International Accounting

Ø Understanding International
Accounting Overview

Ø Understanding IAS & IFRS

LEARNING
OBJECTIVES Ø Understanding the basic accounting
principles and guidelines

Ø Understanding basic accounting

equation

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 International Accounting Overview

◦ Scenario 1: Intel Corporation is an American multinational

corporation, headquartered in California. Intel's total
investment in Vietnam has now reached 1.5 billion USD.
Origins of During the period of doing business in Vietnam, Intel
International Vietnam must comply with the regulations on accounting
Accouting regime of Vietnam
◦ How will Intel Corporation’s consolidated financial
statements be prepared in the context that subsidiaries
in different countries around the world apply different
financial accounting systems?
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 International Accounting Overview
Scenario 2

Sold goods worth

$10,000

Origins of
International
Accouting

US Company Aus Company

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 International Accounting Overview
Scenario 2
Assuming the Exchange rate between $US and AUD was US$1 =
AUD 1.4 at this time point of the transaction

Journal entry to record

Origins of Dr Purchases AUD 14,000

International Cr Accounts Payable AUD 14,000

Accouting Exchange rate between $US and AUD at the time of payment to US
company was US$1= AUD 1.44

Journal entry to record

Dr Accounts Payable AUD 14,000

Cr Bank AUD 14,400
How should the difference of AUD400 between the original value of the
payable and actual paid be recorded?
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 International Accounting Overview
Source:
IFAC.ORG
/ global-
impact-
map

Origins of
International
Accouting

International accounting emerged to meet the complex business activities of

multinational corporations and is an indispensable need for integrating
accounting between countries in the region and the world. 6
 Ø A statement of financial position as at the end
of the period
Ø A statement of profit and loss and other
comprehensive income for the period
A complete set Ø A statement of changes in equity for the period
of financial Ø A statement of cash flows for the period
statement Ø Notes, comprising a summary of significant
accounting policies and other explanatory
information
Ø A statement of financial position as at the
beginning of the preceding comparative period
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 Ø There is a big difference between VAS
and IFRS
Why does Ø The key difference between VAS and
Vietnam have IFRS makes VAS financial statements of
to convert a company incompatible
from VAS to
Ø Some Vietnamese enterprises have also
IFRS?
been preparing IFRS financial statements
in parallel with the VAS financial
statements
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IFRS
Phase 3, the
roadmap Phase 1, the
preparation
Phase 2, pilot
mandatory
adoption in phase, from
phase, from
period for
2022 to 2025
Vietnam 2019 to 2021. applying
“IFRS”, from
after 2025

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 International Accounting Overview

We need to learn
International Accounting

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The Evolution of the IASC into the IASB

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v The International Accounting Standards Committee (IASC) was
established in June 1973 in London by an agreement of the leading
professional accounting bodies in 09 countries

v IASC aims to harmonize the international diversity of company reporting

practices and set up “International Accounting Standards”

v Prior to its dissolution, the IASC comprised of 156 professional

accountancy bodies in 114 countries

v The IASC issued 41 International Accounting Standards, each dealing with

a particular financial reporting topic

v 34 standards were still extant and adopted by the IASB

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v On April 1, 2001, the newly created International Accounting Standards
Board (IASB) took over from the IASC regarding issuing IAS, which were
called International Financial Reporting Standards (IFRS)

v Instead of harmonization, IASB targeted convergence or global standard-

setting

v There are 16 IFRS and 25 IAS (updated on 06 Feb,2022)

v There are 166 jurisdictions that adopted IFRS standards

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STRUCTURE DIAGRAM

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 Ø 86 jurisdictions that require or permit the IFRS for SMEs standard

Ø The IFRS for SMEs was published in July 2009. Effective

whenever adopted by an individual jurisdiction

Ø The listed companies and financial institutions, i.e company that

IFRS for are publicly accountable, should not use it

SMEs Ø There are some SMEs’ challenges in terms of adoption of IFRS,

Standard including
ü The burden of complying with complex accounting requirements
ü the cost of implementing IFRS is disproportionate to the expected
return

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 Ø Economic Entity Assumption

Ø Monetary Unit Assumption

Ø Time Period Assumption

THE BASIC Ø Cost Principle

ACCOUNTING Ø Full Disclosure Principle

PRINCIPLES Ø Going Concern Principle

Ø Matching Principle

Ø Revenue Recognition Principle

Ø Materiality

Ø Conservatism
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 § The financial records of any business must be
kept separate from those of its owners

§ Supporting for evaluating profitability and tax

ECONOMIC purposes based on accurate financial data
ENTITY rather than a muddled mix of personal and
business finances
ASSUMPTION
§ Note: It is also applied to all businesses even
if legally a business and its owner as viewed
as the same entity (i.e: sole proprietorships)

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 v For example:
§ If a business owner purchases gas for a car
personally owned by him using a personal credit
card, but uses that gas and car for business
travel
ECONOMIC Ø The owner should be reimbursed for those
ENTITY expenses
ASSUMPTION
§ If the business owner takes the company owned
car and uses his business credit card to
purchase gas while on a week-long vacation

Ø Those expenditures should not be recorded as

business expenses in the company financial
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records
 • It can also refer to the separation between various
divisions in a company

• For example, if a company runs two business

ECONOMIC divisions – one is a hotel chain and the other is a
ENTITY restaurant chain – separate accounts need to be
maintained for each division. The expenses of one
ASSUMPTION line of business cannot be combined with the
other. Maintaining separate records will help the
company know the true value of each business
line.

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 qThose events and transactions
are recorded if they can be
measured in monetary terms
MONETARY
UNIT
qCan not record the transaction that
ASSUMPTIO
could not measure in currency.
N
qThe dollar is the most effective way to
communicate economic activities.
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 q Inflation and deflation are ignored in
accounting records.

MONETARY q The language of business and finance is

UNIT money
ASSUMPTIO
N q Note: When there is inflation, the value of
assets and liabilities are not changed in the
FS based on the assumption. However,
assets are impaired if carrying value is less
than fair value.
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 ◦ Example 1:
◦ The CEO of Wesfarmers Group delivers a lecture to the
employees in a special meeting that can be helpful in
MONETARY accelerating the employees’ motivation and completing
UNIT the current projects on time.
ASSUMPTION
◦ As the value of the lecture cannot be measured in terms
of money, it cannot be recorded in the books of
accounts of Wesfarmers Group

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 ◦ Example 2:
◦ The Metro company purchased a property for $25,000
in 2005. Because of inflation, the worth of the property
MONETARY
is now $40,000.
UNIT
ASSUMPTION
◦ The Metro company cannot adjust its balance sheet
because the monetary unit assumption enforces it to
ignore the impact of inflation.

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 ◦ Example 3:
◦ The Fast transport company has five trucks. One of the
trucks is seriously damaged in a road accident and is
MONETARY being repaired.
UNIT ◦ The company can only account for the amount of
ASSUMPTION
insurance or any expenses that it actually has to pay to
get the truck in working condition but cannot record the
loss of revenue caused by the time the truck takes to be
overhauled.

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 BASIC ACCOUNTING
EQUATION
• Get a better understanding of
company's financial situation

• A valuable skill, but it takes

research and practice

• Correctly tracking down

assets and liabilities can
have a direct impact on its
success. 28
 Assets are all valuable belongings of a company,
such as land, buildings, equipment and intellectual
property

Current Assets Non-current Assets

Total asset Money and everything a company's long-term
else that can be investments, cannot easily
converted into money be converted into cash,
within a year, such as such as intellectual
inventory property, land or the
company's brand value

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 Liabilities are all the company's debts and
generally any sum of money that the company
owes another party

Current liabilities
Total Non-current liabilities
Liabilities
Debts due within 12 months,
Debts that need to be paid
such as accounts payable,
within a longer period than
short-term debt, dividends
12 months, such as
payable,…
debentures, long-term
loans, bonds payable…

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 Total Shareholders’ Equity is the
amount of value left over after
Total
subtracting all the company's
Shareholders’
liabilities from its total assets.
Equity

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 ◦ It breaks down shareholder’s equity
into more depth than the fundamental
Expanded
accounting equation
Accounting
◦ To see the components of
Equation
shareholder’s equity and how it
impacts the company

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Expanded
Accounting
Equation

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The expanded accounting equation is broken
down to be:

Assets = Liabilities + Share Capital + Retained

Earnings

Assets = Liabilities + Contributed Capital +

Beginning Retained Earnings + (Revenue –
Expenses – Dividends)
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Where:
ü Contributed capital comes from the capital provided by the
original stockholders.

ü Beginning retained earnings is the carryover retained

earnings that were not distributed to stockholders during the
previous period.

ü Revenue comes from the sales and operations of the business.

ü Expenses are the costs associated with running the operation.

ü Dividends are the earnings that are distributed to stockholders

of the company. 35
 Example
New machine that cost $5,000 are purchased. $2,000 is paid
upfront in cash and the rest is paid on account

Dr Machine $5,000
Cr Cash $2,000
Cr Accounts Payable $3,000
Asset = Liability + CC + BRE + R - E - D
$5,000 - $2,000 = $3,000 + CC + BRE + R - E - D

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Example

A supplies expense of $1,000 is paid on account

Dr Supplies Expense $1,000

Cr Accounts Payable $1,000

Assets = $1,000 + CC + BRE + R - $1,000 - D

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Example
Company XYZ wishes to purchase a $1,500 machine but it
only has $500 of cash in its holdings. The company is
allowed to purchase this machine with an initial payment of
$1,000 but it owes the manufacturer the remaining amount
Dr PPE $1,500
Cr Accounts Payable $1,000
Cr Cash $500

$1,500 - $500 = $1,000 + CC + BRE + R - E - D

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