International Financial and Managerial Accounting
By Ahmed Riahi-Belkaoui
Quorum Books: $72; 379 pp. plus index;
ISBN 1-56720-416-3
Reviewed by Robert N. Waxman, CPA

The author states that his goal was to identify the issues and problems that are most critical to the management of multinational companies and to give practical solutions to international accounting problems.

The intended scope and coverage are broad, and each chapter includes footnotes and selected readings. However, this is largely a book of lists used to organize a huge amount of information. Moreover, much of the information is not explained, some of it seems unnecessary, and many of the lists are derived from other sources. The book has too much filler and not enough meaningful content. Most of the selected readings are from the 1970s and 1980s, which creates the mistaken impression that no more up-to-date reference materials are available.

The text has certain specific problems. In Chapter 1—

• The Form 8-K due dates for reportable events are only partly correct.
  
• The International Accounting Standards Committee (IASC) was renamed the International Accounting Standards Board (IASB) effective April 1, 2001. For a book published in November 2001, either the text could have been updated or the author and publisher could have provided an errata sheet.
  
• The book states that multinational corporations (MNC) face a diversity of accounting standards and that they need to be sensitive to “operational international accounting standards.” But the author never reviews the current international accounting standards and exactly how they can help in the conduct of international operations.

In Chapter 2—

• This chapter on taxation is based on old sources, and some of the topics have little to do with today’s international business. For example, the book states, “large shareholders can use any of several complex Wall Street strategies to raise cash and lock in their stock market profits without actually selling their shares, which would create a tax bill,” but it never addresses what these strategies are and how they work.

In Chapter 3—

• The overview of exchange rate risk management and economic exposure is interesting but misses the book’s avowed aim of addressing “the normative solutions to international accounting problems.”The author discusses the regression equation but does nothing with it. A later discussion of applying regression analysis models (with many formulas) also goes nowhere.
  
• The Eun and Reswich monetary approach is discussed along with the empirical equation for the natural logarithm of the spot exchange rate, but none of this material gives management any practical tools with which to run a MNC.
  
• Appendix 3.1, “Major Market Indexes as of Nov. 29, 2000,” serves no apparent purpose other than filling three pages.

In Chapter 4—

• In a bulleted list of eight different swaps, only one specifically mentions foreign currency (i.e., cross-currency interest rate swaps). Missing is a description of the hedge, the tax impact, and the accounting for both the derivative and the hedged item.
  
• Equity swaps are mentioned with no discussion of either the tax or accounting impact.

In Chapter 5—

• Other than the limited discussion of EVA, this chapter may be of interest to management, but will be of little interest to accountants and auditors.
  
• Terms such as return on investment (ROI), economic value added (EVA), and total cost of ownership (TCO) are mentioned and explained, but the chapter gives no examples of how to use them for international financial management.

In Chapter 6—

• The decomposition of return on equity (ROE) and the equity value of the firm disintegrates into a series of formulas with no useful examples.
  
• The discussion of the profit model (which results in an earnings manipulation index) would be more valuable if the formulas and listing were integrated with an example.
  
• Formulas and other ratios are presented, but again without showing how to apply them.
  
• A discussion of the now superseded SFAS 14 runs four pages, while SFAS 131 (issued in 1997) rates only four lines and a disclosure checklist at the end of the chapter, seemingly as an afterthought.
  
• This chapter’s appendix listing the International Accounting Standards (IAS) is outdated. It lists IASs 1 to 31, but there are now 41 IASs, and many of the isted standards have been superseded.

In Chapter 7—

• The topic of capital budgeting is interesting, but for practicing accountants and auditors, most of the chapter (e.g., the discussion of blocked funds and the present value formula) is unusable.

In Chapter 8—

• The material dealing with foreign currency translation uses old terminology. For example, “separate component of equity” has been superseded by “other comprehensive income,” which is required by SFAS 130.
  
• The discussion about hedging a net investment incorrectly refers to hedging a translation loss.
  
• Information in the text is repeated unnecessarily in the exhibits.
  
• SFAS 133 and hedging foreign currency exposures are inadequately covered. Furthermore, the definition of a derivative is confused with the definition of a financial instrument.
  
• Under “What is an Effective Hedge,” there is no discussion about “effectiveness,” nor mention of the dollar offset or the statistical correlation methods.

In Chapter 9—

• Pricing under the Robinson Patman Act brings up, with no further discussion, the terms “full cost,” “direct cost,” and “differential cost.”

In Chapter 10—

• This chapter is mostly superseded by SFAS 89, issued December 1986.

This book’s potential strengths become weaknesses. For example, the early chapters include a concluding summary. But as the book progresses, these conclusions become shorter, and some chapters lack a summary entirely. The index is meager and omits many terms used in the text (e.g., forward, premium, and discount). Misspellings, punctuation problems, and clumsy word usage are frequent.

Another problem is that the chapters do not tie together. For example, Chapter 1 says that Chapter 2 examines in detail some of the factors determining accounting differences internationally, but Chapter 2 discusses only taxes, not accounting.

In today’s climate of convergence and harmonization of accounting, the title suggests that this book discusses current international accounting issues and managing an international organization. The preface says the book will provide practical solutions to the various international issues confronting management, but that goal is never achieved. As a result, this reviewer cannot recommend the book.

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