International Financial Statement Analysis

Analysis of financial statements is a deliberative process in order to help evaluate the financial position and results of operations in the present and past, in order to determine the estimates and predictions are most likely about the condition and performance of companies in the future. Analysis of financial statements, but in fact many in the present study the authors use financial ratio analysis because this analysis is more frequently used and simpler.
Financial ratio analysis is the comparison between the two / group financial statement data in a given period, the data can be among the data from the data sheet and income statement. The aim is to give a picture of weakness and the financial ability of the company from year to year. The types of financial ratio analysis is:

1. Liquidity Ratio

This ratio is useful to measure a company’s ability to meet its short term obligations. There are 3 (three) types of liquidity ratios are used, namely:

1. Current Ratio

2. Acid Test Ratio

3. Position Cash Ratio

2. Solvency ratio

This ratio is useful to measure a company’s ability to meet all obligations (short-term debt and long-term debt). There are 4 (four) solvency ratio is used. namely:

1. Total Debt To Equity Ratio

2. Total Debt To Total Assets Ratio

3. Long Term Debt To Equity

4. Long Term Debt To Total Assets

3. Profitability ratios

This ratio is useful to measure a company’s ability to generate profits in a given period. There are 4 (four profitability ratios are used, namely:

1. Return On Equity (ROE)

2. Return On Assets (ROA)

3. Net Profit Margin

4. Gross Profit Margin

The purpose of financial analysis is to evaluate the performance of companies on the present and the past and to assess whether the performance can be maintained. There are two important tools in financial analysis:

1. Ratio Analysis

This analysis includes a comparison of the ratio between a company with other companies in the same industry, the ratio between the time a company or other fiscal period or the ratio of a reference standard.

2. Cash Flow Analysis

This analysis focuses on cash flow statements, which provide information about incoming and outgoing cash flow companies, which are classified into operating activities, investing and financing activities, and disclosures about the activities of non-cash investing and financing activities periodically. For example, if the company has generated positive cash flow from operations.

1. Ratio Analysis

There are three problems to be addressed when conducting ratio analysis in an international environment:

1. Whether cross-country differences in accounting principles lead to significant differences in the numbers of reported corporate financial reports from different countries?

2. How far the differences in culture and economic conditions of local competition and hamper interpretation of the size of the accounting and financial ratios, although the accounting measurements are presented from a different country back in order to achieve “comparability of accounting”? Some evidence that strongly suggests the existence of interstate perberdaan in profitability, leverage, and the ratio and number of other financial reports from accounting and non accounting factor.

3. How big is the difference in the financial statement items are caused by differences in national accounting principles? Hundreds of non U.S. companies that listed shares on U.S. securities exchanges perform a reconciliation footnote disclosures that provide evidence against this claim, at least in the context of the differences between the accounting value under U.S. GAAP and non U.S. GAAP.

A previous study on reconciliation of financial statements by foreign issuers prepared by the SEC with sufficient information. About half of the 528 non U.S. issuers under study reveals a material difference between income reported their financial statements according to GAAP net income of U.S.. Five different types of financial statements expressed by a large number of issuers are:

1. Depreciation and amortization

2. Deferred Costs

3. Deferred tax

4. Pension

5. Foreign currency transactions

This study shows that more than 2/3 issuers who disclose a material difference in earnings report that profit under U.S. GAAP is lower than the non-GAAP earnings in the U.S.. Nearly half of them reported earnings difference is greater than 25%. twenty-five of the 87 issuers that reported earnings under U.S. GAAP is greater than on non U.S. GAAP reporting differences greater than 25%. Sam results were also found for the reconciliation of shareholders’ equity. Overall, the evidence in this SEC study showed that differences in the financial statements under U.S. GAAP and U.S. GAAP is non material for most companies.

2. Cash Flow Analysis

Statement of cash flows are very mendetal is required under U.S. GAAP, UK GAAP, IFRS, and accounting standards in a growing number of countries. Measures relating to cash flow is very useful especially in the international analysis because not too influenced by differences in accounting principles, compared with earnings-based measures of cash flow statement If not presented, often found it difficult to calculate cash flow from operations and the size other cash flows to settle based on actual earnings.

Mechanisms to Overcome

To address the cross-country differences in accounting principles, some analysts present the foreign accounting resize according to a group of internationally recognized principles or according to other, more general basis. Some others develop a complete understanding of accounting practices in a particular group of countries and restricting their analysis to firms located in these countries.

 

FINANCIAL RISK MANAGEMENT

It Fundamental the main objective of financial risk management is to minimize the potential loss arising from unexpected changes in currency rates, credit, commodities and equities. The risk of price volatility faced is known as market risk. There is market risk in various forms. Although the focus of the volatility of prices or rates, management accountants need to consider other risks such as:

1. Liquidity risk arises because not all financial risk management products can be traded freely.

2. Market discontinuity refers to the risk that the market does not always lead to price changes gradually.

3. Credit risk is the possibility that the other party in contract management resikotidak can meet its obligations.

4. Regulatory risk is the risk arising from public authorities banned the use of a financial product for a particular purpose.

5. Tax risk is the risk that certain hedging transactions can not obtain the desired tax treatment.

6. Accounting risk is the chance that a hedging transaction can not be recorded as part of a transaction that seeks to protect the value.

Why Manage Financial Risk?

The growth of risk management services that quickly shows that management can enhance shareholder value by controlling the financial risk. If the company equal the present value of future cash flows, active management of potential risks can be justified in a number of reasons. Stable earnings reduce the probability of default and bankruptcy risk or the risk that profits may not be able to cover contractual debt service.

The Role of Accounting

Management accounting plays an important role in the risk management process. They assist in the identification of market exposure, quantified the balance associated with alternative risk response strategies, measure the potential risks facing the company against certain, noting certain hedging products and evaluate the effectiveness of the hedging program.

Identification of Market Risk

The basic framework is useful for various types of risks mengidentiofikasikan market could potentially be referred to as risk mapping.

Balancing quantify

The role played by accountants in the process of risk management involves balancing the quantification process relating to the alternative risk response strategies. Leih management may prefer to maintain some of the risks involved rather than have to do when the cost of hedging the perceived risk protection higher than the benefits.

Risk Management in the World with a Floating Exchange Rate In a world of floating exchange rates, risk management include:

1. Anticipation of exchange rate movements

2. Measurement of exchange rate risk faced by companies

3. The design of an adequate protection strategy

4. Preparation of internal risk management control

Forecasting the exchange rate changes

In developing the program exchange rate risk management, financial managers must have information about the possible direction, time, and magnetudo changes in exchange rates. Aware of the previous exchange rate outlook, financial management can develop adequate defensive measures with a more efficient and effective. However, is it possible to predict accurately the movement of currency remains a problem. If the exchange rate forecasting is not possible or too expensive to do, then the manager finance and accounting have to adjust their corporate problems in such a way as to minimize the adverse effect of exchange rate changes. This process is known as the management of potential risks.

Management of Potential Risks

Potential for foreign exchange risk arises when the foreign exchange rate changes also change the net asset value, earnings and cash flows of the company.

Potential Risk of Translation

Translational gauge potential risk of exchange rate changes impact on the domestic currency equivalent value of assets and liabilities denominated in foreign currency held by the company.

Protection Strategy

These strategies include:

1. Balance sheet hedging

2. Operational hedging

3. Contractual hedging

Strategies for Hedging Products

Product contractual hedge is a contract or financial instrument that allows the user to minimize, eliminate, or at least mengalihkanresiko market on the other shoulder.

Forward Foreign Currency Contracts

Currency forward contract is an agreement to send or receive a certain amount of currency is exchanged for domestic currency, at a date in the future, based on fixed exchange rates are referred to as the forward exchange rate.

Future of Finance

A financial futures contract has properties similar to a forward contract. As a case of forward, futures are commitments to buy or deliver a series of foreign currency at a specified future date at a price that has been specified.

Currency Options

Currency option entitles the buyer to buy or sell a currency based on the seller’s specified price on or before the specified expiration date. European type options can be exercised only on expiration date.

Currency Swap

Currency swap involves an exchange of present and future of two different currencies based on a pre-determined exchange rate. Currency swaps allow companies to gain access to capital markets can not be obtained before access to a relatively low cost. Swap is also possible for companies to hedge against exchange rate risks arising from international business activities.

Accounting Treatment

FASB issued FAS No.. FAS 133 is clarified through 149 in April 2003, transform and provide a single approach that kompherensif on accounting for derivatives and hedging transactions. No IFRS. 39 contains the newly revised guidelines for the first time provide universal guidance on accounting for financial derivatives. Before the two standards made global accounting standards for the products of incomplete and inconsistent developed gradually.

Practice Issues

Although the guiding rules issued by the FASB and IASB have a lot to clarify the recognition and measurement of derivatives, there are still some problems. The first relates to the determination of fair value. Wallance says there are 64 possible calculations to measure the change in fair value of the risk being protected and the value of hedging instruments.

Speculate in Foreign Currencies

Accounting treatment for foreign currency instruments to be discussed is similar to treatment for forward contracts. The accounting treatment described here is based on the nature of the hedging activities is whether the company’s commitment to protect the value of derivatives, the transaction will occur, the net investment in foreign operations, and so forth.

Disclosure

Analyzing the potential impact of derivative contracts are reported on the performance and characteristics of the rumor of a company is difficult. Disclosures required by FAS 133 and IAS 39 has more or less solved this problem.

Disclosure, among others:

1. Objectives and risk management strategies for hedging transactions

2. Description of the items hedged

3. Identification of the market risk of the posts which the hedged item

4. Description of the hedging instrument

5. Amount not included in the assessment of hedge effectiveness

6. Initial justification that the hedging relationship will be very effective to minimize the risk of market

7. Runs on hedge effectiveness assessment of the actual value of all derivatives that are used during the period

The finer points of Financial Control

Performance evaluation system proved useful in various sectors. These sectors include but are not limited to the corporate treasury, purchasing and overseas subsidiaries. Control of the treasury company-wide performance measurement program include exchange rate risk management, hedging is used to identify and report the results of the hedge. The evaluation system also includes documentation on how and to what extent the company tresury help other business units within the organization.

Proper reference

The object of risk management is to achieve a balance between risk and cost reduction. Thus the proper standard by which to judge the actual performance is a necessary part of any performance appraisal system. This should make clear reference section at the beginning before the creation and protection program should be based on the concept of opportunity cost.

Reporting System

Financial risk reporting system should be able to reconcile the internal and external reporting systems. Risk management activities have a future orientation. But in the end they have to reconcile with the measurement of potential risk and account-akunkeuangan for external reporting purposes.

FOREIGN CURRENCY TRANSLATION

Trade flows are now not only play in one country alone, especially if there is a company which has foreign capital. Free trade agreements such as AFTA was opened wide the door of entry for trade between countries. Payment transactions between the regions will not encounter such problems are often found in international payment traffic, because of all the territory of a country generally uses the same currency.

Companies with overseas operations to prepare the financial statements of significant joint report on the reader information about the company’s operations globally. To meet this, the foreign currency financial statements of subsidiaries are calculated in foreign currency are reported again on the currency of the parent company statements. The process of reporting financial information from one currency to another currency is called the foreign currency translation (translation).

Translation of foreign currency is not the same as the conversion, the translation of physical currency. Translation of foreign currencies is a simple translation in monetary expressions, such as the balance sheet using the British pound and then presented again in equivalent U.S. dollars. Translation does not happen physically, and no transactions can be calculated as in the conversion.
Foreign exchange market is commonly called foreign exchange market we also interpret as market institutions in which people can acquire the facilities to carry out the payment to a resident of another country or receive payment from other state residents. There are many terms in the system tanslasi foreign currencies between countries. Translational forward contract means an agreement to conduct translational currency from different countries with a specific rate (forward rate) and the agreed time. Monetary item that is the obligation to pay or the right to obtain a unit of currency in the foreseeable future. Spot rate is the current rate against foreign currencies.

Openness of a country’s economy is reflected by the growing trade and capital flows between countries. The more open the economy of a country needs its international reserves tend to be larger in order to finance trade transactions. Parameters commonly used to measure the adequacy of international reserves with respect to trade between countries is the marginal propensity to import. The greater the propensity figures indicate the growing need for international reserves, a must-have and the smaller numbers indicate the propensity is little need for international reserves, a must-have (Gandhi, 2006 in Asmanto and Suryandari, 2008). With the availability of sufficient international reserves so when a country is headed for a poor terms of trade which will then affect the real exchange rate of the international reservest can act as absorber.

Approach to accounting for foreign currency translation adjustments from the suspension until there are no holds on the second hybrid approach is shown as follows:
a. Suspension

Abolish the foreign currency translation adjustments on the revenue lancer is usually recommended because the adjustment is the result of the preparatory process repeated. Changes in the domestic foreign currency equivalent to the net assets of the subsidiary will not be recognized and have no effect on the local currency cash flows are run by foreigners. Therefore, it would be wrong to include such adjustments in current income. In these circumstances, foreign currency translation adjustments are accumulated separately as part of the incorporation of capital.

2. Deferralandamortization

Some companies suspend gains and losses and adjustments mengamortisasi exceed its benefits on the related balance sheet items. For example, assume that the acquisition of fixed assets financed by debt issuance. Can be argued that the payment of principal and interest on debt can be covered by cash flow from the use of existing fixed assets. Here, foreign currency translation gains and losses associated with debt will be deferred and amortized against future use of the asset, then, be considered as income in a manner consistent with the depreciation expense.

c. Suspension of Some

The third option in the profit and loss accounting for the translation of foreign currency is to recognize the loss immediately when incurred, but admitted only if the realized profit only. This is a common practice in the United States. Although conservative, suspend foreign currency translation gains simply because the profit is to deny the occurrence of changes in exchange rates. Furthermore, it is not logically consistent to suspend foreign currency translation again but recognize in a foreign currency ranslationlosses.

d. No Suspension

Choice of a final report done by many companies around the world is to correctly identify the advantages and disadvantages of foreign currency translation in the income statement. This option is looking at any type of suspension is false and wrong. Deferral criteria are often considered to be inconsistent and difficult to implement. However, include gains and losses on translation of foreign currency earnings rise smoothly random element in the revenue that could result in significant fluctuations in revenue when the exchange rate change.

In terms of consistency of presentation of LK, there arises a problem that involves a MNC. Suppose that Nestle is the entity that originated and based in Switzerland but have branches operating in the United States, whether the standard should be applied to present the appropriate LK. Switzerland is a country in continental Europe since January 2005 are required to apply the financial reporting standards International Financial Reporting Standards (IFRS) by the International Accounting Standards Boards (IASB). But when viewed from the domicile of the branch of Nestle operations in the United States, then the entity is required to make a sheet that is using the financial reporting standards of the General Accepted Accounting Principles (GAAP), the Financial Accounting Standards Boards (FASB). The same could happen to some MNC like Cevron, Samsung, General Motors, and Yamaha.

In adopting the functional currency, FAS No. 52 and IAS 21 to accommodate the perspective of both parent report and local companies in the combined financial statements. However, whether it’s better if the users of financial statements of the company provided two different perspectives on the report, and whether a report template with two different currencies used in the combined financial statements? Also mentioned that FAS No. 52 is not consistent with the theory of consolidation, the parent company wanted to show the report as a single company. Subsidiary functional currency is the local currency relative to operate independently of its parent company.

FASB decided to oppose the inflation adjustment before foreign currency translation, because they thought that such adjustments would not be consistent with the framework of valuation-cost basis used in the U.S. report. If the rate of inflation in an economy that is very high inflation falls below 100 percent in three years, switched to the current rate method (because the local currency will be the functional currency) will result in foreign currency translation adjustment for the joint venture, because the exchange rate will change significantly for a while. In this condition, charging the shareholders’ equity by foreign currency translation losses on fixed assets in foreign currency will cause a significant effect on financial ratios to equity shareholders as the denominator.

Sumber bacaan :

1. Anthony, Robert N. dan Vijay Govindarajan. Management Control System. Buku 1 Edisi 11. 2005: Salemba Empat.

2. Asmanto, Priadi dan Sekar Suryandari. Cadangan Devisa, Financial Deepening Dan Stabilisasi Nilai Tukar Riil Rupiah Akibat Gejolak Nilai Tukar Perdagangan. Buletin Ekonomi Moneter Perbankan Vol. 11 No. 2. 2008: Bank Indonesia.

3. Choi, Frederick D.S. dan Gary K. Meek. International Accounting. Buku 1 Edisi 6. 2010: Salemba Empat.

4. Reksoprajitno, Soedijono. Ekonomi Internasional Pengantar Lalu-Lintas Pembayaran Internasional. 1993: Universitas Gunadarma.

FINANCIAL REPORTING AND PRICE CHANGES

Changes the definition of price

To understand the notion of price changes, we must distinguish between the general price movements and price movements specific. General price changes occur when the average price of all goods and services in an economy subject to change. Called inflation in the event of price increases as a whole and is called deflation if prices decline. Specific price changes refers to changes in the price of goods or services which are caused by changes in demand and supply.

 

Why Has Potential Financial Statements For the Period Price Changes Over Misleading?
During periods of inflation, asset values are carried at acquisition cost less initially reflect its current value (the higher). Lower value of the assets yield a lower rated load and rated higher profits. This distorts the measurement inaccuracies

1) financial projections based on historical time series of data,

2) the budget is the basis of performance measurement,

3) performance data can not isolate the effect of inflation that can not be controlled. Earnings are valued more in turn will lead to:

1. increase in the proportion of taxes.

2. Demand more dividends than shareholders.

3. Demand of salaries and wages higher than the workers.

4. doing the disadvantage of the host country (the imposition of higher taxes).

General Price Level Adjustment

Constant currency historical cost or general purchasing power equivalent amount of currency is adjusted to changes in the general price level (purchasing power). Nominal amount is the amount of currency that have not been adjusted in such a way. For example, during periods of rising prices, long-lived assets are reported in the balance sheet at acquisition cost initially expressed in nominal currency. Where historical cost is allocated to earnings period now (in the form of depreciation expense), income, which reflects the purchasing power now, matched with costs that reflect the purchasing power (higher) than the previous period when the asset was purchased. Therefore, the nominal amount should be adjusted for changes in general purchasing power of money to be matched precisely to the transaction now.

International Perspective Against Inflation Accounting

Various countries have tried different methods inflation. Actual practice also reflects considerations such as severity paragmatis national inflation rate and the views of parties who are directly affected by the rate of inflation accounting. Observe several different methods of inflation accounting is very useful when assessing the current condition of the most advanced.

United States

In 1979, FSAB issued Statement of Financial Accounting Standards (Statement of financial accounting standards-SFAS) No. 33. Titled “Financial reporting and changing prices”, this statement requires U.S. companies that have inventory and fixed assets. Many users and compilers of financial information in accordance with SFAS No.33 has argued that:

1. disclosure double that required by FASB confusing.

2.  Cost  for the preparation of double disclosure is too large.

3. disclosure constant purchasing power historical cost is not very useful when the data than the current cost.

English

UK Accounting Standards Committee (Accounting Standard Committee-ASC) issued Statement of Standard Accounting Practice 16 (Statement Of Standard Accounting Practice SSAP-16), “current cost accounting”.

Differences SSAP 16 with SFAS 33, namely:

1. If U.S. standards require constant dollar accounting and current cost, SSAP 16 adopt only the current cost method for external reporting.
   U.S. inflation-based adjustment

2. If pad the income statement, expense report in the UK now require both an income statement and balance sheet are now charged, along with the recording of the explanation.

 

In the treatment of gains and losses relating to monetary items, FAS 33 requires

separate disclosure for each digit. SSAP 16 requires two numbers, both of which

reflect the effect of specific price changes, including the monetary working capital

adjustment and the adjustment mechanism

Standards in the UK to allow the three reporting options:

1. present accounts as a current cost basis financial statements with supplementary accounts of historical cost.

2. present accounts of historical cost as the basis of financial statements with supplementary accounts of current cost.

3. provide current cost accounts as the only account that is equipped with an adequate historical cost information.

International Accounting Standards Board

IASB has concluded that the statement of financial position and operating performance in the local currency becomes meaningless in an environment that is experiencing hyperinflation. In particular the financial statements of a company that does the reporting currency hyperinflation economy, based on a framework for assessing whether historical cost or current cost, must be presented again in accordance with constant purchasing power on the balance sheet date. This rule also applies to the corresponding number in the previous period. Purchasing power gains or losses associated with the position of net monetary liabilities or assets put into profits now. Companies that do the reporting must also disclose:

1. Reality that the presentation again to a change in the purchasing power of the unit of measurement has been performed.

2. Frame work asset valuation basis used in the assessment of the main financial statements of historical cost or current cost.

3. Identity and the price index at the balance sheet date, together with the changes during the reporting period.

4. Profit or net monetary loss for the period

Issues Regarding Inflation

There are 4 of them is the issue of inflation accounting:

1. What constant dollar or current cost better measure the effects of inflation.

2. Treatment accounting of profits and losses of inflation.

3. Accounting inflation abroad.

4. Keep away double the fall phenomenon.

Advantages and Disadvantages Inflation

Treatment of gains and losses of monetary items (eg cash, receivables, and debt) considered controversial. Our study of the practices in various countries reveal important differences in this respect.

In America, the gain or loss on monetary items dientukan to present again in constant dollars, the beginning balance and ending balance. And transactions in, all assets and liabilities (including long-term debt), the resulting number is expressed as a separate balance. This treatment was looking at the advantages and disadvantages of monetary items as being different from other types of income.

Ownership Advantages and Disadvantages

Now accounting for the cost of dividing the total income into 2 parts:

1. Profit surgery (difference between revenues and expenses are now present resources consumed).

2. Unrealized of ownership of non-monetary assets with a replacement value of which increases with inflation.

Although measurements of the advantages of ownership is done directly, but the accounting treatment is not like that. The increase in operating assets replacement cost which is a projected outflow higher to replace the equipment, not a good profit is realized or not. If the current cost-based profit measure estimates the company’s assets that could be used, then the change in current cost of inventory, fixed assets and other operating assets are revalued equity owners of which are part of the profits to be retained by the company to maintain its physical capital.

Accounting for Inflation Out of State

Investors pay attention to the company’s potential to produce dividends, because the value of their investment depends on future dividends. Potential of a company to produce dividends directly related to its capacity to produce goods and services.

If a firm to maintain its production capacity, there is a new future dividends that may be considered. Re presenting the accounts of foreign companies and domestic prices would now be equivalent yield information relevant to a decision. This information provides the opportunity for investors to obtain as much information as possible regarding future dividends. Much easier to compare and evaluate the results of consolidation throughout the firms than do today.

Avoiding the Fall Doubles

The size of the adjustment that occurs to eliminate double fall depending on the exchange rate and inflation differences and negatively related. Inflation adjustment to the cost of goods sold or depreciation are intended to reduce the magnitude of earnings to avoid a further assessment of net income.

Due to the influence of an inverse relationship between local inflation and currency values, changes in foreign exchange rates between successive financial statements are generally caused by inflation led to some inflationary impact on the company’s operations.

To avoid the influence of the inflation adjustment process twice, the inflation adjustment must take into account the loss of translation that has been reflected the results ofin a company.

 

Sumber Bacaan : Federick DS Choi and Gary K.Meek.2005.Akuntansi internasional. Edisi Salemba kelima.jakarta-four.

Planning and Management Control

Planning and management control is critical for the company, in this multinational company. However, the reduction in national trade barriers continuously, a floating currency, sovereign risk, restrictions on sending funds across national borders, differences in national tax systems, differences in the level of interest rates and commodity prices and the effect of changing equity to assets, earnings , and the cost of capital is a variable that complicates management decisions. And rapid global Persaingn penyebarn the limited information supports national differences in management accounting practices. Additional pressures include, among others, changes in markets and technologies, the growth of privatization, incentive costs, and performance as well as coordination of global operations through joint ventures and other strategic links.

Company in the conduct of management control requires a planning tool that can identify the relevant factors in the future, scanning the external and internal environment. The tool helps companies identify opportunities and challenges. One such tool is the WOTS-UP analysis regarding the strengths and weaknesses of the company relating to the company’s operating environment. Accountants can also help corporate planners to obtain useful data in strategic planning decisions.

Then, the decision to invest abroad is a very important element in the global strategy of a multinational company. Investment risk, followed by the foreign environment, complex and constantly changing. Formal planning is a must and is generally performed in a capital budgeting framework that compares the benefits and costs of the proposed investment yng. Differences in tax law, accounting system, the rate of inflation, the risk of nationalization, currency framework, market segmentation, restrictions on the transfer of retained earnings, and differences in language and culture adds to the complexity of elements that are rarely found in domestic environments. Adaptation (adjustment) by multinational companies for investment planning models have traditionally been carried out in three areas of measurement:

1. determine the relevant returns for multinational investments
2. measure of cash flow expectations
3. calculate the cost of multinational capital.

A manager must determine the relevant rate of return on foreign investment opportunities mengalisis remedy. However, the relevant rate of return is a matter of perspective: a project or parent companies abroad. Returns from these two viewpoints may differ significantly because of several reasons:

1. restrictions on repatriation of profits by the government and capital
2. license fee, royalt, and other payments which is the profit for the parent company but is a burden for the subsidiary
3. differences in national inflation rate
4. changes in foreign exchange rates
5. differences in taxes. Financial managers need to meet multiple objectives by providing a response to investor groups and noninvestor in the organization and the environment.

If somethink not promise the return of foreign investment that has risk-adjusted returns that value is obtained from local competitors, the parent company’s shareholders would be better to invest directly in local companies.

For managers of multinational companies, measuring the expected cash flows of a foreign investment is quite a challenge. Revenue estimates are based on projected sales and billing experience antipasti. Operations and local tax burden equally predictable. However, there are additional complexities that must be considered:

1. Project cash flow versus the parent company
2. The parent company’s cash flows related to financing
3. Funding for subsidized
4. Political risks

This process should also consider the impact of changes and fluctuations of the currency on expectations of return on foreign currency. The main source of cash flow covers loans from the parent holding company, dividends, license fees, overhead expenses, royalties, transfer pricing for purchases from or sales to the parent company, and the estimated final value of the project. Measurement of cash flows requires an understanding of the differences in national accounting, repatriation policy of the government, inflation, and potential future exchange rate and tax differences.

Differences in accounting principle be relevant if the fund managers rely on the pro forma financial statements with a local basis when estimating the future cash flows. If the rules of measurement used to compile these accounts differ from the rules used in the parent company’s country of origin, they can lead to differences in the estimated cash flows.

Preparation of the world’s information system of a company is crucial in supporting the corporate strategy, including the planning process. Circumstances of geography, formal information communication generally replace the personal contact between the local operations manager with the central office manager. Developments in information technology should reduce, but will not completely eliminate this hassle. The design of the system affect the success achieved:

1. The spread of low to high centrality, used by smaller organizations with limited international business operations and information systems that dominate the domestic needs.
2. Deployment of a centralized high-low, are used by multinational companies with operations in different geographical areas vary.
3. Deployment of a high high centrality, run by the company with strategic alliances throughout the world

Management control system is basically a system that is used by management to build the future of the organization. to build the future of the organization, need to be determined in advance in the business of what the organization will try. Jabawan to that question is the mission of the organization so the organization’s mission is the chosen track to bring the organization realize its future. Expected to dilaksanakannnya management system structure will create a company vision and mission of the organization and then implement them.

The problems that arise in the implementation of the structure of management control systems that can be identified right now is the weakness lies in the structure and process weaknesses. Management control systems can not realize the purpose of the system possibly because its structure does not fit with the environment facing the company, may also occur purpose of management control system is not achieved due to the weak management control system.

Impacts that arise because the company does not impose a structure of management control systems, among others, enterprise organizations will be difficult facing radical changes sharply, the constant, rapid, simultaneous so that the organization will not work and can not make a variety of planning, organizational objectives can not predict the future

Structures necessary to deal with the management control system starts from the observation and pengindetifikasian spur change (change drivers) that affect the environmental characteristics that will enter the company.) Structural components of the system is closely related to each other that together are used to realize the goal of system as claimed Mulyadi, Johny (2001: 8) that the management control structure consists of three components, namely the organizational structure, network information and reward systems. Rerangka designing the structure of designing management control systems use the contingency approach to human resource approach and leverage.

Issues of management control system structure is important to study because it gives hope that the ability for management to map out a comprehensive enterprise business environment that will be entered by corporate organizations in the future, make changes quickly map the trip according to the changing demands that are expected to occur and multiply enterprises as wealth creators institution, so the company has an enormous ability to always make the necessary changes.

Management accounting information for management to prepare a number of companies ranging from data collection to reporting of liquidity and operational forecasts of the various types of expenditure weights. Environmental factors also affect the use of internally generated information. For example, the influence of culture. Cultural, uncomfortable with uncertainty and ambiguity tend to be more ready to accept information technology than those who are not comfortable. Translational factors also affect the use of information generated. FAS No. 52 requires the use of temporal translation method when doing a translation of the accounts of foreign affiliates located in high-affiliated environment. However, the provision does not meet the information needs of companies operating in countries with high inflation because it tends to cause distortion of reality through:

1. Assess the rate is more or less revenue and expenses
2. Report translation gains or losses that are difficult to interpret large
3. Distorts the intertemporal comparison of performance.

Why do we need to pay attention to this distortion?

1. The traditional reporting system has a bad influence on the behavior of salespeople
   Trandisional-reporting system does not provide motivation for salespeople to memfakturkan and send the first of the month
2. System is manipulating the results

For a control system for a multinational company to function properly, the system typically used by many multinational companies to control its foreign operations in many respects much the same as those used domestically. Parts of the system are generally shipped out include financial control and budget as well as the tendency to apply the same standard that was developed to evaluate the domestic operations.

Once the strategic goals and capital budgets are created, the management focus on short-term planning. Short-term planning includes making the operating budget or profit plan when needed in the organization. Plan earnings are the basis for forecasting cash management, operating decisions, and management compensation schemes. Plan of the company income statements of foreign affiliates is first converted according to accounting principles adopted in the parent company’s country of origin and translated from local currencies into the currency of the parent

Structure of Management Control Systems

The structure of management control systems are the components associated with the other together form a system. Each component in the structure has a specific function to achieve the objectives of the system. A healthy structure is the structure of the system that each of the components designed in accordance with the demands of the business environment to be treated the system.

In building the organizational structure is built based on the functions required of the organization is concerned, if an organization built for the demanding business environment into decision-making speed in which the customer in control of business and the hiring knowlegde workes, the organizational structure that fits with the organization is a function that has characteristics, quick response, flexible and innovative.

The structure of management control systems as required by corporate organizations which require all companies memasukil environment has more power to compete. In order to be selected by customer, product and services companies need to have the advantage will not last long, because competitors will find ways to produce the best value for the customer. Therefore, to survive and thrive in a competitive business environment, companies are required to continuously reinvent a competitive advantage.

To be able to survive and grow in a competitive business environment, organizations are not enough companies are only able to be creators of wealth (wealth-creating institution) however, are required to have capabilities far more than that, the company claimed to be a proliferation of institutional wealth (wealth-multiplying institution) to build the company’s ability as a multiple of the multiplication of wealth, management needs to take advantage of the management system specifically designed for the purpose of multiplying wealth.

Effective control system is a system that is directed to two causes, the need for personnel in the control of the inability to achieve organizational goals through the expected behavior, the inability of personnel in the dtingkatkan can achieve through education and training, and provision of adequate technology, the inability of personnel to achieve goals organization through behavior that is expected to be reduced or eliminated through:

1. Formulation of mission, vision, basic beliefs and basic values of the organization are clear.
2. Communicating the mission, vision, core beliefs and values fundamental to the organization of company personnel through personal behaviors of organizational leaders and operational behavior. Through the internalization process, mission, vision, basic beliefs and basic values can be embedded in the organization of all personnel within a shared mission, shared vision, shared beliefs and shared values.Shared mission, shared vision, shared values and shared belief makes people powerless to control behavior as expected in achieving the goals set.
3. Management control system also provides a variety of systems to implement the planning and implementation of the plan. Through the international system of management control, the main activities to make the whole enterprise as an institution has a wealth creator can be implemented in a structured, coordinated, scheduled and integrated so that the achievement of promising companies increasing wealth in sufficient quantity. Process Structure and Management Control Systems of management control system consists of the following six main stages:
   1. Formulation  Strategy

Stage of strategy formulation is a crucial stage survival and growth of the organization. In this stage was observed on the macro trends of environmental change and industrial environments. Based on the observation of these trends do formulation, mission, vision, purpose, basic beliefs, and values of the organization.

1. Strategic Plan

After formulating corporate strategy chosen to realize the vision and mission through the organization, the strategy is then needed to be implemented. The first step is to carry out strategic planning, in this step strategy has been formulated in the balance sheet is translated into a comprehensive strategic and coherent, which consists of three components: strategic goals, targets, strategic initiatives

1. Preparation of the Program

Preparation of the program is a long-term planning process to define the selected strategic initiatives to achieve strategic objectives. Implementation of strategic initiatives requires systematic planning steps to be taken by the company in the long run forward along with the estimated resources required for the program, a long-term plan contains strategic measures chosen to achieve certain strategic objectives together with the estimated resources needed.

1. Preparation of the  Budget

Preparation of the program is a long-term planning process to define the selected strategic initiatives to achieve strategic objectives. Implementation of strategic initiatives requires systematic planning steps to be taken by the company in the long run to the front along with the estimated resources required to execute these steps. preparation programs produce the program, a long-term plan containing measures chosen to achieve strategic goals and their specific strategic resources necessary to estimate it. Budgeting is the process of planning short-term (usually for a period of one year) that lists the steps taken by the company in implementing a portion of the program in a particular program budgeting translated into action plans to be implemented in the fiscal year, the show manager and employee responsible for and allocated resources to carry out these activities.

1. Implementasi
   Once the comprehensive plan is completed, the next step is the implementation of the plan. In the implementation phase of this plan, management and employees to implement the plan contained in the budget to the actual activity. Because the budget is part of the program, and the program is a translation of strategic objectives chosen as the translation strategy is formulated, then the implementation plan, management and employees must always be aware of close links between implementation, budgets, programs, initiatives, strategic objectives and strategies. This realization will maintain detailed steps undertaken in the implementation phase remains in rerangka chosen to realize the vision of the organization.
2. Monitoring
   Implementation of the plan requires monitoring, the results of each step is planned to be measured to require feedback for monitoring the implementation of budgets, programs and strategic initiatives. The results of the implementation plan is also used to provide information for administrators on how far the target has been achieved, strategic objectives have been successfully realized and the organization’s vision can be achieved.

REPORTING AND DISCLOSURE

Most of the discussion which will be performed include disclosures related to noted that financial reporting for external users. Although the disclosure practices vary from country to country, slowly began to arise in common.

Hundreds of companies have improved their disclosure:

1. Voluntarily adopt International Financial Reporting Standards (IFRS) or U.S. GAAP
2. Comply with stock exchange and securities regulators domestic and foreign
3. Respond to various requests for information filed by investors and analysts.

Disclosure Developments

Development of the disclosure system is closely associated with the development of accounting systems. Disclosure standards and practices are influenced by financial resources, legal systems, political and economic ties, the level of economic development, education, cultural and other influences. National differences in disclosure is driven largely by differences in corporate governance and finance.

In most other countries share ownership remains highly concentrated and the bank has traditionally been a major source of corporate financing. Public disclosure is not too advanced on the market, this market and the huge difference in the amount of information given to the major shareholders and creditors to that given to the public is still allowed.

VoluntaryDisclosure

Some studies show that managers have incentives to disclose such information voluntarily. Benefit from a more enhanced disclosure is lower transaction costs in trading securities issued by companies, the interest of financial analysts and investors on the company’s growing, increasing stock liquidity, and lower capital costs. In a classic writing, the two authors argue that the communications manager with outside investors would be incomplete if:

1. Manager has the advantage of information about the company
2. Urge managers are not perfectly aligned with the interests of all shareholders
3. Accounting and auditing rules are not perfect

Mandatory Disclosure Provisions

Transform and protect the investors most of the stock exchange (along with the professional bodies or government regulators such as the U.S. Capital Market Commission and the Ministry of Finance in Japan) impose reporting and disclosure for the benefit of domestic and foreign companies seeking access to that market.
Stock exchanges and government regulatory agencies generally require that foreign companies listed stocks to provide financial and nonfinancial information similar to that required for domestic firms. Foreign companies whose shares are listed on a stock exchange generally have flexibility in the accounting principles used and the scope of the disclosure.

U.S. SEC Financial Reporting Debate

SEC requires registrants from overseas companies to provide financial information which is basically the same as those required of domestic companies. But the company’s financial statements of foreign registrants do not have to be prepared in accordance with U.S. GAAP. Some commentators argue that the SEC financial reporting requirements for foreign firms may hamper efforts to bring the company of securities issued in the United States.

Reporting and Disclosure Practices

The practice of disclosure in the annual report reflects the response of managers to the disclosure provisions issued by the regulator and the incentives they get if you provide information to users of financial statements voluntarily. In most parts of the world is not very meaningful disclosure rules and that means there is no supervision and enforcement. We focus on:

1. Disclosure of information to see the future.
2. Disclosure of segment
3. Cash flow statement and funds
4. Disclosure of social responsibility
5. Specific disclosures for users of financial statements nondomestik
6. Disclosure of corporate governance
7. Reporting and disclosure of business through the internet

Disclosure of Information All Seeing the Future
the term “future-looking information” which includes:

1. Revenue forecasts, profit / loss, profit / loss persaham (EPS) of capital expenditures and other financial pos
2. Prospective information regarding the performance or future economic position that is not too sure when compared with the projected post, fiscal period, and the projected of number.
3. Reports of management plans and objectives of future operations

Disclosure of Segment

International financial reporting standards (IFRS) also discussed the highly detailed segment reporting, accounting standards sebagaimanajuga in many other countries. Segment disclosures assist users of financial statements to better understand how the inside of a company affects the whole enterprise. Actual returns and risks faced by kesempatanyang product line and the area in the world is very different. Reporting responsibilities sosisal refers to the measurement and communication of information about a company’s influence on the welfare of its employees, local communities and the environment.

Special Disclosures for Financial Statement Users Nondomestik And the accounting principles used Such disclosure is:

1. “Re representation for comfort” to the financial information in currencies nondomestik
2. Repeated presentation of the results and financial position is limited by a second group of accounting standards
3.  A complete set of financial statements prepared in accordance with generally accepted accounting principles and the second group discussion about the differences between the accounting principles used in financial statements and the main financial statements akintansi some other set of principles.

Disclosure of Corporate Governance

Corporate governance related to the internal tools used for running and controlling a company. The problems of corporate governance include the rights and treatment to the shareholders, the board’s responsibilities, disclosure and transparency and the role of the parties concerned. Corporate governance practices has gained the attention of regulators, investors and analysts. America, Britain, Australia is an example of a state that requires companies listed their shares to make a disclosure of corporate governance in particular in its annual report.

Disclosure and Reporting Business Through the Internet

Securities trading using the internet has increased the demand for financial reporting and web-based business. Individual investors are increasingly using the WEB to conduct trade and investment decisions, and use the WEB as an important source of information. An important development that will facilitate business rules WEB-based Extensible Business Reporting Language is. XBRL is an early stage of financial reporting revolution. Computer language is built into almost all software for accounting and financial reporting to be issued in the future, and most users do not need to learn how to cultivate it so that it can directly enjoy the benefits.

Disclosure of the Annual Report on Emerging Market Countries

Disclosure of the company’s annual report on emerging market countries are generally less extensive and less credible than the reporting companies in developed countries. But investor demand for information about the company in a timely and credible in emerging market countries and a growing number of regulators to respond to this demand by creating more stringent disclosure provisions and increase surveillance efforts and enforcement.

Implications For The Users of Financial Statements and Managers

The users of financial statements should be expected that large differences in the level of disclosure and financial reporting practices. Although the managers of many companies continue to strongly influenced by the cost of mandatory disclosure, the level of mandatory and voluntary disclosure is increasing worldwide.

Harmonization of International Accounting

“Harmonization” is a process to improve the compatibility (suitability) accounting practices by setting limits on how large these practices may vary. Include the harmonization of accounting harmonization:

1. Accounting standards (which relates to the measurement and disclosure)
2. Disclosures made by public companies associated with the securities offering and listing on stock exchanges
3. Auditing standards Survey of International Harmonization

 Profit International Harmonization:

1. Into global capital markets and investment capital can move across the globe without hitch.
2. High-quality financial reporting standards that are used consistently throughout the world will improve the efficiency of capital allocation.
3. Investors can make better investment decisions; portfolio will be more diverse and less financial risk.
4. Companies can improve decision making strategies in the areas of mergers and acquisitions.
5. The best ideas arising from the standard pat-making activity is spread in developing global standards of the highest quality.

Criticism of the International Standards

Some penentusn says concerning that international accounting standards is a very simple solution for complex problems. Furthermore, it feared that the adoption of international standards will lead to “excessive standards”. Companies must respond to the pressure composition of the national, political, social, and economic and increasingly made the MAGs to meet additional international regulations are complicated and costly. Joint Reconciliation and Recognition
Two approaches are proposed as a possible solution is used to overcome the problems associated with cross-border financial report:

1. Reconciliation
   Through reconciliation, a foreign firm can prepare financial statements using accounting standards country of origin, but must provide a reconciliation between the accounting measures (such as net income and shareholders’ equity) in the country of origin and in countries where financial statements are reported.
2. Mutual recognition (which is also referred to as the “payoff” / reciprocity)
   Pengauan joint occurs when the regulator outside the country of origin to receive the financial statements of foreign companies which are based on the principles of country of origin.

Application of International Standards

International accounting standards are used as a result of:

1. International treaties or political
2. Voluntary compliance (or being pushed in a professional manner)
3. Decision by the international accounting standards-making body

Major International Organizations Promoting Harmonization of Accounting

Six organizations have become a major player in the determination of the international accounting standards and in promoting international harmonization of accounting:

1. International Accounting Standards Board (IASB)
2. Commission of the European Union (EU)
3. International Organization of the Capital Market Commission (IOSCO)
4. International Federation of Accountants (IFAC)
5. Intergovernmental Working Group of Experts on the United Nations International Standards of Accounting and Reporting (International Standards of Accounting and Reporting – Isar), part of the United Nations Conference in Trade and Development (United Nations Conference on Trade and Development-UNCTAD)
6. Accounting Standards Working Group in the Organization of Economic Cooperation and Development OECD Working team.

International Accounting Standards Board

International Accounting Standards Board (IASB), formerly AISC, founded in 1973 by professional accounting organizations in nine countries. IASB objectives are:

1. To develop in the public interest, a set of global accounting standards are of high quality, understandable and can be applied which requires high quality information, transparent, and comparable financial statements.
2. To encourage the use and application of these standards are strictly
3. To bring the convergence of national accounting standards and International Accounting Standards and International Financial Reporting toward high quality solutions

TRANSFER PRICING AND TAXATION INTERNATIONAL INITIAL CONCEPT

The complexity of the laws and rules that determine the tax for foreign companies and the profits generated abroad actually derived from some basic concepts

a. Tax neutrality is that the tax has no effect (or neutral) of the resource allocation decisions.

b. Tax equity is that taxpayers who are facing similar situations should pay similar taxes and the same thing but on disagreements between how to implement this concept.

PROFIT FROM THE RESOURCE TAXATION ABROAD

Some States separti french, costal Rica, hongkong panama south africa, swiss and venezuala apply the principle of territorial taxation and impose taxes on companies that are domiciled in the country that profits generated outside the State. While most countries (including Australia, Brazil, China, Czech Republic, Germany, Japan, Mexico, Netherlands, UK, and Amarika States) to apply the principles throughout the world and impose taxes on profits or income of companies and citizens in it, regardless of the territory of the.

FOREIGN TAX CREDIT

The tax credit can be expected if the amount of foreign income tax paid is not too obvious (ie when the foreign subsidiary sent most profits come from overseas to the domestic parent company). Dividends are reported here in the parent company’s tax return should be calculated gross (gross-up) to cover the amount of taxes (which are considered paid) plus all foreign levies taxes applicable. This means that as if the parent company receives dividends domestically which includes taxes payable to the foreign government and then pay the tax. Indirect tax credit allowed foreign (foreign income taxes deemed paid) is determined as follows: a. Dividend payments (Including all tax levies) b. x foreign tax can be credited c. Profit after tax foreign income

TAX PLANNING IN MULTINATIONAL COMPANIES

In the tax planning of multinational companies have certain advantages over a purely domestic firm because it has greater flexibility in determining the geographic location of production and distribution systems. This flexibility provides the opportunity to utilize their own national tax ataryuridis differences so as to lower the overall corporate tax burden. The observation of these tax planning issues at the start with two basic things:

a. Tax considerations should never mengandalikan business strategy

b. Changes in tax laws are constantly limit the benefits of tax planning in the long term.

VARIABLES IN TRANSFER PRICING

Transfer prices set a monetary value on the exchange between firms that take place between the operating unit and is a substitute for market prices. In general, the transfer price is recorded as revenue by one unit and the unit cost by others. Cross-border transactions of multinational corporations are also open to a number of environmental influences that created the same time destroying the opportunity to increase profits through transfer pricing. A number of variables as tax rate competition infalsi rates, currency values, limitations on the transfer of funds, political risk and the interests of joint venture partners are very complicated transfer pricing decisions. Tax Factor Reasonable transaction price is the price to be received by parties not related to special items the same or similar in the exact same situation or similar. Reasonable method of determining the transaction price that is acceptable is:

1. the method of determining the comparable uncontrolled price.

2. method of determining the resale price.

3. plus the cost price determination methods and

4. other methods of assessment rates Factor Fare Tariffs for imported goods also affect transfer pricing policies of multinational corporations. In addition to the balance didentifikasikan, mulinasional companies should consider the costs and benefits tambaha, both internal an external maupum. High tax rates paid by the importer will generate the income tax base is lower. Competitiveness Factors Similarly, a lower transfer price can be used to protect the ongoing operation of the influence of foreign competition is increasingly tied to the local market or other markets. Such competitiveness considerations must be balanced against the many losses that the opposite effect. Transfer rates for competitive reasons may invite anti-trust action by the government. Performance Evaluation Factors Transfer pricing policy is also influenced by their influence on behavior management and is often the main determinant of company performance. Accounting for Contributions The management accountant can mamainkan a significant role in calculating the balance (trade-offs) in transfer pricing strategies. The challenge is to mempertahanka global perspective when mapping the benefits and costs associated with determining pricing decisions

TRANSFER PRICING METHODOLOGY

In a world with very competitive transfer rates, it will be a big deal when they wanted to transfer pricing resources and services between firms. However, there is rarely a competitive external market for products that are transferred between related entities is special. Problem of determining these costs are felt in the international level, kareba concept of cost accounting is different from one country to another. Principle of Fair A common type of multinational companies is the integration operation. Subsidiaries are in the same control as well as the sharing of source and destination sama.Kebutuhan to declare taxable income in different countries means that multinational companies must allocate income and expenses among subsidiaries and determining transfer prices for transactions between companies.

Determination of Accounting Standards and Standar

Accounting standards are the regulations or rules (including also the laws and statutes) that govern the preparation of financial statements. Standard setting is the process of formulating or formulation of accounting standards. Accounting standards is the result of standard setting. But in practice is different from that specified by the standard. There are four reasons that explain them, among others:

1. In most countries the penalty for disobedience to accepted accounting practices tend to be weak and ineffective.

2. The company may voluntarily report more information than is required.

3. Some states allow companies to ignore the accounting standards if the melakukannnya operations and financial position will tersajikan better results.

4. In some countries accounting standards only apply to the separate financial statements, and not for the consolidated report.

   Accounting standard setting generally involves a combination of private and public sector groups. The relationship between accounting standards and accounting processes are complex and not always move in the same direction. Reasonable accounting peyajian usually associated with common law countries, while accounting law compliance generally found in countries legal codes. This difference is seen in the standard setting process, in which the private sector is more influential in countries with the presentation of natural law, while the public sector is more influential in countries with code law legal compliance.
   Accounting Systems in Developed Countries
   1. UNITED STATES
   Accounting in the United States governed by the Private Sector (Financial Accounting Standards Board, or the Financial Accounting Standards Boardi – FSAB), but a government agency (Capital Market Supervisory Commission or the Securities Exchange Commission – SEC) also has the power to applying his own standards.
   Until 2002 the American Institute for Certified Public Accountants, other private sector entity, define Auditing Standards. In that year the Public Company Accounting Oversight Body established with broad powers to regulate the audit and the auditors of public companies. U.S. companies formed under the laws of the state, not federal law.
   Each state has its own law firm. In general, the law contains provisions for a minimum of accounting records and financial statements periodically. Many law firms that are not strictly enforced, and the report submitted to the local bodies are often not available to the public. Therefore, the provision of financial reporting and annual audits are in reality only the artifacts at the federal level, as determined by the SEC. SEC has authority over companies that list their stocks on U.S. stock exchanges and the companies whose shares are traded over the counter. Other limited liability company with a face no mandatory provisions for financial reporting, so menbuata United States does not look normal according to International Standards.
   The financial statements should be made by the company in the United States include the components:

1. Management reports

2. Independent auditors’ report

3. Primary financial statements (income statement, cash flow lapooran, comprehensive income, stockholders’ equity and statements)

4. Management discussion and analysis or results of operations and financial condition

5. Disclosure of accounting policies with the most important influence on the financial statements.

6. Notes to the financial statements

7. Comparative financial data for five years or ten years old.

8. Selected quarterly data.

   The consolidated financial statements and financial statements shall be published in the U.S. typically does not include only the parent report alone. Consolidation rules require that all subsidiaries that are controlled (ie with the property that exceeds 50% of the shares with voting rights) should be consolidated in full, although operations were no longer homogeneous. Internal financial reports (quarterly) is required for a company whose shares are listed on major stock exchanges. This report usually contains only a summary financial statements are unaudited and management are briefly commented.
   Accounting measurement
   Accrual basis of measurements with a very broad and the recognition of transactions and events are highly dependent on the matching concept. If a change in practices or procedures terajadi, then the change and its effects must be disclosed.
   Business combination should be recorded as a capitalized oodwill pembelian.G as the difference between the fair value of the gifts given in exchange and the fair value of acquired net aktifa (including other intangible aktifa). Goodwill should be reviewed for impairment annually and written off and charged to the profit if the book value exceeds fair value. Translation of foreign currencies to comply with SFAS NO. 52, which uses the functional currency of foreign subsidiaries to determine the translation methodology.
   2. JAPAN
   Accounting and financial reporting in Japan reflects a combination of domestic and international influences. Two separate government agency responsible for the regulation of accounting and corporate income tax law in Japan have more influence as well. In the first half of the 20th century, reflecting the effect of German accounting thought; in the second half, the ideas of the influential U.S.. Lately, the influence of body the International Accounting Standards Board began to be felt and in 2001 major changes occurred with the establishment of private sector organizations as a maker of accounting standards.
   Japan is a traditional community with cultural and religious roots are strong. Group consciousness and interdependence in personal relationships and independent firms as opposed to a reasonable relationship between individuals and groups in western countries. The Japanese company has an equity stake together with each other, and often jointly own other companies. These investments are interlocked industrial conglomerate which produces the so-called meraksasa
   keiretsu. Banks often become part of this large industry group.
   The use of bank credit and debt capital to finance the company’s expanding fairly large lots when viewed from the perspective of the West and especially the company’s management more accountable to the banks and other financial institutions, compared to shareholders. The central government also imposed a strict control over a wide range of business activities in Japan, which means a strong bureaucratic control in matters of business, including accounting. Knowledge of the main business activity is limited to companies and other parties such as banks and the government.
   This usahakeiretsu capital, is in line with the reform of structural changes in the Japanese to overcome economic stagnation that began in the 1990s. The financial crisis that followed the breakup of the Japanese bubble economy is also pushing for a thorough evaluation of the Japanese financial reporting standards. It is apparent that many accounting practices to hide how bad the company in Japan. A major change in accounting was announced at the end of the 1990s to make the economic health of the Japanese companies become more transparent and bring Japan closer to international standards.
   Accounting Regulations and Enforcement Rules
   The national government still has the most significant influence on accounting in Japan. Accounting regulation is based on three laws: Commercial Law, Capital Market Law and the Income Tax Law of the Company.
   a) Commercial Law organized by the Ministry of Justice (MOJ). The law is at the core of accounting regulation in Japan and most have a major influence. Developed from German commercial law, a law enacted early in 1980, but was only implemented in 1899. Protection of creditors and shareholders is the main principle with a very clear dependence on the historical cost. Disclosure of credit worthiness and income available for dividend distribution is equally important. Established a company is required to meet the accounting provision, contained in the rules concerning the balance sheet, income statement, statement of business and supporting schedules perusahaandengan limited liability.
   b) The Company’s public shall further comply with the Capital Market Law (SEL) is regulated by the Ministry of Finance. SEL is based on the Capital Market Law and the U.S. imposed on Japan by the United States during the occupation after World War II. The main purpose of SEL is to provide information in making investment decisions. Although SEL requires the same basic financial statements as commercial law, terminology, form and content of financial statements is defined more specifically by SEL; some postal financial statements reclassified for presentation purposes and additional details are given. However, net income and shareholders’ equity remains the same under the law Kom.ersial and SEL.
   c) Accounting Business Advisory Council (BADC) is a special advisory body for the finance ministry is responsible for developing accounting standards in accordance with the SEL. BADC can be said is the primary source of GAAP in the State of Japan today. But BADC can not exclude that different standards of commercial law. BADC members appointed by the finance ministry and work part time. They come from academia, government, business circles as well as members of the Institute of Certified Public Accountants in Japan (JICPA)
   Major changes in the setting of accounting standards in Japan occurred in the formation 2001dengan Accounting Standards Board of Japan (ASBJ) and the associated regulatory agency known as the Institute for Financial Accounting (FASF). As an independent private sector organization, ASBJ is expected to be stronger and more transparent and less influenced by political pressures and special-purpose, when compared with the BADC. ASBJ working with the IASB in developing IFRS.
   Financial Reporting
   Company incorporated under commercial law are required to make mandatory reports that must be approved in the annual meeting of shareholders which contains: a balance sheet, income statement lapioran, business reports, proposals for the determination of the use (appropriation) profit in the hold, supporting schedules.
   Notes accompanying balance sheet and income statement of accounting policies to explain and provide supporting detail. The report outlines the business operations and information operations, financial position and operating results. A number of supporting schedules shall also be made, apart from the notes to the financial statements, which include:
   a) Changes in share capital and reserves must
   b) Changes in bonds and long-term debt and short-term
   c) Changes in fixed assets and accumulated depreciation
   d) Assets in the underwriting
   e) Guarantees of debt
   f) Changes in provisions
   g) The amount owed to and are collectible from shareholders
   controllers
   h) Ownership of equity in subsidiaries and the number of shares
   company owned by a subsidiary company.
   i) Receivables from subsidiaries
   j) Transactions with directors, auditors must, the controlling shareholder
   and the third party raises a conflict of interest
   k) Remuneration paid to directors and the auditor shall
   This information is compiled for a single year by a parent company and shall be audited by the auditor. Commercial law does not require a cash flow statement.
   Company that listed its shares must prepare financial statements in accordance with the Capital Market Law (SEL) which generally requires the same basic financial statements with the commercial law coupled with the cash flow statement. But according to the consolidated financial statements SEL was not primarily the parent company financial statements. Financial statements and schedules are prepared in accordance with the SEL must be audited by independent auditors. Cash flow forecast for the next 6 months included as additional information in the report to the Ministry of Finance. Other forecast reports are also reported. Overall, the number of very large firms reporting forecasts in Japan. However, this information is only reported in the mandatory and rarely presented in the annual report to shareholders.
   Accounting Measurement
   Commercial law requiring large companies to prepare consolidated reports. Additionally share listed companies must prepare consolidated financial statements in accordance with the SEL. Account is a separate company basis for consolidated reporting and general accounting principles as used for both. Consolidated subsidiary if the parent company directly and indirectly control the financial and operational policies. Although the pooling of interest method is allowed, the purchase method for business combinations commonly used.
   Most accounting practices implemented in recent years as a result of the Great Change in Accounting. Recent changes include:
   A. Requires companies that list their stocks to make
   statement of cash flows
   2. Expand the number of subsidiaries are consolidated based on
   control that and not the percentage of ownership
   3.Memperluas number of affiliated companies accounted for under the equity method based on significant influence, and not a percentage of ownership
   4. Assessing investment in securities of the market price rather than cost
   5. Full provision for deferred liabilities
   6. Full accrual for pension and other pension obligations.
   Accountancy in Japan being reshaped to conform with IFRS.

12. 3. NETHERLANDS
    Accounting standards are the regulations or rules (including also the laws and statutes) that govern the preparation of financial statements. Standard setting is the process of formulating or formulation of accounting standards. Standards are the result of standard setting. However, the practice
    1.di most countries the penalty for noncompliance with the provisions of the official accounting tends to be weak and ineffective.
    2. the company may voluntarily report infomasi more than required.
    3. some states allow companies to ignore the accounting standards when doing operations and financial position will tersajikan better results
    4. and in some countries the standard only applies to the separate financial statements, and not for the consolidated report.
    Accounting standard setting involve a combination of private sector group that includes the accounting profession, users and compilers of financial statements, the employees and the public which includes agencies such as the tax authorities, ministries in charge of commercial law and capital market commission. Stock exchanges are private or public sector (depending on country) also affect the process. In common law countries, the private sector is more influential and auditing profession tends to regulate itself and to better be able to attest to the consideration of the fair presentation of financial statements. In code law countries, public sector and influence over the accounting profession tend to be more regulated by the State. This is why different accounting standards around the world.
    Accounting in the Netherlands has some interesting paradox. The Netherlands has the provision of accounting and financial reporting are relatively permissive, but the professional practice standards are very high. The Netherlands is the country code of law, but accounting-oriented penjayian reasonable. In the Netherlands, accounting is considered as a branch of the business economy. As a result, many economic thought devoted to the topics of accounting and in particular to the accounting measurement.
    Regulation in the Netherlands remained until 1970 when liberal laws enacted annual financial statements. Among the major provisions of the law in 1970 are as follows:
    A. The annual financial statements must demonstrate a reasonable picture of the financial position and results for one year
    2. Keuangn report should be prepared in accordance with good business practices
    3. Basic presentation of assets and liabilities and determination of operating results should be disclosed
    4. The financial statements have been prepared in accordance with a consistent base material and the effect of changes in accounting principles should be disclosed to taste
    5. Noted that financial comparative information for prior periods should be disclosed in the financial statements and accompanying footnotes.
    The quality of the Dutch financial statements are very uniform. The financial statements shall be prepared in Dutch but in English, French, and German can be accepted. The financial statements must contain the following: balance sheets, income statements, records, reports of directors, and other information are recommended. The annual financial statements must be presented either by the parent company only and consolidated. Groups of companies for the purpose of consolidation of the companies that make up the economic unit under the control of the same.
    Dutch accounting has some interesting Pardoks. The Netherlands has the financial reporting provisions of Accounting and the relatively permissive, but the standards of professional practice which is tinggi.Belanda a code law country accounting oriented but fair presentation. Financial reporting and tax accounting is a separate activity for modern day. Furthermore, the orientation of developing without adnya influence the fairness of the stock market. England and Amrika States has influenced the Dutch accounting melabihi same as or even other continental countries, and unlike other continental Europe, the accounting profession has a significant influence on accounting standards and rules.
    The Netherlands is one of the first supporters of the international standards for accounting and acceptable practice. The Netherlands also became home to some of the world’s largest multinational companies, like Philips, Royal Dutch / Shell and Unilever. Annual reporting of the Council issued guidance on accounting principles generally accepted. Council consists of:
    A. Drafting financial statements (Company)
    2. Users of financial statements (union representatives and analysts
    finance)
    3. Auditors of financial statements (the Netherlands Institute of Registered Accountants or
    NivRA)
    4. ENGLISH
    Accounting in the UK to grow as an independent branch of science and pragmatically address the needs and business practices. Over time, successive legislation adds to the company structure and other provisions, but still allows the accountant to have sufficient flexibility in the application of professional judgment. Tauhun since the 1970s, the source of the legal development of the company’s most important is the EU Directives, particularly the Fourth and Seventh Directives. At the same accounting standards and standard-setting process has become increasingly assertive.
    UK accounting for the world heritage is very important. Britain was the first country in the world to develop the accounting profession as we know it. The concept peyajian results and financial position of the fair (which is true and fair view) is also from England. Thinking and professional accounting practices exported to Australia, Canada, the United States and former British colonies like Hong Kong, India, Kenya, New Zealand, Nigeria, Singapore, and South Africa.
    Accounting Regulations and Enforcement Rules
    The two main sources of financial accounting standards in the UK is the company’s legal and accounting professions. Activities of a company incorporated in England is widely regulated by the assets of the so-called law firm. The law firm adjusted, expanded and consolidated throughout the year. For example in 1981, four EU Directives in place, adding mandatory rules regarding the form, accounting principles, and basic accounting conventions. It introduces a form of financial reporting standards in the UK for the first time. Companies can choose an alternative form of balance sheet and profit and loss accounts of four forms. Unadang Act of 1981 also set out five basic principles of accounting:
    A. Revenues and expenses should be matched according to the accrual basis.
    2. Postal assets and liabilities separately in each category of assets and liabilities are assessed separately.
    3. Koservatisme principles (prudence) is applied, particularly in recognition of the realization of profits and all liabilities and losses are known.
    4. Application of accounting policies that are consistent from year to year are required.
    5. Business continuity principle is applied to companies that use accounting.
    The Act contains a broad assessment of rules in which the accounts can be determined based on historical cost or current cost. Company law in 1985 to consolidate and expand the previous rule and was amended in 1989 to recognize ketujh EU directive. This law requires that consolidated financial statements, although consolidation has become a standard practice of an engineering standard accounting statements submitted in the private sector.
    Here are six UK accounting bodies associated with
    Consultative Committee of Accountancy Board, established in 1970:
    A. Institute of Official Licensed Accountants in England and Wales (The Institute of Chartered Accountants in England and Wales – ICAEW)
    2. Institute of Official Licensed Accountants in Ireland (The Institute of Chartered Accountants in Ireland – ICAI)
    3. Institute of Official Licensed Accountants of Scotland (The Institute of Chartered Accountants in Scotland__ICAS)
    4. Association of Official and Licensed Accountants Association (The
    Association of Chartered Certified Accountants – ACCA)
    5. Officially Licensed Institute of Management Accountants (The Chartered Institute of Management Accountants – CIMA)
    6. Institute of Public Finance and Accountancy Official Licensed (The Chartered Institute of Finance and Accountancy – CIPFA)
    The standards developed from the recommendations in the UK accounting principles (issued by the Institute of Official Licensed Accountants in England and Wales) until the establishment committee of the Steering Committee on Accounting Standards (Accounting Standards Steering Committee) in 1970, which was later renamed as the Committee on Accounting Standards (Accounting Standards Committee-ASC). ASC issued a Statement of Standard Accounting Practice (Statements on Standards
    Accounting Practice – SSAP). SSAP issued and confirmed by the six accounting bodies mentioned above, in which one can effectively veto against existing standards. Dearing Report, issued in 1988, expressing dissatisfaction denbgan existing standard-setting process. Company Act of 1989 is important not only in combining the Seventh EU Directives, but also in ratifying the Dearing Report recommendations. Act of 1989 created the Financial Reporting Council (Finance Reporting Council – FRC) with the task of overseeing three parts:
    Accounting Standards Board (Accounting Standards Committee – ASB) which replaces the ASC in 1990, an Urgent Issues Task Force (Urgent Issues Task Force – UITF) and a Supervisory Financial Reporting Panel.
    Accounting Measurement
    Britain to allow both methods of recording the acquisition and merger accounting for business combinations. Based on the method of acquisition, goodwill is calculated as the difference between the fair value of the submission made and the fair value of acquired assets. Goodwill amortized ikapitalisasikan and a maximum of 20 tahun.metode equity digunkana to associated companies (where the company owns 20 percent or more of the voting rights and do not consolidate) and institutions form a joint venture company. SSAp 20 relating to foreign currency translation and the closing exchange rate for the method requires an independent subsidiary and the temporal method for integrated subsidiaries. The first method according to the translation reserve included in shareholders’ equity, whereas under the latter method included in the profit and loss account.
    Assets can be valued using historical cost, current cost, or a combination of both. Therefore the revaluation of land and buildings are allowed. In practice only a few British companies that do the capitalization and development costs. Inventory is valued at the lower of cost or net realizable based on FIFO or average price, while the LIFO is not allowed.
    Leases that transfer the risks and rewards of ownership to the tenant (lessee) and capitalized lease obligations is presented as a liability account. Cost of providing pensions and other retirement benefits should be recognized in a systematic and rational during the period when the employee provides services. Loss contingencies recognized to the extent possible and can be estimated with reasonable accuracy. Deferred tax liabilities are calculated based on the method with a full provision basis for most of the time difference. Long-term deferred tax balances can be assessed using the discounted present value.
    In 2003, the Department of Trade and Industry uses that starting in January 2005, the entire company Inngris allowed to use IFRS, UK GAAP in addition to the newly dijelaska. Thus, the EU initiative for the 2005 companies listed their shares extended to British companies whose shares are not listed
    Sources:
    http://www.scribd.com/doc/21245468/AKUNTANSI-KOMPARATIF-1

Development and Classification of the International Accounting

Introduction

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

Technology transfer and Strategic Alliance The challenge for the accounting profession in the development of accounting:

1. Skill and competency
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.

Factors affecting the Development of International Accounting

In addition there are 8 (eight) factors that influence the development of international accounting, namely:

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. UniformiProfessionalism 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.ty versus flexibility preference for uniformity and consistency than the flexibility to react to specific circumstances.
2. Conservatism versus optimism.
3. 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:

1. 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:

1. Individualism vs. collectivism is the tendency towards a social order composed of loosely arranged compared to the strict order and interdependent.
2. 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
3. Strong vs Weak Uncertainty Avoidance (avoidance ketidakpasian) is the extent to which people feel uncomfortable with ambiguity and an uncertain future.
4. 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.