International Finance and Accounting Handbook

INTERNATIONAL FINANCE AND

ACCOUNTING HANDBOOK

THIRD EDITION

Edited by

FREDERICK D.S. CHOI

JOHN WILEY & SONS, INC.

INTERNATIONAL FINANCE AND

ACCOUNTING HANDBOOK

THIRD EDITION

INTERNATIONAL FINANCE AND

ACCOUNTING HANDBOOK

THIRD EDITION

Edited by

FREDERICK D.S. CHOI

JOHN WILEY & SONS, INC.

This book is printed on acid-free paper.
∞

Copyright © 2003 by John Wiley & Sons, Inc., Hoboken, New Jersey. All rights reserved.

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Library of Congress Cataloging-in-Publication Data:

International finance and accounting handbook / edited by Frederick D.S. Choi.—3rd ed.

p. cm.

Rev. ed. of: International accounting and finance handbook. 2nd ed. New York: Wiley, ©1997.

Includes bibliographical references and index.

ISBN 0-471-22921-0 (cloth)

1. International business enterprises—Accounting. 2. International business

enterprises—Accounting—Standards. 3. Comparative accounting. I. Choi, Frederick D.S.,

1942– II. International accounting and finance handbook.

HF5686.I56H36 2003

657′.96—dc21 2002192266

Printed in the United States of America

10 9 8 7 6 5 4 3 2 1

To Lois—

Thank you for being there

always and all ways.

vii

ABOUT THE EDITOR

Frederick D.S. Choi, is the Abraham L. Gitlow Professor of Accounting and Inter￾national Business and Dean of the Undergraduate College at the Stern School of

Business at New York University. He has served as chairman of NYU’s Department

of Accounting, Taxation, and Business Law and its International Business Area and

is former Director of the Vincent C. Ross Institute of Accounting Research.

He has lectured at such institutions as the Cranfield School of Management (Eng￾land), I.N.S.E.A.D. (France), University of Washington, Japan America Institute of

Management Science, University of Bocconi (Italy), and the Stockholm School of

Economics (Sweden) and served as a member of the First American Visiting Team to

establish the National Center for Industrial Science and Technology Management

Development in the People’s Republic of China.

Professor Choi has contributed more than 100 pieces to the scholarly and profes￾sional literature including 20 books on the subject of international accounting and fi￾nancial control. The first edition of this Wiley publication, the Handbook of Interna￾tional Accounting, received the Most Outstanding Book Award, having been judged

the best work on law and accounting for 1991 by the American Association of Pub￾lishers. A Fellow of the Academy of International Business, he is a recipient of the

Citibank Excellence in Teaching Award and the American Accounting Association’s

Outstanding International Accounting Educator Award.

Currently serving as co-editor of the specialist journal, The Journal of Interna￾tional Financial Management and Accounting, Professor Choi joined NYU in 1981.

ix

ABOUT THE CONTRIBUTORS

Carol Adams is a Professor of Accounting and Head of School of Business and Eco￾nomics—Gippsland at Monash University. She is a Council Member and Director of

the Institute of Social and Ethical AccountAbility.

Linda Allen is a professor of finance at the Zicklin School of Business at Baruch

College, City University of New York, and Adjunct Professor of Finance at the Stern

School of Business New York University. She is also the author of Capital Markets

and Institutions: A Global View (Wiley) and co-author of Credit Risk Measurement:

New Approaches to Value at Risk and Other Paradigms, 2nd edition (Wiley). She is

an associate editor of the Journal of Banking and Finance, Journal of Economics and

Business, Multinational Finance Journal, Journal of Multinational Financial Man￾agement, and The Financier, and has published extensively in top academic journals

in finance and economics.

Edward I. Altman, MBA, PhD, is the Max L. Heine Professor of Finance at the

Stern School of Business, New York University. He is the Vice Director of the NYU

Salomon Center and an international authority on credit risk management, corporate

distress analysis, and fixed income valuation.

Paul M. Bodner, Esq., CPA, is an attorney with offices in Great Neck, New York.

He has written and spoken extensively on international tax matters.

Paul Brunner, CPA, BCA (Hons), is a Partner in the Global Capital Markets Group

of PricewaterhouseCoopers LLP and provides U.S. accounting advice to non-U.S.

companies registered with the United States Securities and Exchange Commission

and to companies seeking to undertake securities offerings, cross-border mergers and

acquisitions, and structured transactions.

Mikelle A. Calhoun, J.D., received her undergraduate degree and a master’s degree

in speech communications and later obtained an MBA and a JD from the University

of North Carolina. As the result of her experience practicing law for ten years, Ms.

Calhoun’s interests are primarily in the areas of service and financial industry corpo￾rate strategy decisions and international operations.

Ya-Ru Chen, PhD, is currently an assistant professor of management and interna￾tional business at New York University. Her research has examined how fundamen￾tal processes of organizational behavior, such as feedback, intergroup processes, and

conflict resolution, operate in various cultural settings. She has published numerous

articles in these areas. She has also begun work exploring the social psychology of

status, particularly with respect to its effects on behavior in negotiations.

Marcia Millon Cornett, PhD, is a professor of finance at Southern Illinois Univer￾sity, Carbondale. She has written several articles in the areas of bank performance,

bank regulation, corporate finance, and investments. She has served as an associate

editor for Financial Management and is currently an associate editor for the Multi￾national Finance Journal. She is a member of the Board of Directors of the South￾ern Illinois University Credit Union.

Aswath Damodaran is a professor of finance at the Stern School of Business at New

York University, and teaches the corporate finance and equity valuation courses in the

MBA program. He has published in the Journal of Financial and Quantitative Analy￾sis, the Journal of Finance, the Journal of Financial Economics, and the Review of

Financial Studies, and has written three books on equity valuation (Damodaran on

Valuation, Investment Valuation, The Dark Side of Valuation) and two on corporate

finance (Corporate Finance: Theory and Practice and Applied Corporate Finance:

A User’s Manual). He has co-edited a book on investment management with Peter

Bernstein (Investment Management). He was profiled in BusinessWeek as one of the

top 12 business school professors in the United States in 1994.

William E. Decker, CPA, is the senior partner and founder of Pricewaterhouse￾Coopers LLP’s Global Capital Markets Group. He has served on the AICPA’s Inter￾national Practices Task Force and is the author of The Coopers & Lybrand SEC Man￾ual, 7th ed. (John Wiley & Sons, 1997).

Gunter Dufey, DBA (University of Washington, Seattle), is an adjunct professor in

banking and finance at Nanyang Technological University, Nanyang Business

School, Singapore. He also serves as a senior advisor with McKinsey and Company,

supporting the corporate governance practice of the firm in Asia.

David K. Eiteman, PhD, is emeritus professor in international finance at the John

E. Anderson Graduate School of Management at UCLA. He has been a visiting pro￾fessor at the National University of Singapore and the Hong Kong University of

Science and Technology. He is a past president of the Western Finance Association

and the International Trade and Finance Association. He is a co-author of Multina￾tional Business Finance, Fundamentals of Multinational Finance, and Essentials of

Investing.

Edwin J. Elton, PhD, is a Nomura Professor of Finance at the Stern School of Busi￾ness at New York University. Professor Elton has authored or co-authored six books

and over 90 articles, and is a former president of the American Finance Association.

Robert Feinschreiber is an attorney and counselor in Miami. His firm, Feinschreiber

& Associates, concentrates on international transfer pricing. He has written and ed￾ited many books on taxation, including Transfer Pricing Handbook, Transfer Pricing

International: A Country-by-Country Guide, and International Mergers: A Country￾by-Country Tax Guide. He is the editor of Interstate Tax Report and the founding ed￾itor of the International Tax Journal.

Lisa Filomia-Aktas is a partner in Ernst & Young’s New York Financial Services of￾fice. She leads the On-Call Advisory Services group, which assists with evaluating

x ABOUT THE CONTRIBUTORS

the accounting, tax, and regulatory aspects of derivative, securitization, corporate fi￾nance, M&A, leasing, compensation, and structured product transactions. Lisa has

advised a significant number of leading investment banks, global financial institu￾tions, and Fortune 1000 corporations on capital market transactions. She is a mem￾ber of the accounting subcommittee for the American Securitization Forum and is a

frequent speaker at conferences.

Carol A. Frost, PhD, is president of Global Capital Markets Access, LLC, a con￾sulting and research company based in Hanover, New Hampshire. Prior to forming

GCMA LLC, she was on the faculties of the Tuck School of Business at Dartmouth

College and the Olin School of Business at Washington University (St. Louis). She

also is a member of the Nasdaq Listing and Hearing Review Council.

Geoff Frost is a senior lecturer in accounting at the University of Sydney. His major

research interests are environmental accounting and reporting.

Ian H. Giddy, PhD, is a visiting associate professor of finance at New York Univer￾sity’s Stern School of Business and a consultant to multinational companies and

banks.

Sidney J. Gray is Professor of International Business and Associate Dean (Post￾graduate) in the Faculty of Commerce and Economics at the University of New South

Wales, Sydney, Australia. He is also currently President of the Australia and New

Zealand International Business Academy (ANZIBA).

Martin J. Gruber, PhD, is the past president of the American Finance Association,

and the author of more than seven books and 75 articles. The sixth edition of his

book, Modern Portfolio Theory and Investment Analysis, has recently been published

by John Wiley & Sons.

Sara Hanks is a partner with the international law firm Clifford Chance, where she

practices international securities law. She was formerly chief of the SEC’s Office of

International Corporate Finance.

Seymour Jones is Clinical Professor of Accounting at the Stern School of Business,

New York University. Previously, he was a senior partner of Coopers & Lybrand

(now PricewaterhouseCoopers). He teaches auditing, accounting, tax and legal issues

for entrepreneurs, and international financial statement analysis. Mr. Jones has writ￾ten several books and publications on accounting subjects and is also associate di￾rector of the Ross Institute of Accounting Research, New York University.

Margaret Kent is an attorney and counselor at Feinschreiber & Associates in Miami,

Florida.

Stephen J. Mezias, PhD, is a professor in the Department of Management at New

York University. His current research focuses on institutional processes, especially as

they apply to public policy regarding financial reporting standards, simulation of or￾ganizational learning processes, and cultural differences and similarities in multina￾tional corporations.

ABOUT THE CONTRIBUTORS xi

James L. Mills, PhD, is a professor of international finance and banking at Thun￾derbird—The American Graduate School of International Management. He has

served as visiting faculty at the Institute of International Studies and Training

(Japan), McMaster University (Canada), and Stichting Nijenrode (Netherlands). In

addition to teaching courses in international treasury management and financial en￾gineering, he is co-author of Prime Cash: First Steps in Treasury Management (Mc￾Graw-Hill, 1993).

Michael H. Moffett, PhD, is a professor of international finance at Thunderbird—

The American Graduate School of International Management. He has served as vis￾iting faculty and researcher at the Helsinki School of Economics (Finland), the In￾ternational Center for Public Enterprises (Slovenia), Handelsjoskoen I Aarhus

(Denmark), the University of Michigan, Ann Arbor (USA), and the Brookings Insti￾tution (USA). In addition to teaching classes in international corporate financial man￾agement, he is the co-author of Multinational Business Finance (Addison-Wesley,

1994) and International Business (Dryden, 1995).

Patrice Murphy, PhD, holds degrees in business, labor relations, and political sci￾ence. Her research interests include cross-cultural issues in performance manage￾ment, and the effects of diversity on intragroup processes. She is a consultant with

Robert H. Shaffer and Associates, Stamford, Connecticut.

Paul Narayanan is an independent financial consultant. He co-authored one of the

pioneering works in business failure classification models, the Zeta score model

(1977).

Belverd E. Needles Jr., PhD, CPA, is the Anderson LLP Distinguished Professor of

Accountancy at DePaul University. He is the author of many publications in the field

of international accounting and auditing. He has served as chair of the International

Section of the American Accounting Association, has been on the Executive Com￾mittee of the European Accounting Association, and served on the Education Com￾mittee of the International Federation of Accountants. He is currently president of the

International Association for Accounting Education and Research and is senior vice

chair of the Illinois CPA Society.

Paul Pacter, PhD, CPA, is director of the Global IAS Office of Deloitte Touche

Tohmatsu. He is based in Hong Kong. His primary responsibilities at Deloitte are de￾veloping his firm’s responses to IASB proposals; responding to client technical ques￾tions; writing an IAS newsletter called IASPlus; managing the Website www.ias￾plus.com; training; and a project to assist the Ministry of Finance of China in

developing accounting standards. From 1996 to 2000 he was International Account￾ing Fellow at the International Accounting Standards Committee, London. Previ￾ously, he worked for the U.S. Financial Accounting Standards Board from its incep￾tion in 1973 and, for seven years, was Commissioner of Finance of the City of

Stamford, Connecticut. Paul was vice chairman of the Advisory Council to the U.S.

Governmental Accounting Standards Board (1984–1989) and a member of GASB’s

pensions task force and FASB’s consolidation task force.

xii ABOUT THE CONTRIBUTORS