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History, Definition, Benefits, and Objectives of International Accounting

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History, Definition, Benefits, and Objectives of International Accounting

International Accounting began with the double-entry system in Italy in the 14th and 15th centuries. The double-entry system of bookkeeping is thought to be the beginning of the creation of accounting. International accounting began when double-entry accounting was invented and used in business activities, namely the multiple recording systems introduced by Luca Pacioli.

 

The development of this accounting system was driven by the growth of international trade in Northern Italy during the late Middle Ages and the government's desire to find a way to tax commercial transactions.

 

In addition, the Dutch accounting model was exported, among others, to Indonesia, the French accounting system in Polynesia and African regions under French rule. The German system's reporting framework affects Japan, Sweden, and Russia.

 

Definition of International Accounting

In 1971, Prof. Thomas R. Weirich, Clarence G. Avery, and Henry R. Anderson suggest three different approaches:

Universal system A descriptive and informative approach covering all methods and standards from all countries, and the accounting practices of foreign subsidiaries and parent companies.

The name and describe these definitional approaches, each as follows:

 

World Accounting

Within the framework of this concept, international accounting is considered a universal system that can be adopted by all countries. Generally Accepted Accounting Principles (GAAP) for the rest of the world, like those in the US, will be established.

 

Practices and principles will be developed so that they can be applied in all countries. This concept will be the ultimate goal of the international accounting system.

 

International Accounting

The second major concept of the term, international accounting involves a descriptive and informative approach. Based on this concept, international accounting includes all kinds of accounting principles, methods, and standards from all countries.

 

This concept involves each country's GAAP, so accountants need to be aware of a number of different principles when studying international accounting. No universal or perfect principles need to be established.

 

The collection of all principles, methods, and standards from all countries will be referred to as the international accounting system. These differences arise because of differences in geographical, social, economic, political, and legal influences.

 

Accounting for Overseas Subsidiaries

The third main concept that can be applied to “international accounting” refers to the accounting practices of the parent company and its subsidiaries abroad.

Reference to a specific country or company domicile is required in this concept for international financial reporting to be effective. The primary interest of accountants is in the translation and adjustment of subsidiary financial statements.

 

Different accounting problems will arise and different accounting principles should be followed depending on which country is used as the reference for translation and adjustments.

 

 

Benefits of International Accounting

Accounting must anticipate the needs of society. Accounting must reflect the cultural, economic, legal, social, and political conditions in its operations.

 

Objectives of International Accounting

  1. Identify the history of international accounting developments from time to time as well as various accounting differences that exist in the world.
  2. Knowing the importance of global business in shaping the accounting dimension.
  3. Make it easy to record business transactions between countries around the world.
  4. Bringing the convergence of international accounting standards (IFRS) and national accounting standards towards a higher solution.

 

Bringing the world economy in a better direction.

Develop a set of accounting standards that can be understood by users of financial reports around the world in making decisions.

 

The Importance of Studying International Accounting

There are a number of additional factors that add to the importance of studying international accounting. These factors stem from the significant and continuous reduction of trade barriers and national capital controls that have occurred as information technology advances.

 

Several things from this point of view, among others

The concept of comparative accounting or international accounting directs international accounting to the study and understanding of national differences in accounting. This includes:

  1. Awareness of international diversity in corporate accounting and reporting practices.
  2. Understanding of the accounting principles and practices of individual countries.
  3. Ability to assess the impact of various accounting practices on financial reporting.
  4. The emergence of a new paradigm in international accounting broadens the framework and thinking to include new ideas from international accounting.

 

As a result, a very long list of accounting concepts and theories was published by Amenkhienan to include the following:

  1. Universal or world theory
  2. Multinational theory
  3. Comparative theory
  4. The theory of international transactions
  5. Translation theory

 

Each of the above theories provides the basis for the development of a conceptual framework for international accounting. Although there will be arguments as to which theory will be preferred.

 

Iqbal, Melcher, and Elmallah define international accounting as accounting for transactions between countries, comparison of accounting principles in different countries, and harmonization of accounting standards around the world.

 

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