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an international dimension to upper-level financial accounting courses by utilizing foreign annual
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Tondkar, Rasoul H; Adhikari, Ajay; Coffman, Edward N. Issues in Accounting Education 9. 2 (Fall 1994): 271.
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Abstract {summary)
Two approaches to adding an international dimension to upper-level financial accounting courses are presented by utilizing foreign annual reports: 1.
integrating international accounting topics into selected upper-level courses, and 2. covering international accounting topics as a distinct component of a
specific course. International accounting materials that instructors can use in implementing these approaches are also identified. Regardless of the
approach taken, adding an international dimension to accounting courses will make accounting education more dynamic, interesting, and helpful in
preparing students to meet the challenges of a global economy.
Full Text
SEVERAL recent reports have recommended that significant changes be made in accounting education [AAA, 1986; Perspectives ... ,1989; AECC, 1990].
"The need for changes has arisen because accounting programs have not kept pace with the dynamic, complex, expanding, and constantly changing
profession for which students are being educated" [AECC, 1990, p. 1]. A common theme shared by these recommendations is that accounting education
should be more broadly based with a strong international emphasis.
The Accounting Education Change Commission (AECC) recommends that accounting education include international business and accounting [AECC,
0
0, p. 8]. This position is supported by the chief executives of the major public accounting firms in their document Perspectives on Education:
abilities for Success in the Accounting Profession, which states that ''The successful practitioner requires general knowledge that covers a number of
actors ... [including] a sense of the breadth of ideas, issues and contrasting economic, political and social forces in the world" [p. 7]. Additionally, the
American Assembly of Collegiate Schools of Business (AACSB) requires that the curriculum include coverage of global issues [AACSB, 1991, p. 18].
In many situations, accountants and auditors in the U.S. need to be familiar with the accounting principles of other countries. This is particularly true
when (1) a U.S. company's financial statements are prepared for inclusion. in consolidated financial statements of a non-U.S. parent, (2) a U.S. company
seeking to raise capital in other countries is required to prepare financial statements in conformity with the accepted accounting principles in these
countries, or (3) a U.S. company having non-U.S. investors prepares two sets of financial statements--one in accordance with accounting principles of
another country for use by non-U.S. investors and the other in accordance with U.S. accounting principles [AICPA, SAS No. 51, par. 1-8].
The objectives of this paper are to discuss two approaches to adding an international dimension to upper-level financial accounting courses and to
identify international accounting materials that instructors can use in implementing these approaches.
PREVIOUS STUDIES AND PROPOSED APPROACHES TO ADDING AN INTERNATIONAL DIMENSION TO UPPER-LEVEL FINANCIAL ACCOUNTING COURSES
Meek [1985] suggests that international managerial accounting topics, such as planning and control, transfer pricing, and performance evaluation, can be
incorporated into the introductory managerial accounting course. Meek also suggests international accounting materials that instructors might use.
McClure [1988], on the other hand, advocates incorporating international topics into the introductory financial accounting course and suggests
instructional materials that might be used. These two articles, among other things, illustrate how the AACSB's accreditation requirement on "worldwide
dimension" could be met.(l)
The Meek and McClure papers are pioneer works in discussing and illustrating how international topics can be incorporated into the undergraduate
curriculum. A limitation of their studies, however, is that introductory courses may not be the best place in the curriculum to cover international
accounting topics. Students in such courses have limited exposure to accounting and business in general, and thus may lack sufficient knowledge to fully
understand and appreciate accounting practices, concepts, and reporting requirements of other countries.
The papers by Stout et al. [1988] and Bloom et al. [19921 suggest approaches to covering international accounting topics in upper-level accounting
courses. Stout et al. present a case study approach to adding an international dimension to upper-level financial accounting courses. Based on an
assumed set of transactions and events, the authors constructed comparative income statements for companies located in the U.S., U.K., Australia, and
Germany. These income statements can be used by instructors in discussing transnational differences in accounting principles.
et al. discuss differences in the accounting treatment of certain topics such as inventory costing, depreciation methods, and business
" .hbinations in the U.S., U.K., France, Japan, and Sweden. This information is summarized in a table that can be used by instructors for discussing
transnational accounting differences. The authors suggest that understanding of accounting principles in other countries increases students' "cultural
awareness" and enhances their understanding of U.S. accounting principles.
Survey studies (e.g., Burns, 1979; Mintz, 1980) indicate that coverage of international accounting topics is more desirable when such topics are
integrated throughout the curriculum rather than when covered in a separate undergraduate-level course. These studies point out, however, that
because of the lack of instructional materials and familiarity of instructors with international accounting topics, the integration of international accounting
throughout the curriculum has not been adopted at many universities.
This paper presents two approaches for adding an international dimension to upper-level financial accounting courses: 1) integrating international topics
into selected upper-level financial accounting courses, and 2) covering international accounting topics as a distinct component of a specific upper-level
C_nancial accounting course. Both approaches rely on the use of foreign annual r e p o r t s ~
The use of foreign annual reports offers certain advantages. When used in conjunction with a textbook, annual reports enhance students' understanding
of the concepts and procedures discussed in the text [Harkins and Mills, 1985]. Foreign annual reports can be stimulating and exciting to students
because they provide "real life" examples and because they are--in many cases--the first time that students have been exposed to accounting as it
relates to companies located outside the U.S. Students benefit from foreign annual reports by comparing and contrasting their contents with those of
U.S. companies, thus allowing them to better understand the differences between U.S. accounting concepts, practices, and reporting requirements arid
those of other countries. This paper identifies the annual reports of eight companies, one located in the U.S. and one located in each of seven other
countries--Canada, Australia, the United Kingdom, France, Germany, the Netherlands, and Japan.(2) Appendix A contains a list of the companies and
their addresses where copies of annual reports can be obtained. (Appendix A omitted) These annual reports were used in Implementing the two
approaches presented in this paper.
The annual reports of the seven foreign companies were selected for comparison with the annual report of the U.S. company because(1) these
companies are located in some of the most industrialized countries--thus, their financial accounting and reporting practices are relativelyadvanced, (2)
most of the countries in which the companies are domiciled influence accounting systems and practices in other countries, and (3) these companies
provide financial statements in English for the benefit of international investors.(3)
Approach One: International Accounting Integrated into Existing Courses
An international dimension can be added to the accounting curriculum by Integrating international accounting topics into existing upper-level financial
accounting courses. Students would be introduced to the international dimensions of topics generally covered in these courses, such as the form and
content of financial statements, accounting for marketable securities and inventories, accounting for goodwill and deferred taxes, consolidations, foreign
currency translation, and segment reporting. When discussing topics such as these, instructors could present information on the treatment of these
topics in selected countries by utilizing foreign annual reports.
To assist instructors in this process, table 1 presents 21 accounting topics and indicates how these topics are accounted for (shaded areas of table) in
each of the given countries.(4) (Table 1 omitted) To heip locate the companies' discussions of the topics in their respective annual report, page numbers
are presented in the unshaded areas of table 1.
By utilizing table 1 and the annual reports, instructors could discuss how the formats of financial statements (topic 1) of foreign companies vary from
that of U.S. companies. In the U.S., for example, assets are generally reported in order qf liquidity; however, in a typical European company's report,
~ s s e t s are highlighted in the reverse order of liquidity (for example, see annual reports of Imperial Chemical, Daimler-Benz, Philips, and Renault).
'-.-when discussing accounting for goodwill, table 1 and foreign annual reports are most helpful in illustrating that the treatment of goodwill (topic 9) varies
from country to country. In the u.s. and Canada, purchased goodwill is capitalized and amortized over periods not exceeding 40 years. In Australia,
purchased goodwill is also capitalized; however, the amortization period is limited to 20 years. In the United Kingdom and the Netherlands, goodwill is
immediately charged against retained earnings [Dunne and Rollins, 1992] or amortized over a specific period. Companies in France amortize goodwill over
its economic life; however, in some cases it can be charged against retained earnings immediately. In Germany, goodwill may be written-off against
retained earnings, amortized over four years or the number of years benefitted. While expensing of goodwill is encouraged in Japan, it can be capitalized
and amortized over five years. For a further treatment of this topic in Japan, see Dunne and Rollins [1992].
Foreign annual reports in conjunction with table 1 provide a valuable means of illustrating how the method of accounting for foreign currency translation
and the treatment of translation gains and losses (topics 19 and 20) vary in different countries. For instance, accounting for foreign currency translation
in the U.S. and Canada is very similar. Depending on the particular situation, companies in the U.S. and Canada use either the temporal method
("remeasurement") or the current rate method in which translation gains and losses are included either in income of the period or in stockholders' equity
as a translation adjustment.
Accounting for foreign currency translation and the treatment of translation gains and losses in the United Kingdom, Australia, and the Netherlands are
very similar to that of the U.S. In Germany and France, there is no prescribed method of accounting for foreign currency translation; however, the
method applied must be disclosed. Companies in Japan use the "modified temporal" method whereby translation gains and losses are treated as
translation adjustments and disclosed on either the asset or liability side of the balance sheet.
Similarly, by referring to deferred taxes (topic 12) in table 1, we see that the use of deferred taxes is a common practice in all countries presented.
However, by referring to the annual reports of the Japanese, German, and French companies, we see that deferred taxes account for relatively small
amounts on these annual reports. The instructor could take the opportunity here to explain that this is due, at least in part, to the strong influence of
tax laws on financial reporting in Japan, Germany, and France. Because of the similarities of tax and accounting rules in these countries, temporary
differences between taxable and financial income are not as significant as they are in countries such as the U.S., U.K., Australia, Canada, and the
Netherlands. An example such as this not only exposes students to accounting practices in other countries, it also enhances and reinforces their
understanding of the accounting principles under discussion.
Again, by utilizing table 1, we see that, with the exception of Germany, segment reporting (topic 21) is a common practice in the countries presented in .
this study. Even though segment reporting is not required in Germany, Daimler-Benz reports segment information in its (1990-91) annual report.
,.,. addition to providing information on common accounting practices in different countries, table 1 provides the specific page numbers of the annual
")ports of selected companies so that one can refer to the annual reports to see how companies accounted for each topic listed in table 1. On the one
hand, a discussion of differences in accounting practices in various countries allows instructors the opportunity to discuss environmental factors that
influence accounting practices in different countries. On the other hand, an examination of the discrepancies between a common accounting practice in a
country and the manner that a selected company from that country accounted for that item provides instructors the opportunity to introduce and
discuss international forces (e.g., international capital markets) that may have contributed to such discrepancies. To assist in providing accounting
instructors basic background information on accounting practices of different countries, several source materials along with a description of each are
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presented in appendix -B. (Appendix B omitted)
Naturally, the eight annual reports and the 21 topics presented in table 1 are not intended to be all-inclusive. Instructors should have the flexibility to
expand the number of annual reports or modify the topics shown in table 1.
cproach Two: International Accounting Covered As a Distinct Component of a Specific Course
, <A second approach to covering international accounting in upper-level financial accounting courses is to include international topics as a distinct
component of a specific course such as advanced accounting or accounting theory. This approach requires approximately four weeks of class time;
however, the time may vary depending on the extent of International coverage desired and the number of students in the class. Typically, the instructor
would use the first week and the last three weeks of the term to cover the international segment.
During the first week of the term, students are assigned three to five articles covering background and general international accounting Information on
topics such as accounting standard-setting in different countries, international accounting organizations, harmonization of international accounting, and
issues facing multinational companies (see appendix B for suggested readings).
At the end of the first week, students are divided Into groups of three to four students. Each group is assigned an annual report of a foreign company
and specific chapters/sections of the books that are used as primary source materials (see appendix B). These books discuss the accounting systems
and practices of the countries in which the foreign companies are located. The source books are placed on reserve in the library. Between the first week
and the last three weeks of the term, each group is required to write a paper describing the accounting and standard-setting process in the country
where the assigned company is domiciled and to compare and contrast accounting principles and policies discussed In the respective foreign annual report
with generally accepted accounting principles in the U.S. At a minimum, each group should discuss the 21 topics identified in table 1. (Table 1 omitted)
During the last three weeks of the term, each group is required to make a 30-minute presentation and to distribute a five-page summary of Its report to
other members of the class. This project constitutes 25 percent of the course grade. While each group Is assigned only one foreign annual report from a
specific county on which to make a presentation, he cumulative effect is that the class Is exposed to the accounting systems and practices of many
countries.
This approach allows for a more in-depth coverage of international accounting topics than the first approach. In addition, this approach requires that
fewer instructors be familiar with international accounting since international coverage takes place in only one course.
SUMMARY
This paper presents two approaches for adding an international dimension to upper-level financial accounting courses. The particular approach that might
be used depends on the instructor and the institution. Some instructors might prefer to integrate international accounting into various courses, whereas
others might prefer covering international accounting as a distinct component of a specific course. This paper identifies Instructional materials that
can use in implementing these two approaches.
students to international dimensions of topics covered in upper-level financial accounting courses allows them opportunities to compare
accounting concepts and principles In the u.s. with those of other countries. It also increases .students' awareness and appreciation of the wide variety of
accounting practices that exists throughout the world, thus better preparing them to meet the challenges of a global economy.
1. The AACSB Accreditation Standards issued in 1985-86 required that a "worldwide dimension" be incorporated into undergraduate business and
accounting curricula. Starting with the academic year 1992-93 the Standards require that the curriculum Include "coverage of global issues" [AACSB,
1991, p. 18].
2. The annual reports used in this study are for the calendar year 1990 except for Foster's Brewing (Australia) and Daimler-Benz (Germany), which relate
to the fiscal year July 1, 1990 through June 30, 1991.
3. The English version of foreign annual reports is commonly referred to as a "convenience translation" in which the text (narrative statemenfs) is
translated Into English and, in some cases, the reported amounts on the financial statements are converted into U.S. dollars. The financial statements in
the "convenience translation" of a foreign annual report, however, are generally prepared In accordance with the accepted accounting principles of the
country in which the company is domiciled.
4. The appropriate accounting treatment of these topics is based on the source materials shown in appendix B.
APPENDIX B
Source Materials for Use in Adding an International Dimension to Upper-Level Financial Accounting Courses
1. Guides to Financial Reporting Practices in Different Countries and Discussion of Selected International Accounting Topics.
Coopers & Lybrand, 1991 International Accounting Summaries (New York: John Wiley & Sons, 1991).
Provides detailed information about generally accepted accounting principles, financial reporting and disclosure requirements, financial statement
terminology, and auditing requirements in 24 countries.
Mueller, G. G., H. Gernon, and G. Meek, Accounting: An International Perspective (Homewood, IL: Irwin, 1991).
lfl"tpvides an overview of selected international accounting topics. Flnandal accounting topics covered include the influence of environmental factors on
'-.J:ounting in different countries, financial reporting in the international environment, disclosure practices around the world, harmonization of international
accounting standards, and multinational consolidation of financial statements.
Nobes C. W. and R. H. Parker, Eds., Comparative International Accounting (New York: Prentice Hall, 1991).
Provides detailed information on the development of the-accounting profession and financial reporting practices in eight industrialized countries (U.S.,
Canada, U.K., Australia; France, Germany, the Netherlands, and Japan). Also Includes selected international accounting topics such as harmonization of
accounting standards, consolidation and foreign currency translation practices, segment reporting, and inflation accounting practices in different
countries.
The Spicer & Oppenheim, Guide to Financial Statements Around the World (New York: John Wiley & Sons, 1989).
C'rovides an overview of accounting systems and practices in 26 countries.
2. Annual Reports
Annual Reports of Eight Companies (see appendix A).
3. Articles
Choi, F. D. S. and V. B. Bavishi, "International Accounting Standards: Issues Needing Attention, "Journal of Accountancy (March 1983), pp. 62-68.
Daley, L.A. and G. G. Mueller, "Accounting in the Arena of World Politics: Crosscurrents of International Standard-Setting Activities," Journal of
Accountancy (February pp. 40-50.
Fleming, P. D., "The Growing Importance of International Accounting Standards," Journal of Accountancy (September 1991), pp. 100-106.
Horner, L. D., "The New Rosetta Stone," Ohio CPA Journal (Autumn 1986), pp. 5-7.
Korbel, J, J. and C. J. Brescia, "Europe 1992: Changing the Rules of the Game," Price Waterhouse Review, No. 1 (1989), pp. 2-16.
These articles provide excellent background information on the accounting standard-setting processes in different countries, international accounting
organizations involved in harmonizing accounting practices, and the European Community's initiatives to achieve a single and unified market.
REFERENCES
Accounting Education Change Commission (AECC), "Objectives of Education for Accountants: Position Statement Number One," Issues in Accounting
Education (Fall1990), pp. 307-312.
American Accounting Association (AAA), Committee on the Future Structure, Content, and Scope of Accounting Education (The Bedford Committee),
"Future Accounting Education: Preparing for the Expanding Profession," Issues in Accounting Education (Spring 1986), pp. 168-195.
American Assembly of Collegiate Schools of Business (AACSB), The AACSB Accreditation Project: Final Report 1991 (AACSB, 1991).
11"\nerican Institute of Certified Public Accountants (AICPA), SAS No. 51, "Reporting on Financial Statements Prepared for Use in Other Countries," AICPA
, .. ..fofesslonal Standards Vol. 1 (Chicago: Commerce Clearing House, 1992).
Bloom, R., J. Fuglister, and J. Kantor, ''Toward Internationalization of Upper-Level Financial Accounting Courses," Advances in International Accounting, 5
(1992), pp. 239-253.
Burns, J. 0., "A Study of International Accounting Education In the United States," International Journal of Accounting (Fall1979), pp. 135-145.
Dunne, K. M. and T. P. Rollins, "Accounting for Goodwill: A Case Analysis of the U.S., U.K., and Japan," Journal of International Accounting, Auditing and
Taxation, 1(2)(1992), pp. 191-207.
Harkins, J. L. and J. Mills, "Annual Reports: A Pedagogical Tool for Intermediate Accounting," Advances in Accounting, 2 (1985), pp. 149-166.
McClure, M. M., "Internationalization of the Introductory Financial Accounting Course," Journal of Accounting Education (Spring 1988), pp. 159-181.
Meek, G. K., "Adding an International Dimension to the Introductory Managerial Accounting Course," Journal of Accounting Education (Spring 1985), pp.
57-68.
Mintz, S.M., "Internationalization of the Accounting Curriculum," International Journal of Accounting (Fall1980), pp. 137-151.
Perspectives on Education: Capabilities for Success In the Accounting Profession (New York: Arthur Andersen & Co., Arthur Young, Coopers & Lybrand,
Deloitte Haskins & Sells, Ernst & Whinney, Peat Marwick Main & Co., Price Waterhouse, and Touche Ross, 1989).
Stout, D. E., D. E. Wygal, and J. Volpi, "A Comparative Income Statement Approach to Integrating International Topics In the Financial Accounting
Curriculum," Advances in International Accounting, 2 (1988), pp. 149-168.
Rasoul H. Tondkar is a Professor and Edward N. Coffman is a Professor both at Virginia Commonwealth University, and Ajay Adhikari is an Assistant
Professor at The American University.
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Adding an international dimension to upper-level
financial accounting courses by utilizing foreign
annual reports
Tondkar, Rasoul H; Adhikari, Ajay;
Coffman, Edward N
Issues in Accounting Education
9
2
271
1994
Fall1994
1994
American Accounting Association
Sarasota
United States
Education--Teaching Methods And Curriculum,
Business And Economics--Accountinq
07393172
Scholarly Journals
English
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