

5. The existence and importance of accounting profession
Accounting profession that is more advanced in developed countries also make the accounting system used by more advanced than in countries that are implementing a centralized accounting system and uniform.

6. Accounting education and research
Accounting education and research carried out less well in countries that are developing. Professional development is also influenced by education and the quality of accounting research.

7. The political system
Political system run by a very influential country in the accounting system created to describe the philosophy and political objectives in the country, as does the choice of centralized planning (central planning) or privatization (private enterprises).

8. Social climate
Social climate is defined as the attitude of respect for workers' rights and concern for the environment. Information relating to such matters generally affected the social system.

9. Rate of economic growth and development
Changes in economic structure from agriculture to manufacturing will show the other side of the accounting system, among others, began accounting for depreciation of machinery. Services industry also gave rise to consideration of the recording of intangible assets such as brands, goodwill and human resources.

10. The inflation rate
The onset of hyperinflation in some countries in South America makes the thought of using another approach as an alternative to historical cost approach.

11. Regulatory system
In countries such as France and Germany are using the civil codes, the accounting rules used tend to be detailed and comprehensive, in contrast to the United States and Britain are using the common law.

12. The accounting rules
Accounting standards and rules set out in certain countries is certainly not entirely the same as other countries. Role in determining standards of professional accountants and accounting rules were more common in those countries wherewith to enter the professional rules in the rules of the company, such as in Britain and the United States. Meanwhile, Christopher Nobes and Robert Parker (1995:11) explains the presence of seven factors that lead to important differences in the development of international accounting systems and practices. Such factors include (1) the legal system, (2) the owner of the funds, (3) the influence of the tax system, and (4) stability of the accounting profession. (5) inflation, (6) accounting theory and (7) accidents of history.

* The portion of the International Accounting Development

Furthermore Choi et.al (1998: 38) revealed that the structural development of international accounting happens now includes serving as follows:

A. Pattern of Comparative Development
The approach developed by Mueller differently to the development of accounting can be observed in western countries that have market-oriented economic system, including; makorekonomis pattern, the pattern mikroekonomis, disciplined approach to independent, and uniform accounting approach.

Patterns of macroeconomic
Business enterprise goal of course is narrower than the national economic policy. The Company has certain goals to be achieved, often operate in a dimension of time and space is limited, and accountable to the groups a clear ownership. Consequently, normally follows the company's goal of national policy. This is not an absolute condition, because the company is part of the business that affects public kepntingan and directing national policies, so there is a causal relationship of reciprocity. There are three statements related to this pattern are:

1. Business enterprise is an essential unit in the structure of a country's economy.
2. Business companies achieve their goals with the best possible way through its activities in close coordination with the policy-the policy of the national economy in its environment.
3. The public interest is well served if the company's accounting business is closely linked with national policy.

Financial accounting-oriented makrekonomi may formally recognize the value of the discovery of mineral or oil content, calculate depreciation on productive equipment based on units of production, and allow the elimination of certain expenses quickly if this is of interest to regional or national economic development.

Mikroekonomis pattern
Market-oriented economy, including the economy is not so much got a central government administrative intervention, largely entrusted to the economic prosperity of the business activities indvidu individuals and businesses of each company. Thus, in this economy, there is a fundamental orientation which leads to every cell of the activity of the economy. It is so engrained in Western economic organizations in which the orientation is applicable to many business processes, legal, legislative and social issues.

With the activities of private and business as a core business in the market-oriented economy and to perform accounting services for business functions and business firms, it seems only natural that the accounting will orient itself to micro considerations of the same, which was formed in established in the environment. Some of the statements related to this pattern involves:

1. The company provides vocal spots for economic activities
2. The company's main policy is to ensure business survival.
3. Optimization in the economic sense is the best policy of the company to survive
4. Accounting, economics as a branch of business, get the concepts and applications of the application of economic analysis.

The main accounting concepts in the pattern of development that is based on micro-economics is that the accounting must maintain a constant amount of monetary capital investment in the company's real value.

Independent Discipline
Consider accounting as a function of business services to provide enough space to conclude that accounting can build a useful framework for the screened himself from the business process it serves. If this is possible, then the conceptual support of a discipline such as economics is not required. Accounting in other words, relying on him to be an independent discipline.

*
The dominant state in the Development of Accounting Practices

Some countries are dominant on the development of accounting include:
(1) France
(2) Japan
(3) United States

In the progress the countries France and Japan are less dominant than the United States. It can be seen from the development of Japanese accounting in its development is currently based on existing IFRS.

* Knowledge of Basic Accounting Classification

Classification of the International Accounting basis of international accounting classification can be done in two ways, namely:

(1) deductive approach
Which identifies the relevant environmental factors and linking it with national accounting practices, an international grouping or pattern of development proposed.
(2) Inductive Approach
Accounting practices were analyzed individually, the pattern of development or grouping identified and at the end of the explanation is made from the standpoint of economic, social, political and other factors.

International accounting classification can be done in two ways: By considerations and empirically.

Classification of the International Accounting
International accounting classification can be done in two ways: By considerations and empirically. Classification with consideration depends on the knowledge, intuition and experience. Classification empirically using statistical methods to collect data accounting principles and practices worldwide.
There are 4 (four) approach to the development of accounting:
1. Based approach to macroeconomic
obtained from the accounting practices and are designed to improve the national macroeconomic objectives.

2. Based on microeconomic approach
accounting bekembang of microeconomic principles. The goal lies in the individual companies that have the purpose to survive.

3. Based on independent approaches
derived from the business accounting practices and develop an ad hoc basis, with the base slowly and consideration, trial and error, and errors. Accounting services is seen as a function of the concepts and principles taken from the business process being run, and not from the branches of science such as economics.

4. Based on a uniform approach
accounting distandariasi and used as a tool for administrative control by the central government. Uniformity in the measurement, disclosure, and will facilitate the presentation of the designer of government, tax authorities, and even managers to use accounting information in controlling all types of businesses.

Accounting system can also be classified by the laws of a State, namely:
1. Accounting in common law countries have a fair presentation of the character-oriented, transparency and full disclosure and the separation between financial and tax accounting. Dominate the stock market financial resources and financial reporting needs inofrmasi shown to outside investors. Accounting law commonly referred to as the Anglo Saxon.

2. Accounting in code law countries have a legalistic-oriented characteristics, does not allow disclosure of the amount is less, and conformity between financial and tax ankuntansi. Bank or financial ksumber dominate the government and financial reporting and financial reporting is intended to protect creditors. Accounting is also called continental. Provision of accounting parallels the character referred to as the shareholder model and stakeholder role in corporate governance kelila state common law and the legal code.
Many differences in national accounting is becoming increasingly lost. There are several reasons for this
• Hundreds of companies today recorded its shares on stock exchanges outside their home country
• Some state legal code, in particular Germany and Japan to shift responsibility from the government's establishment of accounting standards to private sector groups and independent professional
• The importance of the stock market as a source of funding is growing worldwide.

Classification based Padada fair presentation versus legal compliance pose a major influence on many accounting issues, such as:
1. depreciation, where the load is determined based on the reduction in the usefulness of an asset over the useful economic (fair presentation) or the amount allowed for tax purposes (legal compliance),

2. lease which is substantially the purchase of fixed assets treated as such (fair presentation) or treated as operating leases are common (legal compliance),

3. pension costs accrued at the time generated by the employee (fair presentation) or charged on the basis paid at the time to stop working (legal compliance).

Three regions are the largest equity market, North America, Asia Pacific, and Europe
1. North America
The U.S. economy is experiencing growth and market share without interruption for the year 1990 in 2000, both the NYSE and Nasdaq stock exchanges dominate others around the world in terms of market capitalization, trading value of domestic stocks, foreign stocks trading value, capital of the newly acquired company is registered, the number of shares of domestic companies listed and the number of foreign companies that list their stocks

2. Asia
Asia is expected to become the second most important equity markets. PRC (People's Republic of China) has emerged as a major global economy and the countries of the "tigers" experienced phenomenal growth and development.
Some of the Asian financial crisis shows the vulnerability and immaturity of the economies in Asia and the slow growth of capital markets in the region. Plus the opinion of critics about the lack of accounting measurement, disclosure and auditing standards and monitoring the implementation and enforcement of these standards.
However, future growth prospects in Asia looks strong equity markets. Market capitalization as a percentage of gross domestic product (Gross Domestic Product-GDP) in Asia is low compared to the United States and some major European markets, which suggests that equity markets can play a bigger role in Asia's economy
West

3.Eropa
Europe is the second largest equity market in the world in terms of market capitalization and trading volume. Economic expansion also contributed significantly to rapid growth in equity markets during the second half of 1990-related an.Faktor in continental Europe is slowly changing orientation towards equity has long been characteristic of London's equity markets and North America.

EUROPEAN EQUITY MARKET
European capital markets are undergoing major changes in a short time, partly due to the globalization of world economy and the increasing economic integration within the European Union.
The new culture of equity in Continental Europe
The growth of equity culture in Europe is the basis for estimating the continued growth in European equity markets. Intense competition among European exchanges lead to the development of a culture of equity, which then become more oriented to the investor to enhance the credibility and attract new listings
Many securities regulators and stock exchange markets of Europe has carried out more stringent rules and strengthening enforcement efforts. However, fierce competition also led to the stock exchanges and national regulators to facilitate the listing rules of stock and give a special exemption for the company issuing the stock.
Although during the 1990's the company in the Continental European corporate governance has begun to attract new capital and investors, but many companies including the world's largest companies, is still far behind the standard of disclosure and listing of shares in the UK and North America.

* Differences Fair Presentation and Compliance with State Laws Against the Dominant


Differences fair presentation and compliance with law through many permasahan. This concerns the adjustments made to the application of IFRS as the basis for the presentation. Some problems include:

(1) Depreciation, where the load is determined based on the reduction in the usefulness of an asset during times of economic benefits.

(2) A lease which is substantially the purchase of fixed assets (property) treated as such (fair presentation) or treated as operating leases are common (legal compliance).

(3) Pension costs accrued at the time generated by the employee (fair presentation) paid or charged on the basis of the time you stop working (legal compliance).

* Differences Important Issues Fair Presentation and Compliance Against the Law


Important issues that occur when it is about the application of IFRS basis sebagau presentation. So that the countries that have not made adjustments to the fair presentation put through his report.


* The difference between fair presentation and conformity of law pose a major influence

The difference between fair presentation and conformity of law pose a major influence on many accounting issues. Accounting for common law oriented to the needs of decision-making by outside investors. Compliance with accounting laws are designed to comply with government imposed such as the calculation of taxable income or comply with the national government's economic plan. After 2005, all listed shares of European companies will use fair presentation of accounting in consolidated statements because they will be using IFRS.