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Harmonization is a process to improve the compatibility (suitability) accounting practices by setting limits on how large these practices may vary. International accounting harmonization is now one of the most important issues faced by the makers of accounting standards, capital market regulators, stock exchanges, and those who prepare or use financial statements.
Harmonization and standardization of the term as if it has the same meaning. In general, standardization means that the determination of a group of rigid rules and narrow even possible application of a single standard or rule in any situation. Standardization does not accommodate differences between countries, and therefore more difficult to be implemented internationally.
While harmonization is more flexible and open, do not use one size fits all approach, but to accommodate some of the differences and has undergone major advances internationally in recent years.Alpha Comparability of financial information is a concept that is more clear than harmonize. Financial information generated from the system of accounting, disclosure, or auditing can be different than if you have similarities in the way in which users can compare the financial statements (at least in some aspects) without the need to familiarize themselves with more than one system.
Harmonization of accounting include:

  1. Harmonization of accounting standards for measurement and related disclosures,
  2. Harmonization of disclosure will be made by public companies, related to the securities offering and listing on the stock exchange, and
  3. Harmonization of standards for audit

Supporting the International Harmonization
Proponents say that the harmonization of international harmonization (even standardized) has many advantages. Sir Bryan Carsberg, former Secretary General of the IASC, written sometime in September 2000 Cautious approach to analyze the desire for international harmonization shows that the costs and benefits vary from case to case. Those who use English as their mother may feel fortunate that English be the language that is widely used around the world. However, although it can be done, we can not obtain an agreement that the British or other common language should be used to replace the 6800 or so languages currently used in the world. We recognize that language is the vehicle of an irreplaceable cultural and distinct culture that removal would cause huge losses in the field of literature and other cultural expressions.

What about the harmonization of taxation and social security systems? Businesses will have considerable benefits in planning, systems and training costs, and so of harmonization. But this case shows us that the harmonization of other losses. Taxation and social security systems have a strong influence on economic efficiency. Different systems have different effects. The ability to compare how the different approaches in different countries led to the countries capable of increasing their respective systems. Countries competing and competition forced them to adopt an efficient system through the operation of such market power. Approval of the tax system would be like establishing a cartel and would eliminate the potential benefits of competition between countries.
A recent article also supports the existence of a “global GAAP” harmonized. Some of the benefits mentioned include:

  1. Into global capital markets and investment capital can move across the world without any fuss. High-quality financial reporting standards that are used consistently throughout the world will improve the efficiency of capital allocation.
  2. Investors can make better investment decisions; portfolio will be more diverse and less financial risk.
  3. Companies can improve decision making strategies in the areas of mergers and acquisitions
    The best 4.Gagasan arising from the creation of standards activities can be deployed in developing high-quality global standard.

Determining the history of the International Accounting Standards
Beginning in 1971 (before the establishment of IASC), some argue that the determination of international standards is a very simple solution for complex problems. Also stated that the accounting, the social sciences, has had the flexibility that is built up by itself in it and the ability to adjust to a very different situation is one of its most important values. At the international standards of doubt can be flexible to overcome differences in background, tradition, social and economic environment, some people argue that this will be a challenge politically unacceptable to national sovereignty.
Some other observers say that the international accounting standard-setting is essentially a tactic of the accounting firm that provides international accounting services to expand the market. Furthermore, it feared that the adoption of international standards will lead to “standards overload.” Companies have to respond to pressure the composition of national, social, political, and economic growing and increasingly prepared to meet the additional international regulations are complicated and costly. Related argument is the concern of national politics often influence of accounting standards and that influence international politics will again lead to the inevitable compromise of accounting standards.
Two approaches are proposed as a solution to overcome the problems associated with cross-border financial report:

  1. Reconciliation
  2. Mutual recognition (which is referred to as the “payoff” / reciprocity)

Reconciliation lower cost when compared with the full financial statements based on different accounting principles. But only provides a summary, not a complete picture of the company.
Mutual recognition 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. Payoff does not increase the cross-country comparisons of financial statements and can lead to “unequal playing field” which allows foreign companies to apply less stringent standards than those applied to domestic firms. The debate over harmonization may never be fully resolved. Most companies are voluntarily adopting International Financial Reporting Standards (International Financial Reporting Standards-IFRS). And many countries have adopted IFRS as a whole.
International accounting standards are used as a result of:

  1. International treaties or political;
  2. Kepatuhan voluntarily (or driven professionally);
  3. Decision by the national accounting standards-making body.

Efforts of other international standards in accounting is essentially voluntary. Those standards will be accepted or not depends on the people who use the accounting standards. Current international standards and national standards are not the same, do not be a problem, but when these two different standards, national standards should be the first reference (to have the advantage).

International Organizations That Promote Harmonization
Six organizations have become a major player in the international accounting standard setting and in promoting international harmonization of accounting:

  1. Agency for International Accounting Standard 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 expert working group of the United Nations on the International Standard Accounting and Reporting, part of the United Nations conference on trade and development.
  6. Accounting standards working group within the Organization of Economic cooperation and Development (OECD working group)

Also important is the International Federation of Stock Exchanges (FIBV) trade organization for securities and derivatives markets are organized around the world. One goal is to establish standards FIBV harmony to business processes in cross-border securities trading, including cross-border public offerings.

Agency for International Accounting Standard
Agency for International Accounting Standards Board (IASB) formerly IASC, is a standards-making body that is independent of the private sector which was founded in 1973 by professional accounting organizations in nine countries and restructured in 2001. Before the restructuring of the IASC issued 41 International Accounting Standards (IAS) and a basic framework for the preparation and presentation of financial statements.
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 in the financial statements and other financial reporting to help participants in capital markets and other users in making economic decisions.
  2. to encourage the use and application of these standards are strict.
  3. to bring the convergence of national accounting standards and international accounting standards and International Financial Reporting standards towards high quality solutions.

IASB represents accounting organizations from some 100 countries. With such a wide base of support, the IASB is the driving force in the determination of accounting standards.
Structure of the IASB’s New
IASB Council establish a working group to consider how the strategy should have a strategy and structure of the IASC after completing the program of work of this standard. On November 1999 the IASC board unanimously approved a resolution supporting the proposed new structure is essentially:

  1. The IASC will be established as an independent organization
  2. The organization will consist of two main parts, the Trust and the Council, and committee and advisory interpretation remains the standard
  3.  The Trust will appoint board members, conduct surveillance and gather the necessary funds, while the board has sole responsibility for the determination of accounting standards

Restructured IASB met for the first time in April 2001. IASB, after the reorganized entity will include the following:

  1. Guardian Agency. Trustee body lift IASB board members, international financial reporting interpretations committee and the advisory board of standards. The Trust is responsible for collecting funds and to monitor and evaluate the priorities and operation of the IASB.
  2. Council IASB. Council to establish and improve standards of financial accounting and reporting efforts. Responsibilities include “meet the responsibility for all IASB technical permasahalan including the preparation and publication of the International Accounting Standard, International Financial Reporting Standards, and the Draft Standard … as well as final approval of the interpretations issued by the Financial Reporting Interpretation Committee.” And approve project proposals and methods and procedures to develop the standard. Council appointed by the Mayor to give “the best available combination of technical expertise and background of international business experience and relevant market conditions”. The members are appointed for a period of five years, and can be renewed only once.
  3. Standard Advisory Council. Standard advisory board appointed by the trustees, who have professional backgrounds and different geographical, appointed for a three-year renewable “. Standard Advisory Council generally meets three times each year. Responsibilities is to advise the board on the agenda and priorities, to provide views on the council “organization and individual in the determination of the board of the primary standard for the project” and to provide “other counsel” to the board and trusts.
  4. International Financial Reporting Interpretation Committee (IFRIC). IFRIC appointed by the trust. IFRIC interpret the “Application of International Accounting Standards and the international financial reporting standards in the context of the basic framework of the IASB” published draft interpretation and evaluate the comments above and obtain board approval for the final interpretation. Recognition and support for the IASB.

International Financial Reporting Standards have now widely accepted throughout the world, for example:
A. used by many countries as the basis of national accounting terms;
B. used as an international benchmark in most major industrial countries and emerging market countries that make his own standards;
C. accepted by many stock exchanges and regulatory bodies that allow foreign or domestic companies to submit financial statements prepared under IFRS;

D. recognized by the European Commission and other supranational bodies.

U.S. Capital Market Commission’s response to the IFRS
SEC (U.S. Capital Market Commission) stated that three conditions must be met by the company before the SEC accept IASB standards. The three conditions are as follows:

  1. Standards must include the core accounting provisions that determine a comprehensive basis of accounting and generally accepted
  2. Standards should be high quality, resulting in comparability and transparency, and provide full disclosure
  3. Standards must be interpreted and applied strictly.

Comparison between IFRS and other contents of the Comprehensive Accounting Principles
The U.S. Financial Accounting Standards Board (FASB) has initiated a major project to compare IAS with U.S. standards in 1995, and published a detailed report in 1996 and 1999. project comparison between IASC and U.S. GAAP FASB is part of a plan for international activities, which include the promotion of international comparability of accounting standards. The main objective of this study is to provide information in assessing the acceptability of IAS for the registration of securities in the United States. Other studies have been conducted with the aim to encourage convergence between national accounting standards with IFRS.

The EU (European Union-EU)
Treaty of Rome established the EU in 1957, with the aim to harmonize the legal and economic systems of its member countries. European Commission (EC, the EU ruling body) possess full power over its accounting directive to all member countries.
One goal is to achieve the integration of EU financial markets of Europe. To achieve this goal, the EC has introduced a directive and take a huge initiative to achieve a single market for:

  1. Acquisition of capital in the EU
  2. Create a common legal framework for securities and derivatives markets are integrated
  3. Achieve a single set of accounting standards for companies whose shares are listed.

EC has launched a major program of harmonization of law firm immediately after its formation. EC directive today cover all aspects of company law, some of which have a direct influence on accounting. Fourth EU directive, issued in 1978 is a set of accounting rules of the most extensive and comprehensive in the basic framework of the EU. Provisions of the Fourth Directive applies to the accounts of individual companies and include the rules of the form of financial statements, disclosure provisions, and valuation rules. Appropriate and fair view of the most basic provisions and affect disclosure in the form of footnotes, as well as affecting the financial statements. Fourth directive also requires financial statements to be audited. The aim is to ensure that European companies to disclose information that is comparable and equivalent in its financial statements. Seventh directive, issued in 1983, addresses issues consolidated financial statements. At that time, the consolidated financial statements are the exception and not a liability. Seventh Directives require the consolidation of business groups in the amount above a certain size, determines the disclosure in the notes and the directors report, and it does require an audit. Eighth Directive, issued in 1984, discussed various aspects of professional qualifications that are authorized to carry out the audit as required by law (mandatory audit). Basically, this directive determines the minimum qualifications of auditors. This directive also does not address the professional freedom of establishment in the EU countries. Training must be completed under the supervision of an auditor who has been appointed. There should indepedensi, but the Eighth Directive gives discretionary powers to the EU countries to determine the conditions indepedensi.



The purpose of financial analysis is to evaluate the performance of companies on the present and past, and to assess whether the performance can be maintained. Investors, equity research analysts, financial managers, bankers, and users of financial reports other has a greater need to read and analyze reports keuanganasing.

The need to use and to understand, foreign financial statements also increased due to merger and acquisition activities occurring internationally.

1. Analysis of International Business Strategy

Analysis and assessment of international finance is characterized by many contradictions. On one hand, how quickly the process of harmonization of accounting standards lead to a growing pretext comparability of financial information around the world.
Analysis of business strategy is an important first step in the analysis of financial statements. This analysis provides a qualitative understanding of the company and its competitors related to the economic environment. By identifying the drivers of profit and risk factor is the main business, business strategy or business analysis will help the analyst to make a realistic prediction.
The difficulties of analysis of international business strategy:
a. Availability of information
Analysis of business strategy particularly difficult in some countries due to lack andalnya information about macroeconomic developments. Obtain information about the industry is also very difficult in many countries and the number and quality of information companies are very different. Availability of specific information about the company is very low in developing countries. Lately, many large companies that keep records and raise capital in foreign markets and have expanded their disclosure voluntarily switch to accounting principles that are recognized globally as an international financial reporting standards.
b. Recommendations for analysis
Data limitations make the effort to analyze the business strategy by using traditional research methods to be difficult. Often frequent trips to study the local business climate and real bagaimanan industry and company operations, particularly in emerging market countries.

2. Step Step Analysis of Accounting

Analysts need to evaluate kebujakan and accounting estimates, and analyze the nature and flexibility lungkup accounting of a company. The managers of the company is allowed to make a lot of considerations related to the accounting, because they know more about the financial condition and operations of their companies. Reported earnings is often used as a basis for evaluating the performance of their management.

Step-langah in doing evalusai accounting quality of a company:
a. Identify the main accounting policies
b. Analysis of accounting flexibility
c. Evaluation of accounting strategy
d. Evaluation of the quality of disclosure
e. Indentifikasikan potential problems
f. Make adjustments for accounting distortions.

3. Effect Of Accounting Accounting Analysis of Inter-State

Financial analysis covers different areas of jurisdiction. For example, an analyst mengkin several times to study a firm outside the country of origin or to compare companies from two countries or more. A number of countries that have very large differences in accounting practices, disclosure quality, legal system and laws, the nature and scope of business risks, and how to run a business.
This difference means that a very effective analytical tool in the region to be less effective in other regions. The analysts also often face a great challenge to obtain credible information. In most emerging market countries, financial analysts often have high levels of confidence or of limited reliability.

4. Difficulty of Obtaining Information International Accounting

In obtaining the data of International Accounting, there are several difficulties, among others:
a. Depreciation Depreciation expense adjustment will affect profits, it is necessary to consider the age of the functions that must be decided asset management.
b. LIFO to FIFO inventory adjustment supplies should be converted into the FIFO method
c. Backup Backup is the company’s ability to pay or cover expenses for removing the load.
d. Financial Statement Adjustments reformulation of some of the changes after a few calculations on the points above TSB.

5. Coping mechanisms Differences Between Accounting Principles of the State

In addressing the Inter-country differences in accounting principles can be done by several approaches such as:
a. Some analysts present the foreign accounting resize according to a group of internationally recognized principles, or according to other, more general basis.
b. Some of the Others develop a complete understanding of accounting practices in a particular group of countries and companies to limit their analysis of companies located in the State that State.

6. Set the difficulty of International Financial Analysis

Palepu, Bernard and Healy kerangkan make a useful basis for analyzing and assessment efforts by using financial statement data. The basic framework consists of four stages of analysis, namely:
a. Analysis of Business Strategy
b. Accounting Analysis
c. Financial analysis (ratio analysis and cash flow analysis)
d. Prospective analysis (forecasting and assessment)
The degree of importance of each depends on a purpose of analysis. Business analysis framework can be applied in many situations the decision.

7. Use of Website For information about Research Company

To Obtain Information Research Company Many companies do not make optimum use of disclosure of corporate information via the website, both for financial and corporate sustainability. Another finding in this study is that many companies can not provide information for investors, most of the information presented in the company’s website is about the products or services produced and the many companies that do not update the information presented.
a. Internet Financial and Sustainability Reporting
Since 1995, there have been developments of empirical research related to Internet Financial Reporting (IFR), which reflects the development of forms of corporate disclosure. Some studies examine the factors that influence disclosure policy in Alphathe company’s website, such as research conducted by Pirchegger and Wagenhofer (1999) and Saso and Luciana (2008a). Some studies examine the nature and expansion of financial reporting on the company website as an instrument that relate to the stakeholder.
b. Corporate Social Responsibility
Understanding and awareness of business entities to maintain good relations with all stakeholders in an effort to minimizing negative impacts and maximizing positive impacts of the operational activities of the company towards the development berkelanutan this is now understood as a CSR (Corporate Social Responsibility. Strengthening the sustainable development paradigm and corporate social responsibility initiatives CSR reporting or making social and environmental performance are considered as important as the reporting of economic performance. biggest problem is that the quality of non-financial reports are not yet as good as the quality of financial reporting. In addition to far adrift age (> 500 vs. 10-20 years), the gap between the two is marked by a degree of formality, the destination number and interval report.Gazdar (2007) states there are four things that make non-financial reporting is why it becomes very important:

First, the company’s reputation. The more transparent companies in those aspects that are required by all stakeholders, the higher also the reputation of the company. Of course, if the reported performance is good and valid. Therefore, companies should first improve its performance seriously. Validity is also very important, because stakeholders will never forgive a company that does public deception.

Second, serving the demands of stakeholders. Stakeholders are parties who are affected by and could affect the company in achieving its goals. Of course, those who influenced his life by the company are entitled to know the aspects that come into contact with their lives. Those who could affect the company is very necessary to get the right information, so that their influence can be directed to the appropriate destination.

Third, help the company make decisions. A good performance report would certainly include indicators that will help companies see the strengths and weaknesses of himself. Company can be a little more quiet in the aspect that the indicators show strength. On the other hand, companies need to devote greater resources to those aspects that seem weak. Periodic memilikiLaporan company with a consistent indicator is needed here, so the ups and downs of the performance can be monitored and addressed with appropriate keputusanyang.

Fourth, making investors easily understand the performance of the company. As already stated above, there is a higher demand from investors to be able to find out the real performance of the company. Long-term investors really want to know whether the embedded capital is safe or not. Companies that have social and environmental performance have a high likelihood that it is better to continue business, and investors would be more interested to invest in these companies.




Global competition that occurs along with advances in technology are constantly changing significantly the scope of business and internal reporting requirements. Reduction in national trade barriers on an ongoing basis, a floating currency, sovereign risk, restrictions on sending funds across national borders, differences in national tax systems, the difference in 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. At the same time, developments such as the Internet, video conferencing, and electronic transfer change the economics of production, distribution, and financing. Global competition and rapid dissemination of information to support the limited national differences in management accounting practices. Additional pressures include, among others, changes in markets and technologies, the growth of privatization, incentive costs, and performance, and coordination of global operations through joint ventures (joint ventures) and other strategic links. Does it improve the management of multinational companies to not only implement internal accounting techniques that can be compared, but also use these techniques in the same way.


The latest survey found that management accountants spend more time in strategic planning issues than before. Determination of the business model of the big picture, and consists of the formulation, implementation and evaluation of long-term business plan of a company. It includes four main dimensions.

  1. Identify the major factors relevant to the company’s progress in the future.
  2. Formulate an adequate technique to predict future developments and analyze the company’s ability to adapt or take advantage of these developments.
  3. Develop data sources for menditkung strategic choices.
  4. Certain choices translate into a series of specific actions.


In identifying the relevant factors in the future, scanning the external and internal environment will greatly assist companies in recognizing the challenges and opportunities. A system can be applied to gather information on competitors and market conditions. Both competitors and market conditions are analyzed to see the influence of both the standing of the competition and the level of corporate profits. Inputs obtained from this analysis are used to plan the measures used to maintain or increase market share or to recognize and utilize the new product and market opportunities.

One such tool is the WOTS-UP analysis. This Analicis regarding the strengths and weaknesses of the company relating to the company’s operating environment. This technique helps in generating a series of management strategies that can be run.

Decision tools that are currently used in the strategic planning system relies entirely on the quality of information about internal and external environment of an enterprise. Accountants can help corporate planners to obtain useful data in strategic planning decisions. Most of the required information comes from sources other than the accounting records.


The decision to invest abroad is a very important element in the global strategy of a multinational company. Foreign direct investment generally involves large amounts of capital and the prospects are uncertain. 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.

Approach to more complex investment decisions are also available. There are several procedures to determine the optimum capital structure of a company, measuring the cost of capital of a company, and evaluate investment alternatives under conditions of uncertainty. Decision rule for investment options generally require a discounted cash flow investment based on risk-adjusted interest rates are adequate: the weighted average cost of capital. Generally, companies can increase the prosperity of the owner to make an investment that promises a positive net present value. When considering the options that are mutually separated or mutually independent (mutually exclusive), a rational firm will choose the option that promises the net present value of the maximum.

In the international environment, investment planning is not as simple as that. Huokum differences intax, 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. The difficulty for the quantification of these data make existing problems worse.

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, and (3) calculate the cost of multinational capital. This adaptation provides data that support the strategic choices, the third step in the process of enterprise modeling.


A manager must determine the rate of return that are relevant for analyzing foreign investment opportunities. However, the relevant rate of return is a matter of perspective. Should the international financial manager to evaluate expectations of return on investment from the standpoint of foreign project or from the perspective of the parent company? Returns from these two viewpoints may differ significantly due to several reasons such as: (1) restrictions on repatriation of profits by the government and capital, (2) license fees, royalties and other payments which is the profit for the parent company but is a burden for subsidiaries , (3) differences in national inflation rate, (4) changes in exchange rates acing, and (5) differences in taxes.

Opinion that the rate of return and the risk of a foreign investment can be evaluated from the viewpoint of the parent company’s domestic shareholders, are no longer sufficient because:

  1. Investors in the parent company of the more that comes from the world community.
  2. Investment objectives must reflect the interests of all shareholders, not just from domestic.
  3. Observations also show that multinational companies have long-term investment horizon ‘(and not short term). Funds generated abroad tend to be reinvested rather than repatriated to the parent company. Under these conditions, would be more appropriate to evaluate the return from the standpoint of the host country. The emphasis on local projects of return consistent with the objective to maximize the value of the consolidated group.

Adequate solution is to recognize that financial managers must meet multiple objectives, by providing a response to investor groups and noninvestor in organization and in its environment. Host country governments is one of the group for foreign investment. Match between the goals of multinational investors and host countries should be achieved through two financial return calculations: one from the standpoint of the host country, and the other from the viewpoint of the parent company. The host country’s point of view assumes that a favorable foreign investment (including capital costs of local opportunities) would not be wrong in the somber allocate scarce host country. Evaluation of investment opportunities from the local viewpoint also provides useful information for the parent company.

If a foreign investment does not promise a return on risk adjusted value is higher than the return obtained by a local competitor, then the parent company’s shareholders would be better to invest directly in local companies.



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.

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 the potential risks and financial accounts for external reporting purposes.



Of all the environmental variables that must be considered by the manager of finance, foreign currency only variable that had an effect equal to the tax variable. Tax factors greatly affect the decision regarding which company to invest, what form of organization is used, how to fund it, when and where to recognize the elements of income, expenses and how the transfer prices charged.


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. This concept includes instilah tax neutrality and tax equity. Neutrality means that the tax has no effect (neutral) to the resource allocation decisions. In other words a business decision driven by economic fundamentals seoperti rate of return and not tax considerations. Tax means tax equity wajub facing similar situations should pay similar taxes, but there is disagreement antarbagaimana interpret this concept.


A company can do business internationally by exporting goods and services or to make foreign investments, directly or indirectly. Rarely lead to potential export taxes in the importing country, it is difficult for importing countries to set a tax on foreign exporters. On the other hand a company that is oriented in the other State through a branch or affiliate company is taxable in that State.


Oriented companies overseas face various types of taxes. Direct taxes such as income tax, is easy to recognize and generally disclosed in the financial statements of the company. Indirect taxes such as consumption taxes can not be identified clearly and not too often expressed, they are generally hidden in postal costs and other expenses.

Corporate Income Tax, may be used more widely to generate revenue for the government compared with other major taxes with the possible exception of an excise bead.
Tax levy is a tax imposed by the government of dividends, interest and royalty payments received by foreign investors.

Value added tax is a consumption tax that is found in Europe and Canada. The tax is generally imposed on the value added of each stage of production or distribution. This tax applies to total sales minus purchases of intermediate unit seller.
Border taxes such as customs and import duties are generally geared to keep Agara domestic goods can compete with the price of imported goods. Thus the tax imposed on imports is generally performed in parallel, and other indirect taxes paid by domestic manufacturers of similar goods.



Each country claims the right to impose taxes on income generated within its borders. However, the national philosophy on the taxation of resources from abroad is different and this is important from the perspective of a tax planner. Most countries (including Australia, Brazil, China, Czech Republic, Germany, Japan, Mexico, Netherlands, United Kingdom, and United States) to apply the principles throughout the world and impose taxes on profits or income of the company and the citizens in it without looking at the territory of the State. The underlying idea is that a foreign subsidiary of a local company is a local company that happens to operate overseas.


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 system. In wearing a lot of sources of foreign tax that the tax authorities to focus on the organizational form of foreign operations. A branch is generally regarded as an extension of the parent company. Thus the profits immediately consolidated with the parent company’s profits and fully taxed as income in the year generated, regardless of whether sent back to the parent company or not.


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 separti 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 Tariff

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 can be based on the difference in cost increases or market price. Environmental influences on transfer pricing also raises several questions regarding the pricing methodology. The principle of fair or transfer pricing between firms by assuming that the transaction occurred between parties who are not related instimewa in a competitive market. According to the Income Tax laws in the U.S. are the methods:

1. Method of Equivalent Rates are Not Controlled

Based on this method of transfer pricing is determined by reference to prices used in transactions between companies that equal or equivalent independent company with unrelated third parties.

2. Method of Controlled Transaction Not Equal

This method is applied to the transfer of intangible assets. This method identifies the level of royalty rates with reference to uncontrolled transaction in which the intangible assets of the same or similar transferable. As uncontrolled price method are equivalent, this method relies on a comparison of the market.

3. Method of Selling Price Return

This method of calculating reasonable transaction price that begins with the prices charged on the sale of the goods in question to an independent buyer. Sufficient margin to cover expenses and profit nomal then subtracted from this price for transfer pricing between companies.
4. Method of Determining the Cost Plus

This method is useful when the semi-finished goods transferred between firms or foreign affiliates if an entity is a sub-contractor for other companies.

5. Comparable Profit Methods

This method supports the general view which states that taxpayers are facing a similar situation should also get similar benefits for some period of time.

6. Separation Methods Profit

This method is used if the reference product or the market is not available. This method involves the division of profits generated through transactions with related parties that is special between affiliated companies is based on a reasonable way.

7. Other Pricing Methods

This method can be used if it produces a more reasonable price measure accurately.


In practice, some transfer pricing methods are used together. Factors that influence the selection of transfer pricing methods, among others, the company’s goal: if the goal is to manage the tax burden, or maintain the company’s competitive position, or an equivalent job evaluation memprromosikan.

Technology and the global economy raises its own challenges for many of the underlying principles of international taxation, that every nation has every right to decide for itself how much tax can be collected from people and businesses in the region. However, governments around the world requires the transfer pricing method to the principle of a fair price. That is, multinational companies in different countries are taxed as if they were independent companies which operate naturally from one another. The calculation of fair prices is irrelevant as fewer and fewer companies are Beropreasi in this way. The effect of national taxation, cooperation and sharing of information between tax authorities more closely around the world. Tax competition is also getting bigger. Internet makes the effort to take advantage of a tax haven country more easily. Single tax also used as an alternative to use in determining the transfer price of taxable income.



  1. Choi, Frederick D.S., and Gerhard D. Mueller, 2005., Akuntansi Internasional – Buku 1, Edisi 5., Salemba Empat, Jakarta.
  2. Choi, Frederick D.S., and Gerhard D. Mueller, 2005., Akuntansi Internasional – Buku 2, Edisi 5., Salemba Empat, Jakarta.
  3.  Lymer, A., (Ed), (1999), Special Section: The Internet and Corporate Reporting in Europe. European Accounting Review Vol. 9, pp. 287-396.

Tugas 2



International accounting disclosure practices are influenced by differences in corporate financial governance in a country

Disclosure standards and practices are influenced by financial resources, legal systems, economic political 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 the United States, Britain, and the country – other countries Aglo American equity markets was widespread among shareholders and investor protection is institutionally ditekankan.Investor play an important role, demanding financial returns and increasing shareholder value. Pengukapan public is very advanced as a public company respos of accountability.
In other countries such as France, Japan, and some developing countries share ownership remains highly concentrated and the bank is the main source of finance companies advanced on the market – this market and the huge difference in the amount of information that is given to large shareholders and creditors to that given to public is still allowed. And establish firm discipline.

Voluntary Disclosure

Some studies show that managers have an incentive to disclose more. 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, the increased share liquidity, and lower capital costs. Investors the world demanding more detailed information and more timely voluntary disclosure level is increasing both in developed countries as well as the State finance berkembang.Pelaporan into the mechanism of communication with outside investors who do not complete if the incentives are not aligned with the interests of managers of all shareholders. 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.
Company managers often delay disclosure of negative news and the financial statements further demonstrate the positive side of the company and assess more performance and financial prospects set perusahaan.Aturan disclosure provisions – provisions to ensure that shareholders receive timely, complete and accurate. While the external auditor to try to ensure that the accounting manager menenerapkan appropriate accounting policies, make a reasonable estimate, has a record of accounting and control systems provide adequate and timely disclosure. Choice of disclosure by managers and reflects the combined effect of the disclosure provisions and incentives to disclose information voluntarily.

Mandatory Disclosure Provisions

Stock and government regulatory agencies generally require that records the shares of foreign companies to provide financial and nonfinancial information similar to that required for domestic firms. Wahib disclosure is the disclosure of accounting and reporting required in accordance with Accounting Standard reported that the embrace in their respective countries.
Purpose: Protection of Investors
Investor information and material through the monitoring and enforcement
In particular:
1.  Provide material information to investors.
2. Oversee and enforce market rules.
3. Overcoming Cheating in a public offering, trading, voting and securities offerings.
4. Trying to find comparability of financial information

Market Characteristics
Market is fair, orderly, and efficient system of free from abuse and errors –
1.  Promote equal access to the information and the opportunity to view (equity market) mingkatkan liquidity and reduce transaction costs (market efficiency)
2. Donated through the supervision and enforcement of freedom from abuse through monitoring and penegapan.
The practice of disclosure in the annual report reflects the response of the manager of the provisions pengukapan issued by the regulator and the incentives they get if you provide information to users of financial statements voluntarily. If it is not required pengukapan pengukapan becomes voluntary. Managers. Company will not comply with disclosure rules if it raises compliance costs greater than the cost of non-compliance. It is important to distinguish between disclosure of the “required” and that obviously made the disclosure. Focus attention only to the rules of disclosure without a real look at the practice of disclosure would be misleading. Disclosure rules around the world are very different in some ways like the statement of cash flows and changes in equity, related party transactions, segment reporting, the fair value of financial assets and liabilities and profit persaham. Disclosure to be discussed are:

1. Disclosure of Seeing the Future
Disclosure of information to see the future is considered highly relevant in equity markets around the world. The term “information see the future” include:
1. Forecast revenues, income (loss), earnings (loss) persaham, capital expenditures and other financial post
2. Prospective information regarding the performance or future economic position is not too sure when compared with the projection of the post, the fiscal period, and the projected number of
3. Reports of management plans and objectives of future operations.

2. Disclosure of segment
Investors and analysts will request information regarding operating results and financial industry segments classified as significant and increasing. Example, financial analysts in the United States has consistently been asked disagregat report data in the form of a much more detailed than they are now. International Financial Reporting Standards (IFRS) also discussed the highly detailed segment reporting. This report helps the users of financial statements to better understand how the parts of a company affects the whole enterprise.

3. Cash flow statement and fund flow
IFRS and accounting standards in the United States, Britain, and a large number of other countries require the presentation of cash flows.

4. Disclosure of social responsibility
Today the company is required to demonstrate a sense of responsibility to a bunch of so-called interested parties (stakeholders) – employees, customers, suppliers, governments, activist groups, and the general public.
Information regarding the welfare of employees has long been a concern for labor organizations. The problem areas of concern related to working conditions, job security, equality of opportunity, workforce diversity and child labor. Employee disclosure also preferred by investors because it provides valuable input regarding labor relations, cost, and productivity.

5. Specific disclosures for non-domestic users of financial statements and the accounting principles used
Financial statements may contain specific disclosures to accommodate the users of financial statements nondomestik. Such disclosure is:
1. Repeated for the convenience of the presentation of financial information into currency nondomestik
2. Repeated presentation of the results and financial position is limited by the two accounting standards keompok
3. A complete set of financial statements prepared in accordance with accounting standards kesua groups, and some discussion about the differences between the accounting principles that are widely used in the primary financial statements and a few other sets of accounting principles.
Many companies in countries that do not use English as primary language translation also perform throughout the annual report of the home country language into English. Also, some companies prepare financial statements in accordance with accounting standards more widely accepted than domestic standards (particularly IFRS or U.S. GAAP) or in accordance with both domestic and a second group of standard accounting principles.

Accounting Disclosure purposes in Equity Markets

Effect of Capital Market
In a competitive economy, the disclosure is a means to channel koorperasi koorperasi accountability to capital providers (investors) and to mepermudah allocation of resources to their most productive use.
Koorperasi a need to attract capital in a very large amount to finance the production and distribution activities are extensive. Therefore internal pembiyaan is highly dependent on external capital invested by the investor on a koorperasi, In return, an investor requires disclosure (tansparansi koorperasi) in which investors can assess the quality of their stock to cultivate.
Conceptual link between disclosure and cost of capital meingkat of the theory of investment behavior under conditions of uncertainty, namely:

  1. In a world of uncertainty, investors look at returns on investment securities as money received as a consequence of ownership.
  2. Because of the uncertainty of return is viewed in a probabilistic sense.
  3.  Investors use a number of different measures to quantify the expected results of a security.
  4. Investors prefer a high return rate for a certain risk level or vice versa.
  5. The value of a security is positively related to the flow of expected results and inversely related to the risks associated with the refund.
  6.  Thus, disclosure of the company will increase the probability distribution of outcomes expected by investors by reducing the uncertainty associated with the refund. So will improve performance (performance of the company) in the eyes of investors that lure investors to invest on a larger similar securities so as to reduce the cost of capital.

Distinguishing aspects of Corporate Financial Disclosure Practices

Notes to the financial statements intended to amplify or clarify items presented in the main part of the financial statements (income statement, changes in capital, balance sheet and cash flow). In most cases, all the necessary data reader, can not be presented in the financial statements themselves, therefore the report must include the essential information presented in the notes to financial statements. Notes to the financial statements may take the form of narrative, in part or in full. Notes to the financial statements are not only helpful for users who do not report such a quantitative understanding of accounting information but is also important to understand the performance and financial position.
Level of disclosure in the financial statements are the things that need to be considered by the assessment (judgment) managers. Level of disclosure that is moving towards full disclosure (full disclosure) will reduce the information asymmetry is a necessary condition (Necessary condition) to do earnings management (Trueman and Titman, 1998). Therefore the level of disclosure is negatively related to earnings management. Companies with a minimum level of disclosure likely to do earnings management and vice versa (Lobo and Zhou, 2001) in Yanivi (2003).
In the statement of financial accounting standards (SFAS) No. 1 on presentation of financial statements, paragraph 70 says:
Notes to the financial statements include narrative explanations or details of the amount shown in the balance sheet, income statement, cash flow statement and statement of changes in equity as well as additional information such as contingency obligations and commitments. Notes to the financial statements also include the information required and encouraged to be disclosed in the Statement of Financial Accounting Standards and other disclosures necessary to produce a fair presentation of financial statements.
Notes to the financial statements disclose:
1. Information on the basic financial statements and accounting policies are selected and assigned to important events and transactions.
2. The information presented in GAAP but not presented in the balance sheet, income statement, cash flow statement and statement of changes in equity.
3. Additional information is not presented in the financial statements but is required in order to be fair representation.

The more complete informsi disclosed in the notes to the financial statements (full disclosure) the financial statements, the reader will further understand the company’s financial performance.
Rate Disclosure
In deciding what information will be reported, the usual practice is to provide sufficient information for judgments and decisions affecting the users. This principle is often referred to as full disclosure (full disclosure), recognizes that the nature and amount of information included in financial statements reflect a series of trade off assessments. This trade off between (1) the need to disclose in sufficient detail the things that will affect the decisions of users, with (2) the need to condense the presentation of information in order to be understood. In addition, preparation of financial statements must also take into account the cost of manufacture and use of financial statements (Kieso and Weygandt, 2002).
In case of information asymmetry is high, then the users of financial statements do not have enough information to know whether the financial statements, in particular earnings have been manipulated. Microstructure market theory says that one of the adverse selection problem faced by decision makers is the possibility of firm-specific information that the material not disclosed to the public (Yanivi, 2003). Capital market regulators to reduce this information asymmetry by making the minimum requirement for disclosure needs to be done by the companies listed on stock exchanges. One such regulation is the decision of the Capital Market Supervisory Board chairman KEP-06/PM/2000 number of guidelines for financial statement presentation. Greenstein and Sami (1994) in Yanivi (2003) examined and found that the obligation of the Securities Exchange Committee (SEC) regarding the disclosure of public enterprise segment in the U.S. stock market has reduced the information asymmetry is indicated by a decrease in bid-ask spread of the company.
Level of disclosure in the financial statements will help users of financial statements to understand the content and the numbers reported in financial statements. There are three levels of disclosure that is full disclosure, disclosure is reasonable, and adequate disclosure. Refers to the full disclosure of all information provided by the company, well-informed financial and nonfinancial information. Full disclosure not only include the financial statements but also includes information provided in the management letter, company prospect, and so on. Adequate disclosure is the disclosure required by applicable accounting standards. While the disclosure is reasonably adequate disclosure coupled with other information that could affect the fairness of financial statements such as contingencies, commitments and so forth.
Imhoff and Thomas (1994) in Yanivi (2003) proved that the quality rating of the analysis was positively related to conservatism in the estimation and selection of accounting methods, and a number of detailed disclosures on the reported figures. The implications of this discovery is a company that is more conservative in making estimates and choose the method of accounting (or management company with a level of income / low income smoothing) will reveal more information. If companies choose to report conservative earnings management / low earnings smoothing. Then it shows a negative relationship between income smoothing the level of disclosure.
Quality of Disclosure
Disclosure quality in corporate annual reports known by a variety of concepts. Among others, the sufficiency (adequacy) (Buzby, 1975), completeness (comprehensiveness) (Barrett, 1976), Informative (informativeness) (Alford et al., 1993), and on time (time lines) (Courtis, 1976; Whittred, 1980 ). Imhoff (1992) refers to the level of completeness as a characteristic quality of disclosure, while Singhvi and Desai (1971) refers to the completeness (completeness), accuracy (Accuracy), and reliability (reliability) as the characteristic quality of disclosure. Empirical indicators of the quality of expression in the form of disclosure index (disclosure index) which is the ratio (ratio) between the number of elements (items) information that is filled with a number of elements that might be met. The higher the number the disclosure index, the higher the quality.


Difference between the translation and conversion of foreign currency

Translation is the process of restatement of financial statements information from one currency to another currency.
• The issue of exchange rate combined with a variety of translation methods that can be used and treatment “Profit / Loss” different translational outcomes make comparisons of financial statements from one company to another or the same firm in different periods be difficult.
• Reasons translational
• Companies with overseas operations is the Company with extensive operations, can not prepare consolidated financial statements if their accounts and the accounts of subsidiaries are not disclosed in the single currency.
• The scale of international investment activity that extends the current increases the need to deliver information to readers in other countries who make significant consolidated financial statements that enable the reader to gain a holistic understanding of the operating companies, both domestically and abroad.
• Reasons translational
Another reason:
• Take note of the foreign exchange transactions
• Reporting the activities of international branches and subsidiaries
• Reporting the results of independent operations overseas
• Terminology

• Translation is not equal to the Conversion.
• Conversion: physical exchange takes place between currencies
• Translation only change in monetary units.
• There is no physical exchange that occurred.
• There are no related transactions that occur, like when done conversion.
• The value of domestic equivalent of foreign currency obtained by multiplying the balance in foreign currency with the direct exchange rate quota.
• Terminology
Foreign currency translation The process is repeated presentation of financial information from one currency to another currency. While foreign currency conversion between the exchange of one currency to another currency physically.
The difference is, the translation is simply a change of monetary units, for example, on a balance sheet that is expressed in British pounds are presented back to the U.S. dollar equivalent value. There is no physical exchange that occurred, and no relevant transaction occurs. While the conversion, allowing the physical exchanges that occur and there is a related transaction occurring.

In terms of foreign currency translation
1. Conversion, an exchange of one currency into another currency.
2. Exchange rate now, the exchange rate prevailing on the date of the relevant financial laporang.
3. Net asset position at risk, the excess assets are measured or denominated in foreign currency and in translasikan at the exchange rate of duty is now measured or denominated in foreign currencies and translated at the exchange rate now.
4. Exchange forward contracts, an agreement to exchange currencies of different countries by using a specific rate (forward rate) at a given date in the future.
5. Functional currency, is the main currency used by a company in the conduct of business activities. Usually such currency is the currency of the State where the company is located.
6. Historical exchange rate, the exchange value of foreign currency that is used when an asset or liability denominated in foreign currencies bought or going.
7. Reporting currency, the currency used in preparing the company financial statements.
8. Spot exchange rate, the exchange rate for currency exchange in the time immediately.
9. Translation adjustments, the adjustments arising from the translation of financial statements of a company’s functional currency into the reporting currency.
Glossary of foreign currency translation, adapted from GAAP (SFAS) No.52, 1981.

1. Attributes, quantitative characteristics of an item being measured for accounting purposes. Example, historical cost and replacement cost which is an attribute of an asset.
2. Conversion, pertukatan a currency into another currency.
3. Present exchange rate, exchange rate prevailing on the date of the relevant financial statements.
4. Discount, while the subsequent exchange rate lower than current levels.
5. Net asset position at risk, as measured in excess of assets or denominated in foreign currencies and translated at the exchange rate of duty is now measured or denominated in foreign currencies and translated at the exchange rate now.
6. Foreign currency, a currency other than the currency used by a State, a currency other than the reporting currency used by the company.
7. Financial statements in foreign currencies, the financial statements using foreign currency as the unit of measurement.
8. Foreign currency transactions, the transaction (ie sale or purchase of goods or services, or debt loans or accounts receivable) under the conditions stated in currencies other than the functional currency of the company.
9. Foreign currency translation, the process to declare the amounts denominated or measured in one currency into another currency using the exchange rate between two currencies.
10. Foreign operation, an operation that produces financial statements that (1) combined or consolidated or accounted for under the equity method in reporting the company’s financial statements and (2) arranged in foreign currencies other than the reporting currency of the reporting enterprise.
11. Forward exchange contacts, an agreement to exchange currencies of different countries by using a specific rate (forward rate) at a given date in the future.
12. Functional currency, the currency used by suatau yanga major companies in the course of business, and in generating or using cash.
13. Historical exchange rate, exchange rate of foreign currency that is used when an asset or liability denominated in foreign currencies bought or going.
14. Local currency, the currency of a State that is used; the reporting currency used by a domestic or foreign operations.
15. Items of monetary policy, the obligation to pay or the right to receive a unit of currency in a fixed value in the future.
16. Reporting currency, the currency used in preparing the company financial statements.
17. Completion date, the date when the debt is paid by an uncollectible receivables.
18. Spot exchange rate, exchange rate for currency exchange in the time immediately.
19. Date of the transaction, the date when a transaction is recorded in the accounting records of the reporting company.
20. Translation adjustments, adjustments arising from the translation of financial statements of a company’s functional currency into the reporting currency.
21. Unit of measurement, the currency used to measure the assets, liabilities, revenues and expenses.

Differences in gains and losses of foreign currency translation

If the point of view of local currency to be used (local companies viewpoint), the entry of the translation adjustment in current earnings do not need to be done. Enter translation gains and losses in earnings will distort the real financial relationships and can mislead the users of such information. Translation gains or losses should be treated from the standpoint of local currency as an adjustment to equity owners.
If the parent company’s reporting currency is the unit of measurement of the financial statements are translated (the parent company’s point of view), it is advisable to recognize gain or loss on translation of profit as soon as possible. Point of view of the parent company saw overseas subsidiaries as an extension of its parent company. Translation gains and losses reflect the increase or decrease in equity of foreign investment in domestic currency and should be recognized.

Advantages and disadvantages of foreign currency translation

1. Suspension
Changes in the value of domestic currency equivalent of the net assets of foreign subsidiaries are not realized and no effect on the local currency cash flows generated from foreign entities. Translation adjustment should be accumulated separately as part of consolidated equity.
2. Suspension and Amortization
Suspension of translation gains or losses and to amortize it over the useful adjustment items related to the balance sheet, primarily related to debt ditangguha = kandan will be amortized over the related fixed assets, which is charged against earnings in the same way with the burden of depreciation or deferred and amortized during the remainder of the loan as an adjustment to interest expense.
3. Partial Suspension
Translation gains and losses is to recognize the losses as soon as possible after it happens, but admitted only after the profits realized, this is simply because it is an advantage, it ignores the changes in exchange rates.
4. Not suspended
Recognize translation gains and losses in the income statement as soon as possible. However, inserting translation gains and losses in the current year’s profit will introduce a random element in the profits that may result in significant fluctuations in earnings in case of exchange rate changes.
Translation gains and losses reflect the increase or decrease in equity investments in domestic currency and should be recognized.
5. Effect of foreign currency translation method to the Financial Statements
Although most of the technical issues in accounting tends to resolve itself over time, foreign currency translation terrnyata is an exception. That this trend will continue to be supported by such developments as the collapse of the dominance of the dollar, the currency rate movements are approved by the government, and the globalization of world capital markets, which have increased the importance of reporting and financial disclosure. Such developments have profoundly increased interest ¬ executive-financial executives, accountants, and financial community on the importance and economic consequences of foreign currency translation. Let us look at the nature and development of international accounting puzzle this puzzle.
Single Rate Method
Based on this translational approach, the financial statements of foreign operations, which are considered by the parent company as an autonomous entity, has the reporting of their own domicile. This is a local accounting environment where foreign affiliates are mentraksaksikan his business affairs. To maintain the “flavor” of the local currency reports, a way must be found so that translation can be implemented with minimal distortion. The best way is the use of the method of exchange rate policies.
Since all financial reports of foreign exchange is actually multiplied by a konstansta, this translation method to maintain its financial results and the original relation (eg financial ratios) in the consolidated statements of individual entities that are consolidated. Only the form of overseas estimates, not the essence, the change in the method of exchange rate policies.
Although interesting and conceptually simple, the method of exchange rate policies were blamed by some people because it undermines the basic purpose of the consolidated financial statements, that is because it presents, for the benefit of shareholders of the parent company, operating results and financial position of the parent company and firms from the perspective of children the single currency. maintain the parent company’s reporting currency as the unit of measurement. In the prevailing exchange rate method, the results will reflect the consolidation of perspekfif-exchange perspective of each country where companies are children. For example, if an asset dip = roleh an overseas subsidiary company for when the rate was 1.000 VA VA 1 = $ 1, then from the perspective of historical cost dollars is $ 1,000; from the perspective of local currency is also $ 1000. If the exchange rate changed to VA 5 = $ 1, the historical cost of those assets from the perspective of the dollar (translas’ historical cost) remains $ 1,000. If the local currency will be retained as the unit of measurement, will be expressed nifai assets of $ 200 (exchange rate translation effect).
Rate method applies also to blame because it assumes that all assets are influenced by local-currency exchange rate risk (ie, assuming that the fluctuations in the domestic currency equivalent, which is caused by fluctuations translational running, an indicator of changes in the intrinsic value of those assets). Hat is rarely true because the value of inventory and fixed assets in foreign countries are generally supported by local inflation.
Multiple Rate Methods
Methods of combining multiple exchange rate exchange rate historically runs and in the process of translation. 3 Such methods are discussed below.
Force-historical method. Based on the true-historical approach, which is popular in the U.S. and other places before the year 1976, current assets and current liabilities of a subsidiary abroad are translated into the reporting currency using the exchange rate of its parent company applies. Assets and liabilities are non-smooth translated with historical rates.
Items of income statement, except for depreciation and amortization, are translated at the exchange rate on average each month of operation or on the basis of the weighted average of the entire period to be reported. Depreciation and amortization are translated using historical exchange rates prevailing at the time of the relevant asset is obtained.
This methodology is, unfortunately, has some drawbacks. For example, this method is less choose a conceptual justification. Existing definitions of assets and liabilities and non-current classification does not explain why such a manner which will determine the exchange rate used in the process transiasi.
Monetary-nonmonetary method. As with any true-historical method, the method moniter using pattern-classification of non-monetary balance sheet to determine the appropriate exchange rate translation.
Due to monetary items in cash settled; usage rate applicable to translate the items of foreign exchange domestic currency equivalent yield that reflects the realizable value or value of the solution.
Temporal method according to the temporal approach, translational currency conversion is a process of measurement (ie, repeated presentation of a particular value). Therefore, this method can not be used to change the attributes of an item that is being measured; this method can only change the unit of measurement. Balance of foreign currency translation, for example, just change the (restate) the denomination of inventory. not the actual assessment. In U.S. GAAP, assets are measured based on jumiah cash on hand at the balance sheet date. Receivables and payables expressed in a number expected to be received or paid at maturity. Liabilities and other assets are measured at the prevailing price when the item is acquired or item ¬ occurs (historical price). Even so, some of which are measured by the prices prevailing at the date of financial statements (the price goes), such as inventory under the rules of cost or market. In short, there is a dimension of time associated with the values of this money.
By Lorensen, the best way to maintain accounting bases are used to measure these items is to translate the foreign currency amount of foreign currency at the exchange rate prevailing on the date of the measurement of foreign currency takes place. Temporal principle thus stated that money, receivables, and payables are measured at the promised amount should be translated using the exchange rates prevailing at balance sheet date. Assets and liabilities are measured at the price of money should be translated using the exchange rates prevailing on the date with respect to the price of money.
Translation methods can be classified into two types of methods that use a single exchange rate for the present re-translation of foreign currency balances to the equivalent value in domestic currency or a method that uses a variety of rates.
1. Methods Single Currency
This method has long been popular in Europe, applying the exchange rate, the current exchange rate and the closing exchange rate, for all assets and liabilities lancer. Revenues and expenses denominated in foreign currencies are generally translated using the exchange rate prevailing at the time the posts are recognized. However, to facilitate these items are generally translated using the weighted average exchange rates are appropriate for the period. The financial statements of a foreign operation has its own reporting domicile, local currency environment in which the foreign affiliate companies do business. An asset or liability denominated in foreign currency is said to face foreign exchange risk if the equivalent in the currency used to translate the asset or liability.
2. Multiple methods of exchange rate
The method combines Multiple Currency exchange rate exchange rate historically and now in the process of translation.
3. Now the method-Nonkini
Based on the Method of Non-Now-Now, lancer current assets and liabilities of foreign subsidiaries are translated into the reporting currency of its parent company based on the exchange now. Assets and liabilities are translated lancer historical rates of exchange. Items of income statement (except for depreciation and amortization) are translated based on the average rate prevailing in each month of operation, or based on a weighted average over the entire reporting period. Depreciation and amortization are translated based on the historical exchange rate recorded saaat assets acquired.
However, this method does not consider the economic element. Using year-end exchange rate to translate the lancer assets implies that cash, receivables, and inventory in foreign currencies are equally at risk of exchange rate.
4. Monetary-nonmonetary method
Non-monetary method Monetary also use the balance sheet classification scheme fatherly determine the appropriate exchange rate translation. Monetary assets and liabilities are translated based on the exchange rate now. Items of non-monetary assets, long-term investment, and stock investors are translated using historical exchange rates. Items of income statements are translated using a procedure similar to that described for the concept of non-present now.
5. Temporal method
By using the temporal method, tranlasi currency conversion is a process of re-measurement or presentation of a certain value. This method does not change the attributes of an item being measured, but only change the unit of measurement. Translation of these balances in foreign currency-denominated causes repeated measurements such items but not the actual assessment. Under U.S. GAAP, measured by the amount of cash on hand at the balance sheet date. Receivables and liabilities are stated at amounts expected to be received or paid at maturity.
Evaluation and selection of foreign currency translation method
Under the temporal method, monetary items such as cash, receivables, and liabilities are translated based on the exchange now. Such items are translated at the exchange rate of monetary base that maintains in the first measurement. In particular, the value of assets in foreign currencies are reported at historical cost, are translated based on the historical exchange rate. Why is that? This is because historical cost in foreign currencies are translated at the exchange rate exchange rate historically produces historical cost in domestic currency.
These four methods discussed at one time been used in the United States and can be found even today in many countries. In general, these methods lead to the translation of foreign currency which is quite different. The first three methods (method of exchange rate now, the method now-non-date, and method-monetary non-monetary) are used in the identification of assets and liabilities which are at risk or may be protected from foreign exchange risk. Then, the translation method applied consistently by taking into account these differences.
So far this term the exchange rate used in translation method refers to the historical or present exchange rate. The average rate is often used in the income statement for the posts load. Some countries use the exchange rate is different for different transactions. In this situation should be selected some existing exchange rate. Some suggested alternatives are:
1. rate of dividend payment
2. free market rate, and
3. penalty rates or preferences that can be used, such as those involved in import export activities.
Foreign currency translation relationship with inflation
The use of the exchange rate is now to translate the cost of non-monetary assets are located in berinflasi environment will ultimately lead to an equivalent value in domestic currency is much lower than the initial baseline measurement. At the same time, earnings will be much larger translated with respect to load depresisasi which is also lower. The translation as it can be more easily mislead readers as to give information to the reader. Assessment of the lower dollar typically lower earnings power akutal of foreign assets which are supported by local inflation and the ratio of return on investment that affected inflation in a foreign operation may create false expectations on future profits.
FASB rejected before the inflation adjustment process of translation, because the adjustment is not inconsistent with the historical cost basis of the assessment framework used in the basic financial statements in the U.S.. As a solution FAS No. 52 requires the use of the U.S. dollar as the functional currency for those residing overseas operations with hyperinflation environment. This procedure will maintain a constant value of the dollar equivalent of foreign currency assets, because these assets will be translated according to the historical rate. The imposition of losses on fixed assets in the translation of foreign currency to equity shareholders will cause a significant effect on financial ratios. Foreign currency translation problem can not be separated from the problem of accounting for foreign inflation.


The financial statements may have the potential to mislead during the period of price changesØ

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:
• An increase in the proportion of tax
• Request for more dividends of shareholders
• Request and pay higher wages than workers
Adverse action of the host country (such as the taxation of a huge advantage).

Price index
• Changes in the general price level is usually measured by the price level.
A price index is the ratio of the cost.

Use of Price Indices
• the number of price index used to translate the amount of money paid during the previous period to the equivalent purchasing power at the end of the period.
• Numbers – numbers that have been adjusted price levels do not represent the current cost items in question or the numbers are still the historical cost figures – historical cost figures are presented only repeated in the new measurement unit – the general purchasing power at the end of the period.

General Price Level Adjustment object
• Traditionally, profit is part of the company’s assets that could be drawn by the company during an accounting period without reducing his wealth to below the starting position.
• Accounting conventional measure of income as the maximum amount that can be drawn from the company without reducing the amount of money into capital initially.
• During inflation, the company will experience a change in wealth that is not related to operating activities which generally arises from changes in assets or liabilities.

To understand the notion of price changes (changing prices), the following terms in use:
• A general price changes occur when the average price of all goods and services in an economy subject to change. Price increases are collectively known as inflation (inflation), while the price declines known as deflation (deflation).
• Changes in specific rates refer to changes in the price of goods or services which are caused by changes in demand and supply. A stable price level becomes a national priority for many countries around the world. Although the price changes occur throughout the world, the influence of business and financial reporting varies from one country to another.

Accounting Term InflationØ

Introduction Accounting for Inflation
Objectives and Principles of Accounting
Financial accounting is an information media prepared by management as a business manager for the public especially investors and creditors. Accounting information that happened in the financial statements of companies that provide a picture of a company’s financial condition at any given moment (balance sheet) as well as the results of his efforts in a particular period (the bottom).
Research in the USA, UK, and NZ (Harahap, 1996) shows that the financial statements are the first source of information in investment decisions, predict potential cash flows to be received and associated with uncertainty, assessing the company’s ability to earn income, to assess the ability of management to achieve goals major companies, and provide actual and interpretative information about transactions and other events.
Purpose financial statements under Statement No. APB. 4 (AICPA, 1973) can be divided into two general categories:
a. The general objective of financial statements is to present the statement of financial position, results of operations, and changes in financial position reasonably fit accepted accounting principles;
b. The specific objective of financial statements is to provide information about the property, liabilities, net worth, projected earnings, changes in property and liability, as well as other relevant information.
Many studies and discussions conducted by academics and professional organizations to make improvements in increasing the value, quality, and relevance of financial statements. The constraints faced to achieve this goal are:
a. Conflicts contained in itself the quality objectives;
b. Environmental influences;
c. Lack of complete understanding of the purpose.
Historical cost is the basis for assessing the right to record the acquisition of goods, services, cost, cost, and equity. In each of the estimated historical cost system assessed based on exchange rates at date of acquisition, the profit realized by the difference between the income realized by the realized cost, where cost is a sacrifice that is expected not to benefit in the future. The advantages of this system are as follows:
a. Recording the results can be traced, identified as necessary.
b. The data provided is less disputed than other proposed methods.
c. Does not present holding gains and losses.
d. The data provided is useful for decision making by managers and investors
e. This method is less visible than the cost of recording, cost reporting, auditing, and dispute resolution.
Stable Monetary Unit is also one of the basic accounting principle which states that monetary union is considered stable. Conservatism is a principle in which the value is included in the financial statements are the greatest risk of harm, noting indications of loss, although not yet occurred and no indication of record profits not yet realized. This principle gave birth to a situation where the information presented in the financial statements do not describe the real situation and do not correspond to reality.
Today the historical cost method has lost much of its relevance for investors. This is because many large companies in the economy, the shift from industrial economy to the economy of high tech and service oriented. Measurements are performed accounting is a measurement that uses the money associated with the measurement of assets and liabilities and changes ekonimi.
While the value of intangible assets not covered by the accounting measurement. The method used by APB Statement No. 4 (AICPA, 1970) are:
a. Current exchange the purchase price of the purchase exchange is now used.
b. Current sale prices perjualan exchange is the exchange current can be used.
c. Future exchange rates are based on the exchange in the future

According to Trueblood committee raised about the current cost as follows:
a. Exit value is based on the assessment amount to be received or paid today as a result of the liquidation action.
b. Current replacement cost is the value of assets and liabilities based on the price now owned by the capacity and ability to service the same
c. Discounted cash flows of assets and liabilities are valued by discounting all expected cash flows at a certain level which describes the time value and risk.

Valuation Method Book Value vs. Market Value
The book value of an enterprise is the concept of conventional accounting that can simply be counted as a whole or per share. Can be calculated by the formula:
BV per share = Total assets, total liabilities
Number of shares outstanding
Analysts often use the book value instead of the value of liquidity, for example, to estimate the lower limit of the stock price is tolerable, because the basic value of this book dianggao as a safe limit or safety measures in an investment plan. To measure the value of current assets is considered easy to use book value, but if it is used to measure the value of fixed assets will become more difficult because the book is always very different from its market price.
According to White et al (2003), the relationship between the book value to market value may be influenced by the nature of assets, accounting reporting method, profitability and general economic conditions. The book value is the preferred method of reporting results to management reporting financial position, revenue, and expense at a time and during certain periods. Often in choosing the method of reporting, management is always an emphasis on its importance and consequently can lead to differences between the book value to market value.
Despite this historical cost method still practiced in many countries in the assessment and measurement of the transaction. Here are the reasons that support the historical cost accounting:
a. Relevant historical cost in economic decision-making process, because the necessary data from the past.
b. Based on transactions that are uncertain and actual events, so that it can be accounted for.
c. Required throughout the history of this system is still useful.
d. The concept is most easily understood.
e. It is believed to minimize subjectivity and reduce the possibility of a change by a certain party.
f. CCA is still questionable.
g. Matter of price changes can be reported through the presentation of data or supplement the report
h. Still not enough evidence and data to reject the historical accounting.

Changes of Stable Monetary Unit Concept
One of the basic principles of accounting is considered stable monetary unit, but this is irrelevant because in any exchange never took place there that has a stable value. This suggests that stable monetary unit assumption is only present in but not in reality. Hence the suggestion to use other accounting model, one of which is accounting for inflation.
Inflation accounting seeks to prepare financial statements that include the effects of inflation or a decline in purchasing value of money in the financial statements, so that financial statements show the currency at the prevailing price level.


Currency exchange rate fluctuations and changes in the price of money for goods and services is an integral characteristic in international business. To understand the notion of price changes (changing prices), we must distinguish between the general price movements and specific price movements, which are both included in the terms of the price changes. A general price changes occur when the average price of all goods and services in an economy subject to change. Price increases are collectively known as inflation (inflation), while the price declines known as deflation (deflation).
Specific price changes refers to changes in the price of goods or services which are caused by changes in demand and supply. Political and social destruction caused by a series of hyper-inflation period (when the inflation rate increased by more than 50% each month) are well documented and this explains why a stable price level becomes a national priority for many countries in the world, businesses are also feeling the effects of inflation on factor prices as production increases. Although the price changes occur throughout the world, the influence of business and financial reporting varies from one country to another.

The difference current cost accounting model and the conventionalØ

In general, the conventional accounting, financial statements are presented based on the historical value that assumes that hargaharga (monetary unit) is stable. Conventional accounting does not recognize the changes in general price levels or changes in the level of rates. As a consequence, if there is a change in purchasing power as inflation period, the historical financial statements is economically irrelevant. In this period generally scored higher revenues while fixed assets valued lower. Actually, there are several methods of accounting on the effect of price changes, such as accounting fixed price, current value accounting, and general price level accounting.
General price level accounting restatement will hold the components of financial statements into dollars at the same level of purchasing power, but did not change the accounting principles used in accounting at historical value. In practice, the controversy concerning the relevance of accounting using the general price level still continues to this day. Some of the arguments that support or reject the application of the general price level accounting will be presented in this article. Similarly, the results of two studies on the effects of application of the general price level accounting on the financial statements will be compared to see whether the accounting adjustments based on the general price level is required.

Historical Cost Financial Statements of Financial Position

1. Amount in the statement of financial position are not expressed in the units of measurement are now at the end of the reporting period, are restated by applying a general price index.
2. Items of monetary restated because they are expressed in monetary units is now at the end of the reporting period. Monetary posts are owned and the money to be received or paid in cash.
3. Assets and liabilities, with the agreement, which is connected with changes in prices such as index linked bonds and loans, adjusted in accordance with the agreement to ensure the balance at the end of the reporting period. The posts are recorded at amounts have been adjusted in the statement of financial position are restated.
4. All assets and other liabilities are nonmonetary. Some noted the number of non-monetary post is now at the end of the reporting period, such as net realizable value and fair value, then the post is not restated. All assets and liabilities to other non-monetary restated.
5. Most of the non-monetary items carried at cost or cost less depreciation. Therefore, these items are stated at the amount present on the date of acquisition. Acquisition cost, or cost less depreciation, which are presented back to each item is determined by applying the change in the general price index from the date of acquisition until the end of the reporting period on a historical cost and accumulated depreciation. For example, fixed assets, inventories of raw materials and merchandise, goodwill, patents, trademarks and similar assets are restated from the date of purchase. Supply of intermediate goods and finished goods are restated from the date of the purchase cost and conversion costs.
6. Detailed record of the date of acquisition of units of fixed assets may not be available or can not be estimated. In rare circumstances, it may be necessary, in the first period to implement this statement, to use an independent professional assessment of the value of such units as the basis for the presentation of the return.
7. General price index may not be available for a period of time restate fixed assets required by this Statement. Under these circumstances, an entity may need to use the basic estimates, for example, the transfer rate between the functional currency and foreign currencies are relatively stable.
8. Some noted the number of non-monetary post is now on a date other than the date of acquisition or date of statement of financial position, for example, fixed assets have been revalued in the previous date. In this case, the carrying amount restated from the date of revaluation.
9. Restated amounts of non-monetary items is reduced, in accordance with relevant GAAP, when the amount exceeds the recoverable amount. For example, the amount of fixed assets, goodwill, patents and trademarks presented again reduced to recoverable amount and restated amount of inventory reduced to net realizable value.
10. Investee is recorded using the equity method may make a report in the currency hyperinflation economy. Statement of financial position and reports comprehensive income of the investee are restated in accordance with this Statement for the investor counting on net assets and profit and loss. When the financial statements of the investee are restated denominated in foreign currencies, the financial statements are translated at the closing exchange rate.
11. Effect of inflation is usually recognized in borrowing costs. It is not appropriate to restate the capital expenditure financed by borrowing and to capitalize the borrowing costs to compensate for inflation over the same period. Part of this borrowing costs are recognized as an expense in the period when the cost occurs.
12. An entity may acquire assets in a deal that allows entities to defer payment without incurring an explicit interest charge. When an entity is not practical to determine the amount of interest, then such assets are restated from the date of payment and not the date of purchase.
13. At the beginning of the first period of application of this, a component of equity, except retained earnings and revaluation surplus, are restated using general price index from the date of the equity component is contributed or appear. Revaluation surplus that arose in previous periods is eliminated. Balance restated earnings from all other amounts in the statement of financial position
14. At the end of the first period and subsequent periods, all components of equity are restated by applying a general price index from the beginning of the period or the date of contribution, if more recent. Shift in owners’ equity during the period disclosed in accordance with IAS 1 (revised 2009):

Presentation of Financial Statements. Comprehensive Income Statement

This statement requires that all items in comprehensive income statement are expressed in units of measurement are now at the end of the reporting period. Therefore, the entire amount necessary to implement the changes and display it in the general price index from the date income and expenses were initially recorded in the financial statements.

Gain or Loss on Net Monetary Position

In an inflationary period, if the entity has a monetary assets exceed monetary liabilities, the entity’s purchasing power decreases, and if the entity has a monetary liabilities exceed monetary assets, then the purchasing power is increasing all the entities connected to a price level. Monetary position gain or loss is the difference in net non-monetary assets, and equity items in the comprehensive income statement are restated and the adjustment of index linked assets and liabilities. Gains or losses can be estimated using changes in the general price index to the weighted average over the period of the difference between monetary assets and monetary liabilities.
Gains or losses net monetary position is included in the income statement. Adjustments to assets and liabilities linked to price changes in the agreement) in accordance with paragraph 13, with the offsetting gain or loss on net monetary position. Income and other expenses, such as income and interest expense and foreign exchange differences related to investments or loans, are also associated with the net monetary position. Although the post is separately disclosed, it can be helpful if the post is presented along with the gain or loss on net monetary position in the comprehensive income statement.

Now the Cost of Financial Statements Statements of Financial Position

Items that are presented at current cost are not restated because they are expressed in units of measurement are now at the end of the reporting period. Elsewhere in the restated statement of financial position in accordance with paragraphs 11 to 24.

Comprehensive Income Statement

Comprehensive income statement using the current cost, before restatement, generally reports costs are now at the time of the underlying transactions or events. Therefore, the entire amount is to be presented again in the unit of measurement is now at the end of the reporting period by using a general price index.

Gains or losses Net Monetary Position

Gains or losses are recorded net monetary position in accordance with paragraphs 26 and 27. Statement of Cash Flows

This statement requires that all items in the cash flow statement are expressed in units of measurement are now at the end of the reporting period.

Related Figures

Corresponding number in the previous reporting period, whether based on a historical cost approach or a current cost approach, are restated using general price index, so the comparative financial statements are presented in units of measurement are now at the end of the reporting period. Information disclosed in connection with previous periods is also expressed in units of measurement are now at the end of the reporting period. For the purpose of presenting comparative amounts in the presentation of foreign currency, applied IAS 10 (revised 2010): Effects of Changes in Foreign Exchange Rates paragraph 42 (b) and 43.

Consolidated Financial Statements

The parent entity financial reports in the currency hyperinflation economy may have subsidiaries that also make a report in the currency hyperinflation economy. Entity’s financial statements are restated the child’s needs by using the general price index of the country whose currency is reported prior to inclusion in the consolidated financial statements issued by the parent entity. When a foreign subsidiary is an entity, then the restated financial statements are translated at the closing exchange rate. Entity’s financial statements were reported in children who are not hyper-inflation economy currencies are treated according to Foreign Exchange.
If financial statements with a different end of the reporting period are consolidated, all monetary and nonmonetary post need to be restated in the unit of measurement is now on the consolidated financial statements.

 Differences inflation accounting in American, English, and brazilØ

1. Country United States
In 1979, the FASB issued Statement of Financial Accounting Standards / SFAS No.33, entitled “Financial Reporting and Changing Values” statement requires U.S. companies that have supply and aktifa still worth more than $ 125 million or assets of more than $ 1 billion, for the past 5 years trying to make disclosure of constant purchasing power as the basic framework of the historical cost basis of measurement for the primary financial statements.
Many users and compilers of financial information in accordance with SFAS No.33 found that:
a. Double that required disclosure of FASB confusing.
b. Double the cost of preparation of disclosure is too large.
c. Disclosure of purchasing power historical cost is not too useful when compared to the current cost. Finally issued SFAS N0.88 to help companies that reported the effect of statements on the price change and become the starting point of future inflation accounting standards.
Reporting company is encouraged to disclose the following information for each of the last 5 years:
a. Net sales and other operating income.
b. Profit from opersi running on current cost basis.
c. Increases or decreases in current cost or recoverable amount.
d. Each agregrat foreign currency translation adjustments based on current cost, arising from the consolidation process.
e. Net assets at year end decreased current cost basis.
f. Earnings per share on the basis of current cost
g. Dividend per common share
h. Year-end market price of common stock perlembar
i. Level of consumer price index used to measure the return of opersi running.
SFAS No.88 disclosure guidelines also include overseas operations included in the consolidated statements of U.S. companies holding company which, engadopsi dollar as the functional currency for its foreign operations measure looked at the operations from the perspective of the parent company’s currency.
As a result the accounts of the operation should be translated into dollars, adjusted for U.S. inflation. Multinational companies are adopting local currency as the functional currency for most of its foreign operations in light of the local currency.
FASB is allowing companies to use the present re-translation method or adjust to the foreign inflation and then do a translation into U.S. dollars. Thus, the adjustment of the data to reflect the current cost inflation index can be based on the general price level of the U.S. or abroad.

2. The UK
UK Accounting Standards Committee / ACS issued a “Statement of Standard Accounting Practice 16 / SSAP,” Accounting for Costs Now “for a trial period of 3 years in March 1980. Although SSAP 16 was canceled in 1988, the methodology is recommended for companies that voluntarily report accounts-their account adjusted for inflation.
Differences SSAP 16 with SFAS 33 is
A. If the U.S. standard requires constant cost accounting and now, SSAP 16 only adopt the current cost for external reporting.
2. If the adjustment of U.S. inflation based on the income statement, expense report in the UK now mengwajibkan both income statements and balance sheets are now charged, along with explanatory notes.
3 British Standards allow reporting options:
a. Presenting the accounts as a current cost basis financial statements with supplementary accounts of historical cost.
b. Presenting the accounts of historical cost as the basis of financial statements with supplementary accounts of current cost.
c. Presents the current cost accounts as the accounts satuny dilengkanpi with enough historical cost information.
With treatment of gains and losses relating to monetary items, FAS 33 menharuskan separate disclosure for each digit. SSAP 16 mengaharuskan two numbers that both reflect the influence of specific price changes, ie
a. Monetary working capital adjustment (Monetary Working Capital Adjustment) / MWCA
Acknowledging the influence of price changes specific to the total amount of working capital used by the company in its operations.
b. The adjustment mechanism
Allows the effect of price changes specific to non-monetary assets of the company.

3. Brazilian state
Although no longer required the recommended inflation accounting in Brazil today reflects two groups of reporting options, the Brazilian Corporate Law and Capital Market Supervisory Commission of Brazil. Inflation adjustment in accordance with the law firm presenting the accounts re-permanent assets and shareholders’ equity by using a price index which is recognized by the federal government to measure the local currency devaluation.
Inflation adjustment to permanent assets and shareholders’ equity are presented net of the amount over that disclosed separately in the profit gain or loss is now as monetary correction. Price-level adjustments to equity shareholders are shareholders in the amount of investment which should grow to awalperiode not tertingla with inflation. Adjustments to assets permanently smaller than equity adjustments cause loss of purchasing power that reflects the risk faced by the company on the net monetary assets.

 Financial reporting in hyperinflation economy.Ø

FINANCIAL REPORTING IN ECONOMIC hyperinflation Statement of Financial Accounting Standard 63: Financial Reporting in Hyperinflation Economic consists of paragraphs 1-40. The entire paragraph has the power to set the same. Paragraphs which are printed in bold and italics to set the main principles. IAS 63 should be read in the context of goal setting and the Framework of the Preparation and Presentation of Financial Statements. IAS 25 (revised 2009) Accounting Policies, Changes in Accounting Estimates and Errors provides a basis to select and apply accounting policies when no explicit guidance. This statement is not intended to apply to elements that are not material

1. This statement is applicable to the financial statements, including the consolidated financial statements of each entity that functional currency is the currency of an economy experiencing hyperinflation (hereinafter referred to as hyper-inflation economies).
2. Hyperinflation in the economy, reporting of operating results and financial position in the local currency without restatement is not useful. Money loses purchasing power such that the ratio of the amounts of transactions and other events from time to time, even within the same accounting period, be misleading.
3. This statement does not set at a certain level of inflation is considered hyperinflation. Consideration is required in determining when restatement of financial statements need to be done in accordance with this statement. Characteristics of the economic environment of a country which is an indication that the country is experiencing hyperinflation, among others: (a) inhabitants prefer to store their wealth in the form of non-monetary assets or in a foreign currency is relatively stable. Amount of local currency held immediately invested to maintain purchasing power; (b) the population consider the monetary amount is not in the local currency but in foreign currencies are relatively stable. The prices may dikuotasikan in foreign currency; (c) the prevailing price in the sales and purchases on credit is determined by inserting a factor expected loss of purchasing power during the credit period, even if the short loan period, (d) interest rates, wages and prices associated with the price index, and (e) the cumulative inflation rate over three years approaches or exceeds 100%.
4. All entities that prepare financial statements in the currency of the same hyper-inflation economies are encouraged to apply this statement from the same date. However, this statement is applied to the financial statements of each entity since the beginning of the reporting period when the entity identifies the existence of hyperinflation in the country whose currency is used by such entities to prepare financial statements.
5. Price change from time to time as a result of political influence, economic, social and general or specific. Specific influences such as changes in supply and demand and technological changes may cause individual prices increase or decrease significantly and independently from one another. In addition, the general effects can cause changes in general price levels and purchasing power of money.
6. Entities that prepare financial statements on the basis of historical cost accounting do so without considering changes in general price level or a specific price increase of a recognized asset or liability. An exception to this principle is applied to the assets and liabilities as required, or elected, to be measured at fair value. For example, fixed assets are revalued at fair value. However, some entities present the financial statements based on current cost approach that reflects the impact of changes in specific prices of assets.
7. Hyperinflation in the economy, financial statements, either prepared on the historical cost approach and cost approach now, it will only work if it is expressed in units of measurement that applies at the end of the reporting period. Therefore, this statement is applied to entities that provide financial statements denominated in hyperinflation economy. Entities are not allowed to present separate financial statements are not restated, although attaching the information required by this Statement.
8. Entity’s financial statements that functional currency is the currency hyperinflation economy, based on historical cost approach or a current cost approach, are presented in units of measurement that applies at the end of the reporting period. Corresponding figures for the previous period required by IAS 1 (revised 2009) Presentation of Financial Statements and any information in the previous period are also presented in the unit of measurement is now at the end of the reporting period. For the purpose of presenting comparative amounts in a different presentation currency, applied IAS 10 (revised 2010): Effects of Changes

Is constant dollar or current cost is better to measure the effects of inflationØ

There are four issues of inflation accounting is quite disturbing. These four issues are: (1) whether the constant dollar or current cost better measure the effects of inflation, (2) the accounting treatment of gains and losses of inflation, (3) foreign inflation accounting, and (4) avoid the phenomenon of double fall.

Advantages and Disadvantages of Inflation

Treatment of gains and losses of monetary items (eg cash, receivables, and debt) considered controversial. Gains and losses on monetary items is determined by the present United States again in constant dollars, beginning and ending balances, as well as in the transaction, all assets and liabilities (including long-term debt). The resulting number is expressed as a separate heading. This treatment was looking at the advantages and disadvantages of monetary items as being different from other types of income.
In England, the advantages and disadvantages of monetary items are separated into monetary working capital adjustment mechanism. Both numbers are determined through a specific price changes (rather common). Adjustment mechanism to indicate the benefits (or costs) to shareholders from the main financing for a period of price changes. These figures are added up (less than) current cost operating profit to generate a measure of prosperity can be eliminated, which is referred to as “Profit Cost Now Teratribusi Circular”.
Brazil’s approach is no longer required, do not adjust assets and liabilities are now explicitly, because the amounts are expressed in terms of realizable value. However, the adjustment of the presentation of net assets and the equity owners are permanently adapted to the level of prices show gains or losses on the general purchasing power of working capital financing from debt or obligation. Adjustments to assets in excess of permanent equity adjustment showed a permanent part of the assets financed by debt, giving rise to the advantage of purchasing power. In contrast, equity adjustments greater than the permanent assets show an adjustment for working capital funded partly by equity.

Purchasing power loss is recognized for this section during the period of inflation.

SSAP 16 has an advantage in overcoming the effects of inflation. In line with the inventory and fixed assets, a company needs more capital in nominal value of the net to maintain its operating capability by increasing prices. The Company also will benefit from the use of debt during the period of inflation. The purpose of inflation accounting is to measure the performance of a company and allows anyone who is interested to measure the amount, timing, and possible future cash flows.
A company can measure the mastery of certain goods and services by using an index to measure the monetary gains and losses. Because not all companies can arrange special purchase price indexes for the company, the approach in England is a good practical alternative. Rather than reveal the mechanism of adjustment (or similar), we prefer to treat it as a reduction of the current cost adjustments for depreciation, cost of sales and monetary working capital. Now a charge of re-presentation of historical cost profit during the period of inflation would be eliminated by reducing the burden of debt service that is used to fund items such operations.

Advantages and Disadvantages of Ownership

Now accounting for the cost of dividing the total income into two parts: (1) operating profit (the difference between revenues and expenses are now present resources consumed) and (2) Unrealized gains arising from the ownership of non-monetary assets with a replacement value that increases with with inflation. Although measurements made directly profit ownership, the accounting treatment is not so.
The increase in the cost of replacing the operating assets (ie cash outflows projected higher to replace the equipment) is not an advantage, whether 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 owner’s equity, which is part of the profits to be retained by the company to maintain its physical capital (productive capacity). Assets held for speculation, such as vacant land or marketable securities, do not need to be replaced to maintain productive capacity. Thus, if the adjustment costs now include these items, the increase or decrease in equivalent cost (value) of her present (by as much value can be realized) must be expressed directly in earnings.

Decrease in doubles (double dip) and explain how penangananya.Ø

At the time of her restate estimates beyond horrified to take into account foreign inflation, caution must be maintained to prevent the phenomenon of “double-dip”. This problem arises from the fact that the local inflation impact directly on the exchange rate used in the translation process. Although economists generally assume an inverse relationship between a country’s internal inflation rate with the external value of its currency, the evidence shows that such relationships are rare, at least in the short term. Therefore the magnitude of adjustments made to eliminate the phenomenon of double counting will vary depending on the level of negative correlation between the difference in inflation rates. Inflation adjustment to the cost of goods sold and depreciation expense are designed to suppress earnings “as reported” to avoid overstatement laba.meskipun so, due to the negative relationship between local inflation and currency values, changes in exchange rates between the financial statements of the other sequence, which in general attributable to inflation (at least for a certain period), will lead the company at least partly reflect the impact of inflation (ie the currency translation adjustment), the profits “as dilaporkanya”. So to avoid double counting inflation, loss of translation that has been reflected in earnings “as reported” a company should be counted as part of the inflation adjustment.
Over the relevant adjustment for multinational companies based in the U.S. for adopting the dollar as the functional currency of foreign operations under FASB 52 and that translates inventory using the exchange rate goes. As for companies based in the European tendency toward the use of foreign exchange translation method runs. So that without it could result in an adjustment of profit is too low or too high profits due to inflation abroad be counted twice.

Example: The following inventory accounting shows the relationship between inflation and foreign currency translation. Company in question uses the FIFO valuation method of inventory and translate into dollars using the exchange rate goes. Assumptions:
1. inflation in the local state for one year by 20%
2. U.S. inflation is 6% dive tahuntersebut
3. Beginning 1 January the exchange rate is LC1 = $ 1
4. Exchange closing December 31 LC1 = $ 0.88
5. Currency devaluation during the year tersebutuntuk maintain purchasing power parity is 12%
6. Supply of local currency is the LC 200 on January 1, and LC 240 at December 31,
7. No change in the physical quantity of the stock dive.

Profit as reported will reflect the translational loss of $ 29, the difference between the translational LC240 stock exchange December 31 $ 0.88 to $ 1.00 exchange rate. During the period of the next inventory turnover, HPP will for LC240 in local currency; $ 211 in dollars. If the cost penjualanharus adjusted for inflation in the company restatetranslate method may perform the following steps:
A. Removing the 20% inflation in the local inventory of December 31 (240/1.2) to be equal to the inventory LC200 January 1 prior to inflation.
2. HPP-adjustment of the local currency will become the LC40, the amount required to restate inventory to December 31 of the LC240 to LC200.
3. HPP-local currency adjustment (LC40) will then be translated into dollars at the exchange rate $ 1.00, HPP result in adjustments of $ 40 (LC40x $ 1.00 = $ 40).

On the basis adjustments for inflation, the company hit earnings to account for translation losses of $ 29 and HPP inflation adjustment of $ 40 so total $ 69, or 34% of persedaaan beginning January 1, $ 200. Though inflation is actually only 20%. This anomaly is caused by a “double-dipping”. In counting the dollars he has been a partial duplication of currency devaluation losses resulting from inflation and the inflation adjustment between HPP, which is the cause of currency devaluation. Adjustments in the HPP infalsi restate-translate method not only cover the U.S. inflation rate (6%) but also 14% difference between the 20% inflation rate the country’s inflation rate to 6% U.S. inflation rate which resulted in 12% difference devaluation. His conclusion that if the cost of sales adjusted for inflation to eliminate the local state, we need to reverse any damage that has been reflected in the translation of income “as reported”.

Chapter 1

International Accounting




Accounting plays a crucial role for the world economy, where the goal is as a medium of information for those who need such as investors or the management company itself as a basis for decision making. In the world of business accounting is a means of accounting information which provide accurate information for decision making. In the context of a broader, international accounting has a role similar dpat almost be said, where is the scope of reporting for multinational companies with cross-border transactions and operations. 0proses was not different accounting and reporting standards specific to the qualifications set out internationally. But to be known, the international dimension here is different for each country in which it covers cultural differences, business practices, political structures, legal systems etc.

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

Here are the characteristics of the era of global economy:

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


What distinguishes the local accounting with international accounting

To international accounting process does not vary with local accounting processes contained in a particular country. Problems that cause the differences between international accounting with a local accounting is the international dimension of the local accounting from country to country with other countries is different. These differences include differences in culture, practical business, political structure, legal system, currency values, the level of local inflansi, business risk, and regulatory laws have resulted in barriers to multinational companies conduct its operations and deliver its financial statements.
Rapid developments in global capital markets and cross-border investment activity meant that the international dimension of accounting becomes more important than ever before for the professional who must deal in one way or another within this scope. Accounting plays a crucial role in society. The purpose of accounting is to provide information that can be used by decision makers to make economic decisions.

In the world of business, accounting is an information tool, which provide accurate accounting for decision making. Accounting provides information about the company and the transaction is to facilitate resource allocation decisions by the users. If a reliable and useful information, so that limited resources can be allocated optimally. International accounting has a role similar to the larger context, where the scope of reporting is for multinational companies with cross-border transactions and operations of the state or companies with reporting obligations to report users in other countries. The process was no different accounting and reporting standards specific to the qualifications set out internationally and locally in certain countries. But the important thing to know about the international dimension of accounting processes in different countries. Where differences include, cultural differences, business practices, political structures, legal systems, currencies, local inflation rate, business risk, as well as rules and regulations affect how multinational companies conduct their operations and deliver its financial statements.

International Accounting divided into three broad areas

In the context of a broader, international accounting has a role that can be said to be almost similar, which is the scope of reporting for multinational companies with cross-border transactions and operations. The process was no different accounting and reporting standards specific to the qualifications set out internationally. But to be known, the international dimension here is different for each country in which it covers cultural differences, business practices, political structures, legal systems etc.. In the international accounting is divided into three broad areas, Accounting includes several extensive process include:

1. Measurement

Can provide in-depth feedback on the probability of a company’s operations and financial position of strength. The process of identifying, classifying and counting aktivtias and transactions, to provide input regarding the profitability and operating depth

2. Disclosure

The process by which accounting measurement is communicated to the users of financial statements and used in decision making or process of communicating to the user.

3. Auditing

The process by which the special accounting professionals (auditors) perform attestation (testing) on reliability of measurement and communication processes.

• History of International Accounting and financial sector policies of national trend

At first, beginning with the accounting system of double-entry (double entry bookkeeping) in Italy in the 14th century and 15. Double entry bookkeeping (double entry bookkeeping), considered the beginning of the creation of accounting. Modern accounting started in double entry accounting was found and used in business activity, namely the multiple listing system (double entry bookkeeping) Luca introduced by paciolo (in 1447).

Double entry bookkeeping (double entry bookkeeping) is a standard practice of recording financial transactions. Bookkeeping process only involves recording transactions in a variety of journals and books giving estimates of the classification code (ie the collection of raw financial data), which became the basis for the accounting systems that collect and organize raw data into useful information.

Luca Pacioli was born in Italy in 1447, he was not an accountant but the priest who is an expert mathematician, and lecturer at several universities in Italy. Luca who first published the basic principles of double accounting system in his book: the Arithmetica geometria proportioni Summa et proportionalita in 1494. However many historians argue that the basic principles of double accounting system is not a pure idea Luca but he only summarizes the accounting practices that took place at the time and publish it. It is recognized by the Lica (Radebaugh, 1998). Business practices with the reference method venetian Luca wrote the book has become the method adopted not only in Italy but almost all the countries of Europe such as German, Dutch, English.

Dutch accounting in the accounting model to export such as Indonesia, the accounting system in the French Polynesian and African territories under French rule. Reporting framework of the German system is influential in Japan, Sweden, and Russian empires. Half of the 20th century, as growing economic power of the United States, the complexity of accounting issues arise simultaneously. Then accounting is recognized as a separate academic discipline. After World War II, the accounting impact increasingly felt in the western world. Accounting is supported by the development of education (the emergence of business schools), as times change and the development of international relations, the hassle of getting into accounting.

Contemporary point of view

The existence of a number of additional factors that add to the importance of studying international accounting. These factors are derived from the reduction of significant and persistent barriers to trade and control of the national capital that has occurred over the progress of information technology.

Some of this perspective include :

  1. Any attempt to reduce international accounting differences
  2. National controls on capital flows
  3. Foreign exchange
  4. Foreign direct investment
  5. The liberalization of the transaction
  6. Privatization of government enterprises (for the reduction of foreign exchange controls and restrictions on cross-border investment)
  7. Advances in information technology

 The International Accounting

International accounting covers two main aspects of the discussion is a description and comparison of the dimensions of accounting and accounting for international transactions. In the first aspect, discussed the idea of international accounting standards and accounting practices in various countries as well as accounting standards and practices are compared to each country are discussed. In addition, international accounting aspects also discussed financial reporting, foreign exchange, taxation, international auditing and management for international business.

Trend of national financial sector policy

Bank Indonesia (BI) set out five policy directions in 2012. Direction policy takes into account macro-economic management, which have to deal with global risks and domestic issues are so complex.

Five policy directions are, first, to optimize the role of monetary policy in order to push the capacity of the economy, as well as mitigate the risk of global economic slowdown.
Second, improve the efficiency of banks to optimize the contribution to the economy, while strengthening the resilience of the banking system.

Third, improve the efficiency, reliability, and security of payment systems, both in the national payment system and payment system ties with foreign countries.

Fourth, strengthen resilience by strengthening macroeconomic coordination in the management of crisis prevention and management.

Fifth, support the empowerment of the real sector, including continued efforts to expand access to community banking.

“In 2012, monetary policy will be directed in order to continue the stabilization in the financial sector, as well as keeping the Bank rate is consistent with efforts to optimize the stimulus to the economy, but with due regard to the inflation target.


The Role of Accounting in the fields of business and global capital markets

In the Line of Business

Accountant’s Role In Helping Small and Menengah.Dengan bsnis environmental influences are so powerful, Small and Medium Enterprises who want to progress began to stretch to improve its ability to clean themselves in the competition. Competition is not only local competition but have started with the global competition. To do this all would have done a few things are quite strategic by SMEs. Here, the role of management accountants who can help provide information for decision-making tepat.Dalam global competition, information is an important factor yag will be able to help win the competition.

Small and Medium Enterprises management do not get lost in information and generate information. Accountants beperan how to create relevant information for all stakehloder SMEs, both financial and non financial information. The resulting information to stakeholders can bring good results from many investors and many buyers are able to access deal.Untuk in global markets, Small and Medium Enterprises should improve product quality and quality management. Example in Tasikmalaya city’s famous crafts. Small and Medium Enterprises from access to global markets, whether European, American, African, etc.. They no longer focus bersainga with local ukm but focus on entrepreneurs from China, Vietnam and the Philippines. Small and Medium Enterprises in particular Tasikmalaya memeulai handycraft for access to global markets certainly can not be directly just like the back your hand. They mengikuiti international exhibitions, product quality certification and management. To obtain such certification are many conditions that must be prepared.

Here, many engage accountants to help Small and Medium Enterprises improve management quality management. With international certification such prospective buyer will usually be affected untu buy the products of Small and Medium Enterprises. Starting from where Small and Medium Enterprises will enter the global market. Market Globalization Globalization is a phenomenon of the world market to follow. For example, the unification of European Economic Community (European Economic Community) in 2000, proved to have affected the negotiating power of trade and investment issues of the EEC member states with Developing Countries. In many cases the results are likely to harm in the latter. Other forms of economic cooperation, among others, the Association of Petroleum Producers Group (OPEC), Economic cooperation of Southeast Asian Nations (ASEAN) and Economic cooperation of States Asia Pacific (APEC). Clusters have been encouraging their cooperation and make the market for goods, services, and the broader financial (globalise) with a reduction of barriers (borderless) in the bureaucracy of licensing, and traffic of capital, labor and technology transfer. The globalization of international markets now tend to expand, it becomes complicated and difficult to trace. This process happens so fast with the action tendency of giant multinational corporations (MNCs) and world (global firms) held a business strategy through the integration, merger or joint venture activities with cross territorial boundaries between countries.

Their overall business interests often trump any of the companies they own branches as well as the interests of trading partners in developing countries. The globalization of markets in addition to providing a positive impact, not infrequently result in negative effects for Indonesia’s economy, small and medium enterprise development and competitive advantage in the economic sector or industry tertentu. Responding to this accountant must also improve its ability to help Small and Medium Enterprises enter the global market.. Small and Medium Enterprises are not only trained accountants prepare financial statements, but provide what it needs to enter the strategy taken in memenangkna competition by creating a non-financial information such as business process intenal, learning growth and customer satisfaction. The competitiveness of some aspects of technology entrepreneurs merchandise exporter Indonesia began to lose its competitiveness in international markets since the incident a few years the economic crisis in Indonesia. Indonesia products are oriented so that lpangan mnyerap work can still be competitive in international markets, technological aspects have come to be seen and considered as a solution to improve the quality of the company’s business processes and ultimately to win the competition.

In the Capital Market

As we know that the capital market watchdog aims to protect public shareholders, especially individual investors (individual investors). While the Private Placement or Institutional Investor market is usually considered to have the ability to examine the feasibility of an investment sehinggan not need to specifically get government protection.
In global capital markets transactions known QIB (Qualified Institutional Buyers). This grouping is intended to limit the institutional market participants. This group must be at least menginvest of U.S. $ 250 quadrillion. For this investor group typically does not require much disclosure (disclosure) the financial statements.

In addition known as ADR or American Depositary Receipts. This method is intended to convert the shares into the domestic market from outside the United States making it more compatible with economic conditions and investors. For example, the stock value of $ 10,000 can be broken down to be worth U.S. $ 100 per share or U.S. $ 0.10 seballiknya can be made to U.S. $ 100.00 per share. In addition there is another ADR GDR (Global Depository Receipts) that the nature and meaning as to facilitate the investors to invest in a variety of markets, companies or countries. This situation is all the trigger and accelerate the process towards a global market and global accounting standards.

Into global capital markets and investment capital can move across the world without any fuss. Stadart high-quality financial reporting that is used consistently throughout the world will improve the efficiency of the local allocation.



Chapter 2

Development and Classification of the

International Accounting


International accounting is accounting for international transactions, the comparison of accounting principles that differ between countries 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 a growing awareness of the factors accounting pmembpengaruhi developments in the global context, there are experts who argue that there are systematic differences in the behavior patterns of accounting applied in various countries. It can dilketahui to identify differences and similarities of accounting systems in a State. The essence is that the classification of accounting and reporting system that is affected by issues like the economy and well politik.Pemahaman accounting system in a State is to know what are the factors that affect its development. Differences and similarities that looks can be explained by these factors. Accounting usually differ from place to place, this place is its own accounting Karen react to the environment.

Development of accounting, this deawasa encourage every modern company to conduct periodic auditing. In order to follow the public’s attention to the growing environment and concern for the integrity of the company, accountants have found ways to measure and melaporkankewajiban recovery and disclosure of environmental conditions.
Accounting standards and practices in each country is the result of complex interactions among economic, historical, and cultural institutions. Can be expected to be the difference between countries. Factors that influence the development of national accounting can also help explain differences in accounting between nations.

We believe that the following eight factors that influence the development of accounting seignifikan. Seven main factors of economic, social history, and / or institutional and merupaka factor that is often mentioned by the authors of accounting. Lately, the relationship between culture (following eight factors) and the development of accounting began explored further.

Factors affecting the development of international accounting

 1. Sources of funding

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

2. Legal System

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

3. Taxation

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

4. Politics and Economics Association

Accounting ideas and technologies transferred through conquest, trade and similar forces. Recording system in pairs (double-entry) that began in Italy in the 1400’s is slowly spreading in Europe along with the ideas of reform (rannaissance) others. British colonialism and export accountant accounting concepts throughout the British dominions. German occupation during World War II caused the French to implement Plan Comptable. The United States forced the U.S. style of accounting regulatory regimes in Japan after the end of World War II. Many developing countries use accounting system that was developed elsewhere, either because it imposed on these countries (like India) or because of their own choice (such as Eastern European countries are now imitating the accounting system according to the rules of the European Union (EU).

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. Culture means the values and behaviors that are shared by a society. Cultural variables underlying institutional arrangements in a country.


International accounting classification can be done in two ways: with consideration and empirically. Classification with consideration depends on the knowledge, intuition and experience. Classification empirically using statistical methods to collect data accounting principles and practices worldwide.

• The approach to the development of accounting in a market-oriented economy


  1. Based on the macroeconomic approach, obtained from the accounting practices and are designed to improve the national macroeconomic objectives.
  2. Based on microeconomic approach, accounting bekembang of microeconomic principles. The goal lies in the individual companies that have the purpose to survive.
  3. Based on an independent approach, derived from accounting and business practices developed on an ad hoc, with the base slowly and consideration, trial and error, and errors. Accounting services is seen as a function of the concepts and principles taken from the business process being run, and not from the branches of science such as economics.
  4. Based on a uniform approach, accounting distandariasi and used as a tool for administrative control by the central government. Uniformity in the measurement, disclosure, and will facilitate the presentation of the designer of government, tax authorities, and even managers to use accounting information in controlling all types of businesses.

• State of the Dominant in the Development of Accounting Practices

Some countries are dominant on the development of accounting include:

1.  French
2. Japan
3. United States

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

• Knowledge of Basic Accounting Classification

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

1. Deductive approach

Which identifies the relevant environmental factors and linking it with national accounting practices, an international grouping or pattern of development proposed.

2. Inductive Approach

Accounting practices were analyzed individually, the pattern of development or grouping identified and at the end of the explanation is made from the standpoint of economic, social, political and other factors.

International accounting classification can be done in two ways: By considerations and empirically. There are several reasons why a lot of differences in accounting at the national level becomes increasingly lost, such as:

  1. Hundreds of companies today listed its shares on stock exchanges outside their home country, with internationally-listed shares of dual financial reports. A set of reports in accordance with the provisions of the local domestic financial reporting, and another using accounting principles and contains a disclosure that is addressed to international investors. Multiple reports now enforced in code law countries, like France, Germany and Italy, where the consolidated financial statements in accordance with other standards, such as the International Financial Reporting Standards (International Financial Reporting Standards-IFRS) or generally accepted accounting principles of the United States (Generally — Accepted Accounting Principles GAAP). In 2005, all European companies that do have to set a stock listing IFRS for their consolidated financial statements. The bottom line is necessary distinction between the accounting practices at the national and transnational levels.
  2. Some state codes of law, in particular Germany and Japan, to transfer responsibility of the government’s establishment of accounting standards to the private sector and independent professionals, so that standard-setting process to be similar to the process in common law countries such as Australia, Canada, Britain and the United States.
  3. The importance of the stock market as a source of funding is growing around the world, especially developing countries from centrally planned economies into market-oriented, such as China and the Czech Republic.


  • The difference between fair presentation and compliance with state law and where the dominant application

Classification based on the fair presentation versus legal compliance pose a major influence on many accounting issues, such as :

  1. Depreciation, where the load is determined based on the reduction in the usefulness of an asset over the useful economic (fair presentation) or the amount allowed for tax purposes (legal compliance),
  2. Lease which is substantially the purchase of fixed assets treated as such (fair presentation) or treated as operating leases are common (legal compliance)
  3. Pension costs are accrued at the time generated by the employee (fair presentation) or charged on the basis paid at the time to stop working (legal compliance).

Classification is based on fair presentation explaining accounting versus legal compliance at this time. The distinction between fair presentation and conformity of law pose a major influence on many accounting issues.

And fair presentation of substance over form is the main feature of the accounting law. Accounting for common law oriented to the needs of decision-making by outside investors. The financial statements are designed to assist investors in assessing management performance and estimates of cash flow and profits in the future. Compliance with accounting laws are designed to comply with government imposed such as the calculation of taxable income or comply with the national government’s economic plan.
Accounting for fair presentation is found in Britain, the United States, the Netherlands and other countries affected by political and economic ties (such as the UK affect the former British territory, and the United States affect Canada, Mexico and the Philippines).
Many companies are derived from code law countries (such as German companies and Swiss) now use IFRS in preparing the consolidated financial statements. Some Japanese companies using U.S. GAAP in the consolidated financial statements are prepared. After 2005, all listed shares of European companies will use fair presentation of accounting in consolidated statements because they will be using IFRS which is the reference standard that is currently being developed in Japan and China.

Another problem is the use of reserves to smooth earnings discrete from one period to another. And fair presentation of substance over form (substance over form) is the main characteristic of the general accounting laws. Compliance with accounting laws are designed to comply with government imposed such as the calculation of taxable income or meet the national government’s macroeconomic plan. Conservative measurement ensures that the amount distributed carefully. Accounting for legal compliance will continue to be used in the financial statements of individual firms in code law countries where consolidated statements apply to the presentation of fair reporting. In this way, consolidated statements may provide information to investors, while individual company reports to comply with the law.


  • Issues Important Differences Fair Presentation and Compliance Against the Law

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



Chapter 3

Comparative accounting


Satandar accounting is a regulation or rule (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. Thus, accounting standards are the result of standard setting. In some countries accounting standards apply only to the financial statements in separate reports, and not for the consolidated report. In these countries, companies are free to choose different accounting standards for consolidated financial statements. To obtain a complete picture of how the accounting works in one country, we must give attention to the process of setting accounting standards, accounting standards and practices actually produced. Auditing adds credibility to financial statements. Thus, we must also address the role and purpose of auditing in countries that will be discussed.

Accounting standard setting generally involves a combination of private and public sector groups. Include the private sector accounting profession and other groups affected by the reporting process as users and compilers keaungan financial statements and the employees. Including public sector bodies such as the tax authorities, ministries in charge of commercial law and capital market commission. Stock exchanges also affect the process and may be included in the private sector or public, depending on the country. The role and influence of these groups in setting accounting standat differ from country to country. These differences help explain why different accounting satndar worldwide. The relationship between accounting standards and accounting practices are complex and not always move in the same direction.

In some cases, derived from standard practices; on other occasions, the standard comes from practice. Prakrik can be influenced by market forces such as the yng associated with competition for funds in capital markets. Companies that compete for funds may voluntarily provide information beyond what is required in response to requests from investors and other parties to the information. If a request for information is strong enough, the standard can be amended to require disclosure of a previous voluntary.


  • The terms of accounting standards and the determination of accounting standards

The Financial Accounting Standards Board (FASB) is a private, not-for profit organization whose sole purpose is to develop generally accepted accounting principles (GAAP) in the United States in the public interest. The Securities and Exchange Commission (SEC) designated the FASB as the organization responsible for setting accounting standards for public companies in the United States was created in 1973, replacing the Committee on Accounting Procedure (CAP) and Accounting Principles Board (APB) of the American Institute of Accountants Certified Public (AICPA). FASB’s mission is “to establish and improve standards of accounting and financial reporting guidance and education to the public, including issuers, auditors, and users of financial information.” To achieve this, the FASB has five goals :

  • Increase the benefits of financial reporting by focusing on the main characteristics of relevance and reliability, and on the comparative quality and consistency.
  • Keep standards current to reflect changes in methods of doing business and the economy.
  • Consider promptly any significant areas of deficiency in financial reporting that might be enhanced through the establishment of standards.
  • Promote the international convergence of accounting standards concurrent with improving the quality of financial reporting.
  • Improve public understanding of the nature and purpose of the information in the financial statements.

FASB is not a government agency. . The SEC has the legal authority to establish financial accounting and reporting standards for publicly held companies under the Securities Exchange Act of 1934. Throughout its history, however, the policy of the Commission has relied on the private sector for this function if the private sector demonstrates the ability to fulfill responsibilities in the public interest.

FASB is an independent part of the structure of all businesses and professional organizations. Before the present structure was created, financial accounting and reporting standards was first established by the Committee on Accounting Procedure of the American Institute of Certified Public Accountants (1936-1959) and then by the Accounting Principles Board, also part of the AICPA (1959 -73). Statement of its predecessor bodies remain in effect unless amended or superseded by the FASB.

In addition to full-time members, there are about 68 members of staff. This staff is, “professionals drawn from public accounting, industry, academia, and government, plus support personnel.” The group was formed in order to provide quick response to their financial problems arise. This group includes 15 people from both public and private sectors coupled with the representatives of the FASB and the SEC observer. As problems arise, the task force consider them and try to reach consensus on what action to take. If a consensus can be achieved, they EITF issues and FASB are not involved. EITF considered as a legitimate issue as FASB statements and are included in GAAP.

Creation of Codification

On July 1, 2009, FASB announced the launch of the Accounting Standards Codification, stating that a “single source of authoritative nongovernmental U.S. generally accepted accounting principles.” The Codification regulate many statements which are U.S. GAAP to be sought, consistent format. [3] Codification is not to be confused with the FASB Conceptual Framework, a project initiated in 1973 to develop a sound theoretical basis for the development of accounting standards in the United States.

Norwalk Agreement

FASB is pursuing convergence project with the International Accounting Standards Board (IASB) and International Financial Reporting Standards (IFRS). On 18 September 2002, in Norwalk, Connecticut, FASB and IASB met and issued a Memorandum of Understanding. [4] This document describes a plan to converge IFRS and U.S. GAAP into a single set of high quality and compatible standards. As part of the project, the FASB has begun to move from the principle of historical cost to fair value.

The independence

In June 2009, the FASB has been criticized by investor advisory panel after making the change-to-market accounting as a sign of a response to political pressure. Lobbyists have obtained permission for banks to apply a special accounting treatment for toxic assets. In order to establish accounting principles, FASB issue public statements, each of which address problems or special general accounting. This statement is :

• Statement of Financial Accounting Standards

• Statement of Financial Accounting Concepts

• FASB Interpretation

• FASB Technical Bulletins

• EITF Abstracts

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.

Practice with different accounting standards prescribed

Sometimes people use the term harmonization and standardization as if both have the same meaning. However, contrary to the harmonization, standardization generally means the determination of a group of rigid rules and narrow and may even be the application of a single standard or rule in any situation. Standardization does not accommodate the differences between countries, and therefore more difficult to be implemented internationally. Harmonization is much more flexible and open, do not use one size fits all approach, but to accommodate some of the differences and have experienced great progress internationally in recent years.

Accounting systems in developed countries

Accounting System in 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 producing a meraksasa industry conglomerate called 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.

These keiretsu venture 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.

  1. Commercial law is governed 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.
  2. Public-owned enterprises 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 according to the Commercial Law and SEL.
  3. 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 :

  1. Changes in share capital and reserves must
  2. Changes in bonds and long-term debt and short-term
  3. Changes in fixed assets and accumulated depreciation
  4. Assets in insurance
  5. Loan guarantees
  6. Changes in provisions
  7. And the amount owed to the collectible of the controlling shareholder
  8. Equity holdings in subsidiary companies and the number of shares owned by such subsidiaries.
  9. Receivables from subsidiaries
  10. Transactions with directors, the auditor shall, controlling shareholders and third parties that pose a conflict of interest
  11. 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 the consolidated statements danumumnya same accounting principles are 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 :

  1. Requires companies that list their stocks to make a cash flow statement
  2. Expand the number of subsidiaries are consolidated under the control of owned and not a percentage of ownership
  3. Expand the 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.


 Accounting System in France

Accountancy in France is strongly associated with the code so it is possible to overlook the fact that the legislation of commercial law (Code de Commerce) and the actual tax laws determine many accounting practices and financial reporting in France. The primary basis of accounting rules is the Accounting Law 1983 and Decree 1983 which includes accounting Compatible General Plan shall be used by all companies. Every company should have a manual accounting. The special feature is the presence of accounting in France dichotomy between the separate financial statements of companies with a consolidated group reports. French law allows French companies to follow International Financial Reporting Standards (International Financial Reporting Standards-IFRS). The reason, many multinational companies from France who recorded their shares abroad.

Five major organizations involved in standard-setting process in France :

  1. Counseil National de la Comptabilite or CNC (National Accounting Board)
  2. Comite de la Reglementation Comptable or CRC (Accounting Regulation Committee)
  3. Autorite des Marches financiers or AMF (Financial Markets Authority)
  4. Ordre des Experts-Comptables or OEC (Institute of Certified Public Accountants)
  5. Compagnie Nationale des Comptes Commisaires aux or CNCC (Association of National Compliance Auditor)

French company reported a balance sheet, income statement, notes to financial statements, directors report and auditors report. There are no provisions regarding the statement of changes in financial position or cash flows although CNCC recommends to him. To give you an actual and reasonable (fidele image), the financial statements have been prepared in accordance with the regulations (regularite) and with good intentions (sincerite).
In the measurement of accounting, fixed assets are generally depreciated according to the tax provision in a straight line or multiple balances. Inventories should be valued at the lower of cost or net realizable value using FIFO or weighted average method. Research costs are not amortized over 5 years. Many risks and uncertainties can be reserved, such as those associated with litigation, restructuring, and self-insurance and this allows the emergence of opportunities for income smoothing.

Accounting measurement

Accounting for individual companies is a legal basis for share dividends and compute taxable income. Intangible assets are generally valued based on historical costs. Face-to-depreciated assets according to the tax provisions, generally on the basis of a straight line or balance berganda.persediaan be valued at the lower of cost or net realizable value using FIFO or weighted average. Debebankan research and development costs as incurred, but capitalized in certain circumstances. If capitalized, research and development costs must be amortized over no more than 5 years.

Accounting System in Germany

German accounting environment changes continuously and the results are remarkable since the end of World War II. In the early 1970s, the European Union began to issue a directive harmonizing, which must be adopted by Member States into national law. EU directive ynag Fourth, Seventh and Eighth entirely into German law through Kompeherensif Accounting Law enacted on December 19, 1985. This legislation is something that is remarkable because :

  1. integrates all of the provisions in German accounting, financial reporting, disclosure and auditing in a law course
  2. These laws are the same, especially the third book of the German Commercial Law (HGB), so it applies to all types of business entities, ranging from limited partnership to a company whose shares are owned by public and
  3. legislation is primarily based on the concept and practice in Europe.


Regulation and enforcement of accounting rules

Law on Control and Transparency in 1988 for the Ministry of Justice introduced kaharusan weeks to recognize a private entity that sets national standards to meet tujaun the following:

  • Develop recommendations on the application of accounting standards in the consolidated financial statements
  • Provide advice to the Ministry of Justice for a new accounting legislation
  • Representing the German preformance international accounting organizations, such as the IASB.


 Financial reporting

Accounting legislation in 1985 specifically determine the content and form of financial statements, which include: balance sheet, income statement, notes to financial statements, management reports, auditor’s report. The main traits of financial reporting in Germany is a personal statement by the auditor to the board of managing directors of companies and inspectors perusahaa god. This report contains the opinion of the company’s future prospects, and in particular the factors that threaten the survival of the company.

Accounting measurement

Two forms of the purchase method that are allowed are: book value method and revaluation method (basically two methods differ in their treatment of minority rights). And assets of the company that diakuisi kewajiabn valued at present value and the amount of the goodwill yangtersisa. Goodwill can disalinghapuskan to reserve in equity or amortized systematically over the entire mamfaat economy. The law states a period of 4 years as a regular amortization period, but that 20-year period is acceptable.

Accounting system in the Netherlands

 The Netherlands has the provision of accounting and financial reporting are relatively permissive, but ynag professional practice standards are very high. The Netherlands is the country code of law, but accounting-oriented penyjian reasonable. Financial reporting and tax accounting are two separate activities. The Netherlands is one of the first supporters of the international standat for accounting and financial reporting, and a statement received perhatianbesar IASB in determining acceptable practice. The Netherlands also became home to some of the world’s largest multinational corporations.

Regulation and recognition of accounting rules

Liberal regulations in the Netherlands remained until 1970 when legislation enacted Lppran Annual Financial. The legislation is part of a major program changes in hikum [ompany and was introduced in part to reflect the harmonization of company law in the EU that will terjadi.dewan annual report issued charges against the accounting principles generally accepted. The council has members from three different groups: the preparation of financial statements, the use of financial statements, the auditors of financial statements

Financial reporting

Dutch financial reporting quality is very uniform. The financial statements shall be prepared in the Dutch language, but in English, French, and German can diteima. The financial statements must contain the: balance sheet, income alba, records, reports of directors, other information is recommended.

Accounting measurement

Although the pooling method for business combinations may be used under certain conditions, such methods are rarely used in belabda. Commonly used is the method pembelian.goodwill acquisition cost is the difference between the fair value of purchased assets and liabilities. Dutch flexibility in accounting measurements can be seen by diperbolehkannnya use of present value for intangible assets such as inventory and assets are depreciated.

Accounting systems in the Netherlands

accounting for the world heritage of English is essential. English is the first country in the developed dinia accounting profession as we know sekarang.konsep presentation of results and financial position of the fair is also derived from the standard in English inggris.Penetapan recommendations developed from the accounting principles to influence the formation of Accounting Standards Committee in 1970, which then named as the Committee on Accounting Standards.

Accounting reporting

Netherlands financial reporting, including the most comprehensive in the world. The financial statements generally include: Directors report, profit and loss statements and balance sheets, cash flow statement, statement of total recognized gains dn losses, accounting kebujakan report, references in the notes to the financial statements, reports auiditor.

Accounting measurement

Based on the method of acquisition, goodwill is calculated as the difference between the fair value of the submission made and the fair value akitiva obtained. Assets can be valued using historical cost or current cost using gabungaan both. Therefore, the revaluation of land and buildings are allowed. Depreciation and amortization should be related to the basic measures used against the related asset. Research expenditure is written off in spending occurs under certain conditions and development costs can be deferred.

Accounting in the United States

Accounting in the United States regulated by the private sector (Financial Accounting Standards Board, Accounting Standards Board or Fincancial-FASB), but a government agency (Capital Market Supervisory Commission or the Securities Exchange Commission-SEC) also has the power to set its own standards.

The U.S. system has no general legal provisions regarding the issuance of audited financial statements periodically. U.S. companies formed under state law, not federal hum. Although it has the legal power to determine the accounting and reporting standards for public companies, SEC continue to rely on the private sector that sets the standard stretcher. SEC and FASB to work together to provide pressure when viewing the FASB moving too slowly or in the wrong direction.

Annual financial report should be made by a major U.S. company that includes the following components:

  1. Management reports
  2. Independent auditor’s report
  3. Primary financial statements (income statement, balance sheet, statement of cash flows, comprehensive income, stockholders’ equity and statements)
  4. Management discussion and analysis of operating results 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 5 or 10 years
  8. Selected quarterly data


U.S. accounting measurement rules assume that a business entity will continue to carry out its business. Accrual basis of measurements with a very broad and the recognition of transactions and events are highly dependent on the matching concept. Business combination should be recorded as a purchase. Goodwill is capitalized as the difference between the fair value of the gifts given in exchange and the fair value of net assets acquired. Goodwill must be reviewed for impairment annually and written off and charged in the profit if the book value exceeds fair value.

Differences and similarities of accounting systems in developed countries

While Nobes in the Journal of Business Finance and Accounting (Spring 1983) identify the factors that distinguish the accounting system are :

  1. Types of users of financial statements are published.
  2. Level of legal certainty.
  3. Tax rules in the measurement.
  4. Level of conservatism.
  5. Level of stringency in the application of historical cost.
  6. Replacement cost adjustments.
  7. Consolidation practice.
  8. Ability to obtain provisions.
  9. Uniformity between companies in implementing the regulations.

 The following are the differences and similarities of accounting systems in developed countries:

The taxation system

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

The existence and importance of accounting profession

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

Accounting education and research

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

The accounting rules

Accounting standards and rules set out in certain countries is certainly not entirely the same as other countries. Role in determining standards of professional accountants and accounting rules were more common in those countries wherewith to enter the professional rules in the rules of the company, such as in Britain and the United States. Meanwhile, Christopher Nobes and Robert Parker (1995:11) explains the presence of seven factors that lead to important differences in the development of international accounting systems and practices.
These factors include :

  1. the legal system,
  2. the owner of the funds,
  3. the influence of the tax system
  4. stability of the accounting profession.
  5. inflation,
  6. accounting theory
  7. accidents of history.


The legal system

Company regulations, including in this case is the accounting systems and procedures, much influenced by the legal system in force in a country. Some countries such as France, Italy, Germany, Spain, the Netherlands adhere to the legal system that is classified in the codified Roman law. Codified in law, the rules associated with the basic idea of moral and justice, which tends to be a doctrine. Meanwhile, countries like Britain, the United States and British Commonwealth countries adopted the common law. In common law, the existence of an attempted answer to specific cases and not make a general formulation.

Sources of funding

By source of funding, the company can be grouped into two. The first group is a company that gets most of the funds of the shareholders in the capital market (shareholders). The second group is a company that gets most of the funds of the bank, state or family funds. Generally, in countries with a majority of companies owned by shareholders but the shareholders do not have access to internal information, the more demands on the disclosure (disclosure), examination (audit) and get an unbiased (fair information).

Tax system

 The extent to which the tax system may affect the accounting system is to look at tax laws determine the extent to which accounting measurement (accounting measurement). In Germany, books must be equal to the tax according to commercial accounting. Whereas in many other countries such as Britain, the United States and also includes Indonesia, there are rules – rules that differ between taxation and commercial companies. The most obvious example of this is depreciation.

Accounting profession

Bodies were formed as a container of different professions in each country, and the results of the rules or standards are affected by the shape, authority and members of such bodies. In some countries it was found that the separation of the accounting profession, as a tax expert or just as a corporate accountant. Members of a governing body of accounting standards may consist only of the public accountant or involve parties from business groups, industry, government and educators. The level of education and experience in the practical world as a condition of a person to become a member agency will also determine the quality of accounting standards and rules as the output produced.




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