THE DEFINITION OF INTERNATIONAL ACCOUNTING THROUGH TEXTBOOK CONTENTS Dr Hervé Stolowy HEC School of Management (Groupe HEC) Department of Accounting and Management Control 1, rue de la Libération 78351 - Jouy en Josas Cedex - France Phone: +331 39 67 94 42 Fax : +331 39 67 70 86 E-mail: stolowy@gwsmtp.hec.fr For Presentation at the 8th World Congress of the INTERNATIONAL ASSOCIATION FOR ACCOUNTING EDUCATION AND RESEARCH (IAAER) Paris, France, October 23-25, 1997 Second draft (January 31, 1997) May not be quoted or used without permission Review comments welcomed Please contact the author _ Acknowledgments The works referred to in this report were studied by the author and by Véronique N'Guyen and Philippe Touron, students on the HEC doctoral program at the School’ Department of Accounting and s Management Control The study is based on a comparative table, developed after consulting several experts in the field, to whom we extend warm thanks: David Alexander, University of Hull (UK), Frederick Choi, New York University (USA), Gary Meek, Oklahoma State University (USA), Christopher Nobes, University of Reading (UK), Robert Parker, University of Exeter (UK), Lee Radebaugh, Brigham Young University (USA), Steven Salter, University of Cincinnati (USA), Stefano Zambon, University of Padua (Italy) Particular thanks go to Michel Tenenhaus, Professor at the HEC Group, who supplied valuable help in statistical processing of data, for which we were assisted by Philippe Touron We should also like to thank Michel Lebas, Professor at the HEC Group, who reviewed a first draft of this paper and contributed to its improvement However, responsibility for the results and opinions expressed remains solely and entirely with the author Finally, we wish to thank Ann Gallon, for her much appreciated help in preparing the English language version of this paper THE DEFINITION OF INTERNATIONAL ACCOUNTING THROUGH TEXTBOOK CONTENTS ABSTRACT In the last twenty-five years, international accounting has developed significantly, and this is reflected in the particularly wide range of literature published on the theme But there is a paradox: we have noted that although many works referred to factors that have had an internationalizing influence on accounting, few of them gave any real definition of the concept of international accounting Furthermore, there is no one single definition of international accounting, and several ideas currently co-exist This study aims to identify the field of international accounting by reference to a sample of European and American textbooks on the subject It should further our knowledge of the way in which international accounting is approached in these textbooks, and enable academics to assess their position in relation to the various approaches currently used for international accounting education The methodology was as follows: (1) Establishment of a detailed bibliography of books on international accounting; (2) Selection of a sample of publications; (3) Definition of a table for analysis of the sample; (4) Application of the analysis table to the sample; (5) Classification; (6) Analysis of contents using the tables, based on a principal component analysis; (7) Definition of international accounting by the authors; (8) Conclusion Among other observations, our statistical analysis revealed the dual nature of textbook approaches to international accounting There is one group of textbooks covering the accounting aspects of company internationalization, with a "monistic" view of accounting systems, in other words one which considers financial accounting and management accounting together; these books are concerned with the accounting dimensions, in the broadest sense, of multinational corporations Then there is a second group of textbooks which take a country-by-country approach, and seek to highlight the differences between countries Problems relating to the internationalization of accounting frameworks are dealt with locally, on a national level It is true that a few books have a "mixed" approach, but they remain clearly affiliated to one of these two groups Can the existence of a link between the group a book belongs to and its author’ institution of education be pure s coincidence? One thing is clear: the first group of books are written by authors teaching in the USA, while the second group are written by European-based authors INTRODUCTION - PRESENTATION The development of international accounting In twenty-five years, international accounting, as G Mueller1 states, has outgrown its childhood and adolescence to become a young adult, and its growth is reflected in the large quantity of accounting literature in the sphere Why are researchers and academics so interested in this "discipline" ? There are several possible answers F Choi and G Mueller2 point out that now at the end of the twentieth century, a period shaped by the forces of global competition, operating, financing, and investing decisions are colored by their international implications As many of these decisions are premised on accounting data, a knowledge of international accounting issues is crucial for achieving proper interpretation and understanding in international business communications Paradoxically, we have observed that although many publications referred to factors with an internationalizing influence on accounting, few of them supplied any real definition of the concept of international accounting Furthermore, there is no one single definition of international accounting, and several visions of the concept currently co-exist Objectives of the research This research aims to identify the field of international accounting by reference to a sample of European and American textbooks on the subject It should further our knowledge of the way in which international accounting is approached in these books, and enable academics to assess their position in relation to the various approaches currently used for teaching international accounting Methodology Our goal is to identify the field of international accounting based on the themes covered by textbooks on international accounting, and also their prefaces, forewords and introductory chapters The following methodology was applied: (1) Establishment of a detailed bibliography of books on international accounting; (2) Selection of a sample of publications; (3) Definition of a table for analysis of the sample; (4) Application of the analysis table to the sample; (5) Classification; (6) Analysis of contents using the tables, based on a principal component analysis; (7) Definition of international accounting by the authors; (8) Conclusion -1- - ESTABLISHMENT OF A DETAILED BIBLIOGRAPHY OF BOOKS ON INTERNATIONAL ACCOUNTING Our bibliography was drawn up by consulting the following sources: (1) the HEC library data base; (2) the University of Paris-Dauphine library data base; (3) the catalogues of the major American and British accounting publishers: Addison-Wesley, Chapman & Hall, Harcourt Brace Professional Publishing - Academic Press, Irwin, John Wiley & Sons, McGraw-Hill, Prentice Hall, Routledge, South-Western Publishing, and The Dryden Press; (4) bibliographies from books on international accounting (the "snowball" effect) We were looking for publications with the following key words in their titles: (1) "accounting" and "international"; (2) "accounting" and "multinational"; (3) "accounting" and "Europe" (or "European"); (4) "reporting" and "international"; (5) "comptabilité" and "internationale"; (6) "comptabilité" and "Europe" (or "européenne" or "C.E.E." or "Union européenne"); (7) "principe(s) comptable(s)" and "Europe" (or "européenne" or "C.E.E." or "Union européenne"); (8) "ragionaria" and "internazionale" - SELECTION OF A SAMPLE OF PUBLICATIONS Several books have been published in more than one edition, and it would have been interesting to examine developments in the way their authors approached international accounting as the years passed3 This type of historical perspective would reveal which issues were emerging, and which declining However, for the purposes of this study, we decided to examine the current state of affairs, and only the most recent editions of the selected works were used Books on international accounting can be divided into four categories: (1) Textbooks, (2) Reference books (country-by-country presentation), (3) Published research or anthologies, and (4) Case studies This paper refers only to textbooks We determined that it was not advisable to analyze reference books, whose main objective is to describe accounting practices in a certain number of countries Moreover, these works are not always truly comparative accounting studies, as they often only allot a relatively small amount of space to comparison4 For similar reasons, we eliminated from our sample publications relating to international accounting but which represented research in the field, such as "Judgment in international accounting" by A Belkaoui (1990), "International Group Accounting", coordinated by S Gray, A Coenenberg and P Gordon (1993), and "International Accounting: A Survey" by J Samuels -2- and A Piper (1985) All of these are of great interest, but were eliminated as a result of our desire to study the way international accounting is viewed from an education standpoint, which led to textbooks alone being selected for the final sample We are aware that our system of classification is debatable, as a "textbook" is a relative concept Of course some research work, and even reference books (for example the collection directed by L Klee - see appendix 2) can be used as a basis for teaching In addition, American textbooks have a very standardized presentation - chapter objectives, chapter, questions, specific bibliography - whereas European textbooks, particularly French ones, not generally include such headings For borderline cases, objective criteria had to be applied It was thus decided to exclude all works which did not contain questions or a bibliography, and so we arrived at a sample of 15 books published since 1990 (see appendix 1) The publications we did not select are listed in appendix - DEFINITION OF A TABLE FOR ANALYSIS OF THE SAMPLE In order to define a table to analyze our sample and obtain comparable data, we sent a list of 34 topics (see appendix 3) to 12 accounting academics and international accounting specialists, asking them to divide them into 10 or 12 main themes5 answers were received, and were perfectly apt for use in the study The following experts sent us their answers: David Alexander, University of Hull (UK), Frederick Choi, New York University (USA), Gary Meek, Oklahoma State University (USA), Christopher Nobes, University of Reading (UK), Robert Parker, University of Exeter (UK), Lee Radebaugh, Brigham Young University (USA), Steven Salter, University of Cincinnati (USA), Stefano Zambon, University of Padua (Italy) Several of our respondents remarked that the basic list was American in origin and therefore had a certain in-built bias, since many of the proposed topics were based on the American view of international accounting While in agreement, we believe that the effect can be counterbalanced, as the list of topics is very detailed, and quite capable of adaptation to a non-American context, particularly a European context Furthermore, the sole aim of this list was to draw up a list of themes, not to apply the "American" list of topics to all the publications in the sample The classifications received from respondents were relatively similar, except in the case of certain topics which call for the following comments: • Transfer pricing can be included in international taxation (in of the answers), in managerial accounting (1 of the answers), in both of these themes (1 of the answers) or in a different theme (2 of the answers) This range of opinions illustrates the fact that transfer pricing covers -3- both taxation and management control aspects that are difficult to separate For the purposes of the study, only one theme could be accepted, and the decision was made to include transfer pricing in the taxation theme • Foreign currency management (foreign currency transactions and translation) is a major concern in international accounting Three of our six experts put foreign currency management in general (topics 11, 12 and 15 of the list in appendix 3) into a different theme from accounting for foreign exchange transactions and translation (topics 13 and 14) Two put all these topics into the same theme, while one included foreign exchange risk management (topic 15) in the "managerial accounting" theme For simplicity’ sake, and to avoid increasing the number of themes, we opted s to put all foreign currency-related topics into a single theme The themes determined in this way are listed below: Table 1: List of themes 10 General presentation (Introduction/Definition of international accounting, emerging issues) Classification of financial reporting practices (classifications and differences, environmental influences) Comparative accounting practices (by countries and by issues) Harmonization/International standards Financial reporting and disclosure International financial statement analysis Foreign currency management (exchange rate, foreign-currency transactions and translation, future contracts, transaction exposure, accounting for inflation) Managerial accounting (management control, strategic planning, performance evaluation, capital budgeting for multinationals, accounting information systems for multinational corporations) International taxation (systems, transfer pricing) Auditing (internal, external) - APPLICATION OF THE ANALYSIS TABLE TO THE SAMPLE We determined the proportion of the publication occupied by each theme in relation to the space devoted to all themes as a whole, by calculating the number of pages allotted to it This enabled us to obtain comparable data for all the publications In drawing up the tables, the following conventions were adopted: •when several themes are covered in the same chapter, with references, illustrations, case studies, etc., we allocated the appendices to the relevant themes, proportionally to the number of pages on each theme in the chapter •some themes can be approached from two angles For example, inflation can be considered from a comparative point of view, covering practices in several countries: in this case, we -4- included it in theme n° (comparative accounting practices) If, on the other hand, it is treated as a question of accounting for price fluctuations, from a general, and often American standpoint, we have put it into theme n° (foreign currency management) The same applies to translation of accounts into foreign currencies Either the approach is comparative, and theme n° applies, or translation is considered from an essentially American angle, in which case it is included in theme n° (foreign currency management) To reduce the bias inherent in application of this analysis system by one individual, the same table was used by three different persons: the academic leading the study, and two students on the HEC doctoral program The results were combined, to take into account differences in each person’ assessment of the table and interpretation of the publications The resulting final tables, s with results for each work studied, are summarized in table below Table 2: Comparison: relative importance of themes covered General presentation Classification of financial reporting practices 15% 7% 5% 0% 7% 2% 11% 17% Comparative accounting practices 27% 25% 0% 66% Campedelli Choi & Mueller Evans, Taylor Iqbal, Melcher & Elmallah Lawrence 8% 3% 8% 4% 2% 0% 10% 0% 2% 2% 76% 13% 19% 23% 80% 16% 7% 6% 6% 6% 0% 11% 0% 7% 0% 0% 6% 0% 21% 11% 0% 25% 33% 10% 0% 0% 10% 10% 12% 0% Mueller, Gernon & Meek Nobes & Parker Obert 7% 7% 1% 8% 9% 0% 12% 69% 50% 9% 5% 6% 21% 0% 25% 8% 5% 0% 5% 0% 3% 22% 0% 0% 8% 0% 100% 0% 5% 100% 0% 15% 100% 4% 9% 20% 0% 7% 35% 55% 28% 0% 7% 7% 45% 34% 11% 0% 0% 4% 0% 0% 12% 0% 0% 10% 0% 0% 6% 0% 0% 100% 7% 100% 0% 100% 7% 5% 7% 9% 36% 27% 11% 10% 7% 11% 7% 8% 10% 11% 6% 7% 5% 6% 4% 100% 5% 0% Alexander & Nobes Alhashim & Arpan Belkaoui Blake & Amat Quesada, Blanco & Gonzalez Radebaugh & Gray Zambon Average Standard deviation Harmon -ization/ International standards 12% 14% 8% 4% FinanInterForeign Mancial national curren- agerreport- financial cy ial ing and state- manage- accdisment ment ounclosure analysis ting 0% 23% 9% 0% 3% 12% 14% 9% 0% 14% 30% 16% 0% 3% 3% 0% Inter- Audit Total na- -ing tional taxation 7% 0% 100% 4% 10% 100% 15% 0% 100% 0% 6% 100% 0% 8% 17% 6% 0% 0% 7% 7% 9% 0% 100% 100% 100% 100% 100% - CLASSIFICATION The prefaces, forewords and introductory chapters of the selected works contained pointers to several possible classifications of topics and themes T Evans, M Taylor and O Holzmann -5- (1994, p 2) believe that the most important topics in international accounting fall into two categories: Financial accounting topics: Translation, Consolidation, Segment reporting, Inflation accounting, Disclosure, Auditing, Taxation, Comparative accounting (with non-US nations) Managerial accounting topics: Foreign exchange risk management, Foreign investment analysis, Information systems, Transfer pricing, Budgeting, Performance evaluation, Control, Operational auditing This categorization is somewhat debatable, as it gives the role of foreign currencies, for example, an impact in both areas, and has the same effect for other topics, such as consolidation or the treatment of inflation These authors state6 that international accounting is a well-established specialty area within accounting and has two major dimensions: (1) Comparative: Examining how and why accounting principles differ from country to country; and (2) Pragmatic: accounting for the operational problems and issues encountered by individuals and firms in international business Although, in our opinion, there is no common division in these two systems of classification, Evans, Taylor and Holzmann add that the comparative dimension of international accounting is oriented toward financial accounting, and the pragmatic one tends to be managerial L Radebaugh and S Gray (1993, p 9) also write that the study of international accounting involves two major areas: descriptive/comparative accounting and the accounting dimensions of international transactions/multinational enterprises This second area principally covers the problems encountered by multinational corporations: Financial reporting problems, translation of foreign currency financial statements, information systems, budgets and performance evaluation, audits, and taxes On the basis of this classification, our themes are distributed as follows: Table 3: Classification of themes: Radebaugh/Gray Descriptive/comparative accounting General presentation Classification of financial reporting practices Comparative accounting practices Harmonization/International standards Financial reporting and disclosure International financial statement analysis 10 -6- Accounting dimensions of international transactions/multinational enterprises Foreign currency management Managerial accounting International taxation Auditing Using the classification proposed by T Evans, M Taylor and O Holzmann (1994), the results are as below: Table 4: Classification of themes: Evans/Taylor/Holzmann 10 Financial accounting General presentation Classification of financial reporting practices Comparative accounting practices Harmonization/International standards Financial reporting and disclosure International financial statement analysis International taxation Auditing Managerial accounting Foreign currency management Managerial accounting Another approach would be to group the themes under the headings of information production or information utilization Table 5: Classification of themes based on the concepts of information production/utilization 10 Accounting information production General presentation Classification of financial reporting practices Comparative accounting practices Harmonization/International standards Foreign currency management International taxation Auditing Accounting information utilization Financial reporting and disclosure International financial statement analysis Managerial accounting A fourth system of classification can also be proposed, based on the number of themes covered out of the ten selected themes First, the presence or absence of themes in a given publication must be noted (see table below)7 The summarized results (see table 7, number of pages) are then used to classify the sample textbooks according to the categories in the above tables -7- Table 6: Number of themes Foreign Man- In- Audit- Total InterFinannational currency agerial ter- ing cial report- financial manage- acc- natio oun- nal ment ing and stateting taxment disation closure analysis 1 1 1 1 10 1 1 Comparative accounting practices Harmon -ization/ International standards 1 1 1 1 Blake & Amat 1 1 0 Campedelli Choi & Mueller 1 1 1 1 1 1 10 Evans, Taylor 1 0 1 1 Iqbal, Melcher & Elmallah Lawrence 1 1 1 1 1 1 1 10 Mueller, Gernon & Meek Nobes & Parker Obert 1 1 1 1 1 1 1 1 1 0 0 1 6 Quesada, Blanco & Gonzalez Radebaugh & Gray Zambon 1 1 1 1 1 1 0 0 0 0 0 10 General presentation Classification of financial reporting practices Alexander & Nobes Alhashim & Arpan Belkaoui Table 7: Classifications Alexander & Nobes Alhashim & Arpan Belkaoui Radebaugh/Gray Evans/Taylor/Holzmann Production/Utilization Descriptive/ Accounting Total Finan- Manag- Total Accounting Accoun- Total comparative dimensions cial erial information ting accounting of account accountproduction informinternational -ing ing ation transactions utilization 84% 16% 100% 91% 9% 100% 77% 23% 100% 63% 37% 100% 77% 23% 100% 76% 24% 100% 39% 61% 100% 54% 46% 100% 70% 30% 100% Blake & Amat Campedelli Choi & Mueller 91% 100% 50% 9% 100% 0% 100% 50% 100% 97% 100% 65% 3% 100% 0% 100% 35% 100% 97% 100% 73% 3% 100% 0% 100% 27% 100% Evans, Taylor Iqbal, Melcher & Elmallah Lawrence 33% 63% 100% 67% 100% 37% 100% 0% 100% 57% 78% 100% 43% 100% 22% 100% 0% 100% 90% 60% 89% 10% 100% 40% 100% 11% 100% Mueller, Gernon & Meek 65% 35% 100% 73% 27% 100% 49% 51% 100% Nobes & Parker Obert Quesada, Blanco & Gonzalez 95% 81% 100% 5% 100% 19% 100% 0% 100% 100% 97% 100% 0% 100% 3% 100% 0% 100% 95% 75% 66% 5% 100% 25% 100% 34% 100% Radebaugh & Gray Zambon 65% 100% 35% 100% 0% 100% 78% 100% 22% 100% 0% 100% 76% 100% 24% 100% 0% 100% -8- - ANALYSIS OF CONTENTS OF TEXTBOOKS USING THE TABLES The sample textbooks on international accounting were classified on the basis of relevant criteria A principal component analysis , using two tables of data (table 2, Relative importance of themes covered, and table 7, Classifications, plus the total themes as shown in table 6), brings out the factors which predominate in each publication’ contents This means that the properties of a s relatively high number of variables (10 for table and for table 7) can be contained in two or three factors The results obtained for table 2, then table are presented below Two different classifications were developed in this way 6.1 Table - relative importance of themes covered Three factors are used They can analyze almost 75% of the global dispersion of individuals, in other words 75% of the spatial translation of individuals 6.1.1 The factors The meaning of a factor is determined through interpretation of the axes This interpretation is facilitated by the factorial coordinates of variables along the axis (see Diagram 1) Diagram RELATIVE IMPORTANCE OF THEMES Position of themes in relation to factor and 1.0 Harmonization / International standards General presentation Classification of financial reporting practices International Financial Statement Analysis International Taxation 0.0 Managerial Accounting Comparative Accounting Practices Foreign Currency management Financial Reporting and Disclosure -.5 Auditing Factor -1.0 -1.0 -.5 0.0 Factor -9- 1.0 Factor (F1): View of internationalization Factor shows: • positive correlation with the "international taxation" and "foreign currency management" variables, and to a lesser extent, with the "managerial accounting" variable; •negative correlation with the "comparative accounting practices" variable In terms of content, it marks the contrast between works on multinational accounting and works on comparative accounting practices The former cover problems inherent to the internationalization of accounting systems common to most countries, while the latter examine differences between national accounting systems Factor (F2): The generalization (non specialization) factor Factor shows: • positive correlation, principally with the "harmonization/international standards" variable, and to a lesser degree with the "general presentation", then the "classification of financial reporting practices" variable; • negative correlation with the "auditing" variable These variables never exceed 15% of the total pages in a sample publication This factor reflects the fact that no particular subject dominates within the publication, and/or that the publication covers essentially general subjects: general presentation, classification of practices and international standardization It therefore separates the non-specialized works from the others Factor (F3) Factor shows: • positive correlation with the "financial reporting and disclosure" variable; • negative correlation with the "international financial statement analysis" variable - 10 - In terms of content, it marks the contrast between foreign financial statement analysis and problems relating to financial reporting and disclosure The books studied cover the differences between financial statements in one of two mutually exclusive ways: • either from the angle of methods and volume of information disclosed; • from the angle of financial statement analysis or 6.1.2 Classification of works studied A joint analysis of diagrams and results in classification of the books in three groups Diagram RELATIVE IMPORTANCE OF THEMES Position of textbooks in reltion to Factor and 2.0 B elkao ui Evans 1.5 1.0 Cho i M ueller Iq b al A lhashim Rad eb aug h 0.0 A lexand er , Zamb o n -.5 No b es B lake Lawrence Camp ed elli Ques ad a Ob ert REGR -1.0 factor score for analysis -1.5 -2 -1 REGR facto r sco re for analysis - 11 - Diagram RELATIVE IMPORTANCE OF THEMES Position of textbooks in relation to factor and Belkao ui Evans 1.5 1.0 Cho i M ueller Iq b al A lhas him A lexand e r Rad eb aug h 0 Zamb o n -.5 No b es B lake Ob ert Lawre nce -1.0 Camp ed elli REG factor score for analysis Ques ad a -1.5 -2 -1.5 -1.0 -.5 0.0 1.0 1.5 REGR factor score for analy sis Table 8: Classification of works studied with reference to relative importance of themes covered8 Group Belkaoui Choi Evans Mueller Group Blake Campedelli Lawrence Nobes Quesada Obert Group Alexander Alhashim Iqbal Radebaugh Zambon Group 1: works on international accounting The works of Belkaoui, Choi, Evans & Mueller treat accounting from a transnational point of view Their factor coordinates are well into the positive (diagram 2) Comparative accounting, in their books, has a relatively less important position than in the other works studied: less than 20% of pages International managerial accounting issues occupy a prominent position, ranging from 35% for Mueller to more than 60% for Belkaoui and Evans Auditing is approached either only marginally as by Choi and Evans (7% of pages), or not at all by the others General themes represent a relatively significant portion of the total, from 14% for Evans to 24% for Belkaoui and Mueller - 12 - Similarly, Mueller devotes 21% of his pages to disclosure, and Belkaoui allocates 14% to comparative financial analysis Group 2: works on comparative accounting This group comprises books where the majority, that is more than 50% of discussion, concerns comparison of national accounting practices in different countries, and there is no independent reference to transnational accounting Four books devote more than two thirds of their pages to comparisons of accounting practices in different countries, and never more than 20% to another theme: they are the works of Blake (66%), Campedelli (76%), Lawrence (80%) and Nobes (69%) The works of Obert and Quesada cover not only comparative practices, which occupy 50% and 55% respectively of their pages, but also the themes of financial reporting and disclosure, which occupy 25% for Obert and 34 % for Quesada General themes are not neglected They represent more than 20% of the works of Blake, Campedelli and Nobes Group 3: general works The other books take a "mixed" approach: neither "international multinational" accounting, nor comparisons between the practices in different countries, have a dominant position, except in the works of Alhashim and Radebaugh, which allocate a non-negligible place to comparative accounting practices, with 25% and 28% of pages respectively The books by Alexander and Iqbal devote more than 20% of their pages to international financial statement analysis Nevertheless, these four works are classified as "general” because no subject other than those mentioned above exceeds 15% of the total Zambon’ book also belongs to this group, since 90% s of its pages cover matters of a general nature The classification based on themes thus reveals two "typical patterns" in the selected international accounting works However, there are five "mixed" works, and as a result, in a second stage, the themes are grouped a priori so as to accentuate the trends - 13 - 6.2 Table - relative importance of approaches 6.2.1 The factors Two factors explain almost 95% of the distribution The most discriminant factor accounts for 75% of the distribution Diagram RELATIVE IMPORTANCE OF APPROACHES Position of approaches in relation to factor A and B Financial accounting Accounting information utilization Descriptive/comparative approach Number 0 Accounting information production Managerial accounting -.5 Accounting dimension of multinational enterprises Factor B -1.0 -1.0 -.5 0.0 1.0 Factor A Factor A: "global" or "local" approach Factor A shows: • positive correlation with the following variables: number, multinational dimension of enterprises, managerial accounting; •negative correlation with the following variables: descriptive-comparative approach, financial accounting The "financial accounting" and "descriptive-comparative approach" variables, and the "multinational dimension of enterprises" and "managerial accounting" variables have, respectively, - 14 - the same coordinates in relation to the two factors Their similarity reflects the existence of two groups of publications: works on "international multinational" accounting and works on comparative financial accounting Factor B: whether the approach is strongly focused on information production Factor B shows: •positive correlation with the “accounting information utilization” variable; •negative correlation with the “accounting information production” variable The relative share of contents allocated to production of accounting information is much larger than the space allotted to the utilization of this information More than half the works studied devote at least three quarters of their discussions to accounting information production, and no book, except that by Mueller, allocates less than 66% to this area The result is logical, since the sample essentially comprises works which mainly concern financial accounting Consequently, factor B allows us to discriminate, among the works oriented towards production of accounting information, between those which devote a non-negligible section to the utilization of financial statement, and those which not 6.2.2 The textbooks Two families can now be identified Table 9: Classification of works by approach Family A Subfamily Belkaoui Choi Evans Family B Subfamily Alhashim Iqbal Mueller Radebaugh Subfamily Blake Campedelli Lawrence Nobes Quesada Zambon - 15 - Subfamily Alexander Obert Diagram RELATIVE IMPORTANCE OF APPROCHES Position of textbooks in relation to factor A and B Factor B Quesada Mueller Iqbal Obert Lawrence Alexander Radebaugh Factor A Nobes Alhashim Choi Zambon (a) Belkaoui Blake -1 Evans -2 REG factor score for analysis -3 -1.5 -1.0 -.5 0.0 1.0 1.5 REGR facto r sco re for analy sis (a) Campedelli and Zambon have identical coordinates Family A: works on international managerial accounting This first family of works consists of those which devote more than 20% of their pages to managerial accounting and cover more than themes They are divided into two "subfamilies", according to the relative portion allocated to managerial accounting The first of these subfamilies comprises works containing a large proportion of managerial accounting discussion They are the books by Belkaoui (46%), Evans (43%) and Choi (35%) The second subfamily consists of works allocating between a quarter and a third of their contents to managerial accounting: Alhashim, Iqbal, Mueller and Radebaugh Family B: the "comparative" works Family B comprises works which essentially cover financial accounting and accounting information production - 16 - A secondary criterion is applied to separate the purely "comparative" works from the others In the former, more than 90% of the contents relate to international comparisons The books by Alexander and Obert, which are introductory textbooks, stand alone - DEFINITION OF INTERNATIONAL ACCOUNTING BY THE AUTHORS The different approaches already described are evidence that a certain variety of viewpoints exists We wanted to compare our analyses with the definitions of international accounting given by the authors themselves Having studied their prefaces, forewords, introductions and/or initial chapters, we noted that only rarely did an author state a precise definition of international accounting The table below summarizes our findings: Table 10: Inclusion or otherwise of a definition of international accounting Title (authors) A European Introduction to Financial Accounting (Alexander & Nobes) International Dimensions of Accounting (Alhashim & Arpan) International & Multinational Accounting (Belkaoui) European Accounting (Blake & Amat) Ragioneria Internazionale (Campedelli) International Accounting (Choi & Mueller) International Accounting & Reporting (Evans, Taylor & Holzmann) International Accounting - A Global Perspective (Iqbal, Melcher & Elmallah) International Accounting (Lawrence) Accounting - An International Perspective (Mueller, Gernon & Meer) Comparative International Accounting (Nobes & Parker) Pratique internationale de la comptabilité et de l'audit (Obert) International Accounting & Multinational Enterprises (Radebaugh & Gray) Normativa contable internacional (Quesada, Blanco & Gonzalez) Profili di ragioneria internazionale e comparata (Zambon) Definition included No No Yes No Yes Yes Yes Yes Yes No No No Yes No Yes 7.1 Works without a definition of international accounting There are several possible explanations for the non-inclusion of a definition The most probable reason is that for the authors, international accounting as such does not exist, but is in fact financial or managerial accounting with international aspects caused by the internationalization of the economy Seen in this light, the book titles become highly significant: •D Alhashim and J Arpan (1992) title their book "International Dimensions of Accounting", clearly not "international accounting" - 17 - •Similarly, G Mueller, H Gernon & G Meek (1994) take as their title: "Accounting - An International Perspective", showing that once again the basic subject is accounting, rather than international accounting • Obert’ title is "International practices in accounting and auditing" ("Pratique internationale R s de la comptabilité et de l'audit"): the subject is accounting, treated from an international angle • Finally, the title of the book by D Alexander and C Nobes (1994) - "A European Introduction to Financial Accounting" - clearly indicates that it covers financial accounting from a European angle 7.2 Works including a definition These authors can be considered as either implicitly or explicitly believing that international accounting is a subject in its own right Three publications9 begin by referring to three approaches to international accounting defined by T R Weirich, C G Avery and H R Anderson10: (1) a universal system, (2) a comparative system, and (3) accounting for subsidiaries In addition, several authors give their own definitions, which are worth quoting here According to F Choi and G Mueller (1992, p 12), international accounting extends general-purpose, nationally oriented accounting in its broadest sense to: (1) international comparative analysis, (2) accounting measurement and reporting issues unique to multinational enterprises, (3) accounting needs of international financial markets, and (4) harmonization of worldwide accounting and financial reporting diversity via political, organizational, professional, and standard-setting activities For A Belkaoui (1994, p 12), these new environmental factors of (1) the global economy, (2) the international monetary system, (3) the multinational corporation, and (4) foreign direct investment, have created an environment in which business transactions, their conduct, measurement and disclosure, take new and distinctive forms that call for a specific accounting subdiscipline That accounting subdiscipline is international accounting The definition of international accounting, like its field of application, undergoes frequent changes in order to adapt to changing contexts, needs and expectations International accounting takes in all the technical accounting problems in financial, managerial, tax and auditing areas that have a bearing on the conduct, measurement and disclosure of foreign operations There are issues - 18 - relevant to international business which create special accounting problems and specific solutions that differ from the solutions adopted in a domestic context In the words of T Evans, M Taylor and O Holzmann, international accounting, which includes both financial and managerial accounting, is defined as accounting for international transactions, the operations of international firms, and comparisons of accounting principles and practices found in foreign lands and the procedures by which they are established According to M Iqbal, T Melcher and A Elmallah (1997, p 2), international accounting is defined as accounting for international transactions, comparisons of accounting principles in different countries, and harmonization of diverse accounting standards worldwide This definition encompasses the operational needs of the accountant in financial, managerial, tax, auditing, and other areas of accounting For S Lawrence (1996, p 1), a short definition could concentrate on the two words "international" and "accounting" The former can be defined as "concerning or involving two or more nations or nationalities" and the latter "the process of recording, analyzing and reporting financial information so as to maximize the value of the information produced" Thus international accounting is simply the "process of providing useful financial information viewed on a multinational basis" As we see from this comparison, each of these definitions is closely linked to the contents of its author’ book That may appear obvious, but it does mean they cannot supply a sufficiently clear s view of the relative importance enjoyed by each approach to international accounting It is therefore necessary to refer to the tables and categories described earlier CONCLUSION Among other observations, our statistical analysis revealed the dual nature of textbook approaches to international accounting There is one group of textbooks covering the accounting aspects of company internationalization, with a "monistic" view of accounting systems, in other words one which considers financial accounting and management accounting together; these books are concerned with the accounting dimensions, in the broadest sense, of multinational corporations Then there is a second group of textbooks which take a country-by-country approach, and seek to highlight the differences between countries Problems relating to the internationalization of accounting frameworks are dealt with locally, on a national level It is true that a few books have a "mixed" approach, but they remain clearly affiliated to one of these two groups - 19 - Can the existence of a link between a book’ membership of family A or family B (in table 9) and s the author’ institution of education be pure coincidence? One thing is clear: the first group of s books (family A) are written by authors teaching in the USA, while the second group (family B) are written by European-based authors11 APPENDIX - LIST OF TEXTBOOKS SELECTED ALEXANDER David and NOBES Christopher: A European Introduction to Financial Accounting Prentice Hall (UK), 1994, 460 pages ALHASHIM Dhia D and ARPAN Jeffrey S.: International Dimensions of Accounting PWS Kent (USA), 2nd edition, 1992, 252 pages BELKAOUI Ahmed: International & Multinational Accounting The Dryden Press (UK), 1994, 502 pages BLAKE John and AMAT Oriol: European Accounting Pitman (UK), 1993, 237 pages CAMPEDELLI Bettina: Ragioneria Internazionale G Giappichelli Editore (Italy), 1994, 366 pages CHOI Frederick D.S and MUELLER Gerhard G.: International Accounting Prentice Hall (USA), 2nd edition, 1992, 610 pages EVANS Thomas G., TAYLOR Martin E and HOLZMANN Oscar: International Accounting and Reporting South-Western Publishing (USA), 2nd edition, 1994, 536 pages IQBAL Zafar, MELCHER Trini & ELMALLAH Amin E : International Accounting - A Global Perspective South-Western, 1996, 450 pages LAWRENCE Steve: International Accounting International Thomson Business Press, 1996, 411 pages MUELLER Gerhard G., GERNON Helen and MEEK Gary K.: Accounting - An International Perspective Irwin (USA), 3rd edition, 1994, 200 pages NOBES Christopher and PARKER Robert (coordinated by): Comparative International Accounting Prentice Hall (UK), 4th edition, 1995, 494 pages OBERT Robert: Pratique internationale de la comptabilité et de l'audit Dunod (France), 1994, 307 pages QUESADA SANCHEZ Francisco Javier, BLANCO GOMEZ Antonio and GONZALEZ GIMENEZ Raimundo: Normativa contable internacional Ediciones Ciencias Sociales (Spain), 1991, 435 pages RADEBAUGH Lee H and GRAY Sidney J.: International Accounting and Multinational Enterprises John Wiley & Sons (USA), 3rd edition, 1993, 582 pages ZAMBON Stefano: Profili di ragioneria internazionale e comparata Cedam (Italy), 1996, 267 pages APPENDIX - LIST OF PUBLICATIONS NOT INCLUDED IN SAMPLE - Textbooks FOX Samuel and RUESCHOFF Norlin G : Principles of International Accounting Austin Press (USA), 1986 HOLZER H Peter (coordinated by) : International Accounting Harper & Row (USA), 1984, 524 pages - 20 - - Reference works ALEXANDER David and ARCHER Simon (coordinated by) : The European Accounting Guide The Academic Press (UK), 2nd edition, 1995, 1570 pages Coopers & Lybrand : International Accounting Summaries John Wiley (USA), 2nd edition, 1993 , 1000 pages approx KLEE Louis (directed by) : La comptabilité des sociétés dans la C.E.E La Villeguerin éditions, 1992, 664 pages LEQUIN Yves : Principes comptables européens Sedifor (Éditions d'Organisation), 1994, 189 pages Nexia International : The International Handbook of Financial Reporting Chapman & Hall, 1993, 411 pages MAZARS SA (directed by) : Comptabilité dans les principaux États de la CEE Delmas, 1993, 383 pages - Research and anthologies BELKAOUI Ahmed : International Accounting: Issues & Solutions Quorum Books (USA), 1985, 364 pages BELKAOUI Ahmed : Judgment in International Accounting Quorum Books (USA), 1990, 130 pages BLAKE John and HOSSAIN Mahmud : Readings in International Accounting International Thomson Business Press (UK), 1996, 397 pages CHOI Frederick D.S and MUELLER Gerhard G : Frontiers of International Accounting: An Anthology Umi Research Press (USA), 1985, 313 pages GRAY Sidney J (directed by) : International Accounting and Transnational Decisions Butterworth (UK), 1983, 500 pages GRAY Sidney J., COENENBERG Adolf O and GORDON Paul D : International Group Accounting Routledge, 2nd edition, 1993, 435 pages SAMUELS John M and PIPER A.G : International Accounting: A survey Croom Helm (UK), 1985, 197 pages - Case studies SCHWEIKART James A., GRAY Sidney J and ROBERTS Clare B (coordinated by) : International Accounting A Case Approach McGraw-Hill (USA), 1st edition, 1994, 587 pages APPENDIX - LIST OF TOPICS Conover, Salter, and Price (International Accounting Education: A Comparison of Course Syllabi ad CFO Preferences Issues in Accounting Education Vol 9, No 2, Fall 1994) 10 11 Introduction and definition of international accounting Classification of financial reporting practices (systems) Description/comparison of financial reporting practice by countries (down to specific level) Description/comparison of financial reporting practice by issue (LIFO, pension, etc.) Description/comparison of financial reporting practice by measurement/disclosure continuum Description/comparison of financial reporting practice by analyzing foreign financial statements Comparison/description of countries by institutional framework The measurement disclosure debate Harmonization and financial markets The institutional framework of harmonization/IASC standards Foreign exchange-markets - 21 - 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 Foreign exchange-basics, products, terminology, and mechanics Accounting for foreign exchange transactions Accounting for foreign exchange translation (SFAS No 52) Foreign exchange risk management Capital budgeting in multinational enterprises International auditing (internal) International auditing (external) International auditing (the international auditing firm) The foreign Corrupt Practices Act Systems of taxation outside the U.S.A Taxation-U.S taxation of foreign income Taxation-transfer pricing Management accounting issues Accounting information systems issues (MIS) Accounting for inflation (cross-national comparisons) Capital markets effects of international accounting diversity) Environmental influences on accounting systems and practices Segmental reporting History of international accounting Ethics in international accounting Accounting for social and environmental issues The role of accounting in economic development Other (specify) Foreword to Comparative International Accounting C Nobes and R Parker, Prentice-Hall, 3rd edition, 1991, p XIII Op Cit., preface p XIII This could have been the subject for separate research This is not a value judgement; these works are extremely precious resources This list is taken from the article by T Conover, S Salter and J Price : "International Accounting Education: A Comparison of Course Syllabi and CFO Preferences" (Issues in Accounting Education Vol 9, No 2, Fall 1994) Op Cit., p This table has a 0% significance level, i.e it assumes that a theme is absent if it is not considered at all Another approach could have been to treat a theme as absent if the number of pages allocated to it were equal to or less than a certain percentage, for example 3%, of the total book Only the first author’ name is quoted s F Choi, A Belkaoui and J Samuels (not included in the sample) 10 Weirich, Thomas R., Avery Clarence G and Anderson, Henry R (1971): International Accounting: Varying Definitions International Journal of Accounting, autumn, pp 80-81 11 The only exception is the textbook by L Radebaugh and S Gray : it should be pointed out that S Gray teaches in the UK Furthermore, the first two editions of this book were published by a different pair of authors, L Radebaugh and J Arpan, both working in the USA Although S Gray has no doubt left his mark on the third edition, our statistical analysis shows that this book, which belongs to family A, is influenced by American teaching practices - 22 - ... "accounting" and "international" ; (2) "accounting" and "multinational"; (3) "accounting" and "Europe" (or "European"); (4) "reporting" and "international" ; (5) "comptabilité" and "internationale";... influences on accounting systems and practices Segmental reporting History of international accounting Ethics in international accounting Accounting for social and environmental issues The role of accounting. .. M Taylor and O Holzmann, international accounting, which includes both financial and managerial accounting, is defined as accounting for international transactions, the operations of international