Accounting - International Standards - The 5Ws and 1H

As we progress towards the second decade of the twenty-first century, we inevitably come across a rising spade of International Trade. As an offshoot, International Accounting is also gaining its prominent position. Simply stated, International Accounting is the international aspect of accounting encompassing accounting principles and reporting practices in different countries, foreign currency and exchange and the accounting of multinational companies and their subsidiaries.

A deeper analysis of “International Accountancy” would help us analyse who the key players of international Accounting. Like any trade, the principal individuals involved here are the trading countries or the transborder organizations involved and the agreement with regard to issues of the exchange currency and trade terms which will affect the trade. In addition to this, there can be other bodies such as the International Accounting Standards Board (IASB) which was formed on 1 April 2001. This Board has the responsibility for setting International Accounting Standards. The IASB developed standards which are "International Financial Reporting Standards".

While analysing what are the nitty-gritties of International Accounting, we come across come across the issues foreign currency exchange markets or “forex”, the differences in accounting procedures, trade cultures and governmental trade regulations.

Another factor affecting International Accounting is the where or the place factor. The place where the trade is actually taking place can be more of an advantage to one trading party than the other and the accruing advantages or disadvantages will be reflected in the book of accounts.

When does the trade take place also affects the accounting procedure. This relates to the timing of the trade and also the key aspects: delivery of the goods and payments taking place. Based on the agreements, either of the two activities could precede.

Every trade and accounting procedure has a reason of why it is in place. Therefore a sound international trade taking place will have to take into account to the differences in accounting processes of the trading nations.

How a trade takes place, the modes of payment, the exchange currency and the phases of payment are also key factors of international trade and will be reflected in the books of accounts of both countries. Thus, international trade and its accounting procedure are influenced by who is involved (trading parties), what is happening (forex), where it is taking place, when (time) it is taking place, why(reason) it is taking place and how (process) it takes place.

Let‟s discuss this article today. I think, the crux of the article is understood, but it comes from an „international trade‟ perspective and not an „international accounting‟ perspective.