Accounting Essay Example
Question1. How International accounting differs from purely domestic accounting.
Domestic accounting is divergence from international accounting in that it is tailored to meet the needs of the local business environments in adherence to the local legal issues touching on accounting profession (Stulz, 2006). Principles of domestic accounting vary in different countries, unlike the principles of international accounting, which are universal in and widely acceptable in different countries. The international accounting is designed to bring harmony across the globe in accounting issues such as taxation, auditing, and financial reporting. In domestic accounting, rules on recognition and financial disclosures may not be as elaborate as they are in international accounting.
International accounting promotes rules and procedures that harmonize the administration of accounting by different investors whereas domestic accounting tends to introduce accounting rules that are in favour of the local investors.
Question 3.Contemporary factors contributing to the internationalization of the subject of accounting
The factors that have contributed to the internationalization of accounting subject include the complex nature of accounting firms. Professional services such as accounting have been deregulated and competition with other professionals is high and hence prompting the need to make accounting subject international so that there can be harmony among the players. Competition among the accounting professionals has also been a factor for internationalization (Stulz, 2006). Competition has led to technological development in accounting packages that are applicable in the international accounting. The accounting software is designed to address the accounting issues to the larger community in the world. The globalization of multinational firms is another factor that has contributed to the internationalization of accounting subject since there is need to have uniformity in accounting procedures.
There have been introduction of multinational companies that operate in various countries. Internalization of accounting subject introduces globally acceptable accounting procedures and hence improving the running of such firms regardless of their jurisdiction.
Question 6.Why international accounting issues have grown in importance and complexity in recent years
The growth of many organizations has led to the increase in the importance of accounting in addressing such issues as auditing, cost analysis and the study of world business procedures. International accounting is also important as a tool for transparency in the banking sector and other financial institutions in the world (Stulz, 2006). Due to the rapid increase of the world population, financial sector has grown tremendously and its core operations are based on international accounting.
The need for international financial reporting is another issue that ha led to the importance of international accounting in the contemporary society. Many institutions whether financial or otherwise have accounting departments that deal with financial matters with an aim of increasing efficiency and confidence in stakeholders. Through financial reports, businesses are able to know whether they are operating at a profit or loss and hence apply the necessary business strategies.
It is important to account for all the resources in any organization. All the assets whether financial or otherwise ought to be tracked and a proper record carried out in a balance sheet. Accountability of resources is therefore a major accounting issue that is crucial in many firms.
Question 7. Identify several internal and external reporting issues that arise when business and investments transcend national borders.
Reports on tax payments vary in different countries. Many multinational companies must therefore adhere to accredited external and internal reporting systems for their tax returns. The rates of tax payments also vary in different countries and this affects the financial reports (Stulz, 2006). Profits generated in different countries may vary because of the discrepancies in government tax rates. When businesses invest in other countries the cost of running business becomes generally higher. This is basically because there are some added costs incurred at the border such as tariffs (Stulz, 2006). Increase in costs is also caused by increased delays at the border. There are other costs associated with use of different languages, fitting into new legal systems and culture to some extent.
Stulz, R. 2006. “The Limits of Financial Globalization.” Journal of Finance, 60(4): pp.1595- 1638.
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