ALNAJAH NATIONAL UNIVERSITY

Faculty of economics social sciences

ACCOUNTING DEPARTMENT

International accounting

(the global economy and its effect on accounting)

Prepared by:

Ali Jehad Salameh

(11744062)

Supervised by: Dr. Muiz Abu Alia

 first semester 2020/2021

Contents
Introduction:...................................................................................................................................3
1-international trade......................................................................................................................5
 Impact of international trade on accountability:....................................................................6
 A graphic show Trends of goods and services trade in developing economies:.....................6
2- Foreign direct investment:.........................................................................................................7
 A graphic showing the growth of foreign direct investment in America:................................8
 The effect of foreign direct investment on accounting:..........................................................8
3-multinational Corporations:........................................................................................................9
 The world's largest companies by Fortune in 2019...............................................................10
 Impact of development of multinational corporations on accountability:...........................11
 A graphic show the world’s top 10 non-financial MNEs, ranked by foreign assets, 2019.....12
4-international capital market:.....................................................................................................12
 Figure showing Global trend in stock exchange ESG disclosure guidance:..........................13
 The tasks of the accountant in the international capital markets:........................................14
 A structure showing the structure of the accounting regulatory system in Japan:.................14
Conclusion:...................................................................................................................................15
References:...................................................................................................................................16
Introduction:
The global economy has developed in a very large way compared to the beginning

of the twenty-first century and to the present day, that this development was a

result of globalization, which played a very large role in the development of global

exchange and made the world as a whole a village that includes everyone.

The development of the global economy was also a result of technological

development and the facilities granted by countries to each other, facilities such as
laws and legislation, as well as standards between countries and encouragement of
foreign investment and facilitating the trading process.
All of this is one of the reasons for the development of the global economy, which
has shown very high results in comparison between the present and the past and as
a result of the great development that the world is witnessing.
I will present some of the factors affecting the global economy and its impact on
accounting.
Now I will place the largest countries in the world currently 2020 and compare
them to previous years in terms of economic strength. (Doupnik & Perera, 2015)
The other picture talks about the strength of the economy after 10 years and the
prosperity that will happen to show that the global economy is in continuous
progress. (Doupnik & Perera, 2015)
Presentation:

1-international trade:

International trade is important to get rid of poverty in developing countries.

The developed countries are based on global trade, which aims to innovate
and grow and improve and prosper in income and employment
opportunities, and international trade helps poor families to provide them
with goods and services at reasonable prices and aims also to Prosperity,
economic progress and poverty reduction.
Despite trade and globalization, it has many advantages, but it has faced
many challenges, including: transport, inappropriate customs, applicable
laws, and weak technology in poor countries ... etc.
There is a multi-lateral initiative called (Aid for Trade) which is to stimulate
growth, and it has a great impact on trade, for example, in 2017, trade
boomed at a rate of 4.3% and is the fastest rate in the last 6 years.
And international trade has contributed to the ability to compete, reduce
costs, and the prosperity of markets.
International trade has contributed greatly and effectively to global
economic growth and greatly facilitating trade movement ("Stronger Open
Trade Policies Enable Economic Growth for All, 2020).

 Impact of international trade on accountability:

Since there has been a great development in international trade, accounting
must emerge and develop. All types of global trade can only be managed by
experts and accountants who finance and calculate taxes and the laws that
apply and matters related to global openness.
The apparent impacts that are made through international trade is the
development and improvement of accountants' ability to undertake industrial
globalization.
With regard to the difficulty of accounting in international trade and the
emphasis placed by the AICPA on intensive education and the difficulty of
obtaining a certificate, it has become difficult to be an international certified
accountant due to the importance of accounting in this area because
international trade is based on a permanent change in laws and the political
climate.
And the emergence of international trade also led to the emergence of
international standards for the organization of international business as well
as international taxes, which led to the allocation of accounting in research
in taxes in all countries of the world and the methods of their application. On
accountability in general. ("How Does International Trade Impact
Accounting? - Top Accounting Degrees", 2020).

 A graphic show Trends of goods and services trade in developing economies:

2- Foreign direct investment:

Foreign direct investment is a possible way to transfer technological

development as well as capital from developed countries that are looking
for investment, and when foreign investment in a country, it returns
positively to the country, such as: the advantage of competition, the
production process, the acquisition of experience and its importance in
increasing the growth and economic development in the country as well as
the impact On the contributions from the financial sectors to the growth
and growth of GDP and the flow of foreign direct investment.

It can also be said that it is up to the country in which the investor is

invested, and the biggest example of it is the return of profit (theft of the
market), meaning that the local industry is about to end as a result of
strong competition.

Moreover, it led to several problems, and the biggest problem is the

difference in the applied standards, which led to the difficulty of investing
in another country and the increased costs ("The Impact of the Investment
Environment on Foreign Direct Investment (FDI) in the European Transition
Economies," 2020).
  A graphic showing the growth of foreign direct investment in
America:

 The effect of foreign direct investment on accounting:

Accountability has been greatly affected by foreign direct investment and

great responsibilities have fallen on accountants, for example: as the
accountant is a foreign branch that deals with the company on the principles
of international standards, and on the other hand the responsibility for
evaluating investments and their contribution to the economy of this
country.
The accountant's job led to more than that, as the process of analyzing the
multinational company and the importance of analyzing the financial data as
at the end of the financial period when the financial statement is translated
according to the work of the parent company if it is an integral part of the
foreign entity and this is a result of the difference in exchange rates and
currencies around the world.
One of the responsibilities of the accountant in this area is international
taxation, that is, how to legal tax avoidance by transferring profits that are
subject to tax to the state that imposes low tax.
The International Financial Reporting Standard (IFRS) also aims to solve the
problems faced by foreign direct investment, which mainly aims at
standardization with standards, and with respect to the International
Accounting Standard (IAS) that aims at modalities of transactions and which
requires disclosure of reports.
Therefore, accounting was greatly affected by foreign direct investment,
which helped to organize, standardize and solve corporate and investment
problems (UGWU & OKOYE, 2018).

3-multinational Corporations:
The companies that transport goods and services across borders by opening a
subsidiary company in another country without regard to the location of the
parent company are considered a multinational company.

The emergence of multinational companies led to the development of the

labor economy significantly. For example, Coca-Cola Company has a
percentage of its sales outside the United States significantly exceeding that
of its sales in the United States.

Multinational companies have many advantages compared to other

companies, for example, multinational companies are able to get rid of
problems and challenges with regard to trade, such as: Honda is a Japanese
company that is based in America and sends agreements to Korea.
One of the advantages is that it solves regulatory problems, the largest
example of an American pharmaceutical company and the British company
and Bicham by merging to avoid licensing costs and regulatory problems,
according to what a regulatory official said, "And when we go to
Washington, we are an American company."

There are many positives for the development of the global economy, which
has led to the spread of multinational companies that have contributed to
global economic growth (Gitman et al., 2020).

 The world's largest companies by Fortune in 2019

 
  Impact of development of multinational corporations on
accountability:

The accounting does not stop at regional borders, so it is used to express

activities and continuous updating in the financial statements and the
performance of the company's economic situation.
The spread of multinational companies to many activities and businesses
that are directly reflected in accounting, such as offers on the value of cross-
border prices and activities related to financing and these need data related
to creditors and investors all over the world, and the disclosure of data that
must reflect the reality and the process of exchange in various currencies.
Accounting for multinational companies is a very important topic for the
environment in which it operates.
Since multinational companies conduct their business outside the borders of
their country, this requires principles, rules and standards in common with
the global accounting system that allows investors, companies and economic
sectors in various countries of the world to progress, grow and prosper.
Accountability has developed dramatically with the emergence of
multinational companies, and the standards that have been set to facilitate
the work of these companies and the laws that have been put in place have
enabled accountability to progress and these actions are conducted according
to applicable and approved rules and standards. (Doupnik & Perera, 2015).
  A graphic show the world’s top 10 non-financial MNEs,
ranked by foreign assets, 2019

4-international capital market:

The continuous increase in global capital markets leads to the ease of

companies obtaining capital outside the borders of the country and also
enables companies to have access to obtaining financing, which is the main
purpose of entering international markets and the possibility of issuing
foreign bonds.
Despite the advantages of the international capital markets, there are many
negatives, including: subscription costs, the costs of the listing process with
high costs, auditing costs, investors' bias towards their country, and the
requirements of the conditions of subscription in another stock exchange due
to different standards between countries in the world, laws and disclosure.
This leads to additional costs in translating the lists and understanding the
laws ... etc.
On the other hand, the role of the distance is that the biggest role in the
development of international capital markets is the development of
technology, which is one of the most important causes of development,
which solved the problem of distance and time, which sought direct
communication between stock exchanges around the world, enabling it to
grow and develop to this day. ("Globalization of" Capital Markets:
Implications for Firm Strategies >> globalEDGE: Your source for Global
Business Knowledge ”, 2020).
 Diagram showing the top 10 sectoral distribution of
companies listed on WFE exchanges across regions:

 Figure showing Global trend in stock exchange ESG disclosure guidance:

  The tasks of the accountant in the international capital
markets:
Are to prepare effective and accurate reports, to translate the lists, to
understand the laws between countries and the conditions for entry into other
markets, and to provide lists according to the criteria required by the stock
exchange in the country in which the company wants to invest in and enter.
Hence the importance of the development of accounting in the field of
international capital markets, as the tasks that he performs greatly help in the
growth of capital markets, and the confidence that the accountant gains from
issuing explicit and translated lists is what encourages investors to invest in
this company, and for this reason the presence of AICPA and Big 4 (The
largest four auditing firms in the world) that worked to instill confidence in
working independently, checking disclosures if they were sound or not, and
issuing appropriate standards to facilitate the process of investing in global
markets and unifying laws. All this indicates that international capital
markets were in dire need for the development of accounting and given the
tasks Accountability has played a major role in developing and organizing
the work of global markets ("Journal of Economics and International
Finance", 2020).
  A structure showing the structure of the accounting regulatory system
in Japan:

Conclusion:
In the end, the global economy is in continuous development as a result of
the development of many reasons as a result of globalization, which has led
to the openness of the world and technological development.
All this led to the development of accounting also due to what it requires in
dealing with laws, legislation, standards, relations between countries, foreign
investment and multinational companies, and the importance of the
accountant in global markets from foreign investment in order to obtain
financing and the way to deal with tax (tax avoidance), so we can say that
the development of the economy Global is directly linked with the
development of accounting.
From this research on this topic, we see that the need for unification between
standards in the world is extremely important, as countries faced difficulties
in their commercial operations and the process that impeded progress,
growth and development, and among the matters that must be addressed are
facilities for transactions between countries, removing differences, easing
restrictions, and making the world an actual village and not just Talk, this
also applies to developed countries that have exploited globalization for
personal interests, and this has led to a continuous collapse in developing
countries and continuous and significant progress in developed countries.

References:

Doupnik, T., & Perera, M. (2015). International accounting. London: McGraw Hill

education.

Gitman, L., McDaniel, C., Shah, A., Reece, M., Koffel, L., Talsma, B., & Hyatt, J.

(2020). The Impact of Multinational Corporations. Retrieved 29 September 2020, from

https://opentextbc.ca/businessopenstax/chapter/the-impact-of-multinational-corporations/

Globalization of Capital Markets: Implications for Firm Strategies >> globalEDGE: Your
source for Global Business Knowledge. (2020). Retrieved 29 September 2020, from
https://globaledge.msu.edu/global-resources/resource/21898
How Does International Trade Impact Accounting? - Top Accounting Degrees. (2020).

Retrieved 28 September 2020, from https://www.topaccountingdegrees.org/faq/how-

does-international-trade-impact-accounting/

Journal of Economics and International Finance. (2020). Retrieved 29 September 2020,

from https://academicjournals.org/JEIF
Stronger Open Trade Policies Enable Economic Growth for All. (2020). Retrieved 28

September 2020, from https://www.worldbank.org/en/results/2018/04/03/stronger-open-

trade-policies-enables-economic-growth-for-all#:~:text=Trade%20is%20central%20to

%20ending,more%20affordable%20goods%20and%20services.

The Impact of the Investment Environment on Foreign Direct Investment (FDI) in the
European Transition Economies. (2020). Economic Alternatives, (1), 138-147. doi:
10.37075/ea.2020.1.07
UGWU, J., & OKOYE, E. (2018). Accounting for the Effect of Foreign Direct

Investment on Economic Growth, Post IFRS Adoption in Selected Sub-Saharan African

Countries (1999-2015). International Journal Of Academic Research In Business And

Social Sciences, 8(6). doi: 10.6007/ijarbss/v8-i6/4184