Institutional Affiliation:


Accounting Exercise 2

Accounting Exercise

Student’s Name:

Institutional Affiliation:

Exercise 4

The New York Stock Exchange (NYSE) provides a list of non-U.S. companies listed on the exchange on its Web site ( (Hint: Search the internet for “NYSE List of Non-U.S. Listed Issuers.”)


a) Determine the number of foreign companies listed on the NYSE and the number of countries they represent.

There are about 529 New York Stock Exchange as well as NYSE MKT non United States companies which are listed in the NYSE; these foreign companies represent Issuers from 47 countries (Saudagaran, 2009).

b) Determine the five countries with the largest number of foreign companies listed on the NYSE.

Five countries with the largest number of foreign companies which are listed on the NYSE include, the Netherlands, Canada, the U.K, Brazil and not to forget, Bermuda (Saudagaran, 2009).

c) Speculate as to why non-U.S. companies have gone to the effort to have their shares listed on the NYSE.

Non-United States companies have actually made an effort of going a notch higher to have their shares listed on the NYSE mostly due to the fact that the NYSE is bullish and as such it tends to trade the highest number of shares, it also has an immense access to the wider European markets (Saudagaran, 2009).

Case 1. Besserbrau AG

Besserbrau AG is a German beer producer headquartered in Ergersheim, Bavaria. The company, which was founded in 1842 by brothers Hans and Franz Besser, is publicly traded with shares listed on the Frankfurt Stock Exchange. Manufacturing in strict accordance with the almost 500-year-old German Beer Purity Law, Besser-brau uses only four ingredients in making its products: malt, hops, yeast, and water. While the other ingredients are obtained locally, Besser-brau imports hops from a company located in the Czech Republic. Czech hops are considered to be among the world’s finest. Historically, Besserbrau’s products were marketed exclusively in Germany. To take advantage of a potentially enormous market for its products and expand sales, Besserbrau began making sales in the People’s Republic of China three years ago. The company established a wholly owned subsidiary in China (BB Pijio) to handle the distribution of Besserbrau products in that country. In the most recent year, sales to BB Pijio accounted for 20 percent of Besserbrau’s sales, and BB Pijio’s sales to customers in China accounted for 10 percent of the Besserbrau Group’s total profits. In fact, sales of Besserbrau products in China have expanded so rapidly and the potential for continued sales growth is so great that the company recently broke ground on the construction of a brewery in Shanghai, China. To finance construction of the new facility, Besserbrau negotiated a listing of its shares on the London Stock Exchange to facilitate an initial public offering of new shares of stock.


Discuss the various international accounting issues confronted by Besserbrau AG.

The various international accounting issues which were confronted by Besser-brau AG included reliable as well as comparable corporate reporting in a sense that by not incorporating or rather factoring this into mind, then it is quite simple for an organization to encounter financial discrepancies which may in the long run make Besser-brau to be less competitive in its parent country as opposed to its subsidiary in China (BB Pijio) which is doing significantly well (Saudagaran, 2009).

Exercise 7

As noted in the chapter, diversity in accounting practice across countries generates problems for a number of different groups.


Answer the following questions and provide explanations for your answers.

a) Which is the greatest problem arising from worldwide accounting diversity?

The greatest problem which arises from worldwide accounting diversity includes the basic fact that it creates a significant financial deficit when it comes to harmonizing the accounts of two different countries (Saudagaran, 2009).

b) Which group is most affected by worldwide accounting diversity?

The group which is most affected by worldwide accounting diversity are the low income earning countries.

c) Which group can most easily deal with the problems associated with accounting diversity?

The groups which can most easily deal with the problems which are associated with accounting diversity are the high income earning countries (Saudagaran, 2009).

Exercise 8

Various attempts have been made to reduce the accounting diversity that exists internationally. This process is known as convergence and is discussed in more detail in Chapter 3. The ultimate form of convergence would be a world in which all countries followed a similar set of financial reporting rules and practices.


Consider each of the following factors that contribute to existing accounting diversity as described in this chapter:

• Legal system • Taxation • Providers of financing • Inflation • Political and economic ties • Culture

a) Which factor do you believe represents the greatest impediment to the international convergence of accounting?

It ought to be understood that the factor which for the most part represents the greatest impediment to the international convergence of accounting tends to be legal system; this is due to the fact that the legal system in various countries tends to be quite different and as such, it becomes a bottle-neck to the international convergence of accounting (Saudagaran, 2009).

b) Which factor do you believe creates the smallest impediment to convergence? Explain your reasoning.

The factor which I believe creates the smallest impediment to convergence of accounting would be culture. This is because in any given culture, there exists ambitious individuals whom strive to be financially independent; this simply means that in retrospect, culture tends to cut through these given divides and as a result it becomes a perk when it comes to convergence of accounting.

Exercise 3

Cooper Grant is the president of Acme Brush of Brazil the wholly owned Brazilian subsidiary of U.S.-based Acme Brush Inc. Cooper Grant’s compensation package consists of a combination of salary and bonus. His annual bonus is calculated as a predetermined percentage of the pretax annual income earned by Acme Brush of Brazil. A condensed income statement for Acme Brush of Brazil for the most recent year is as follows (amounts in thousands of Brazilian real [BRL]):

Sales . . . . . . . . . . . . . . . . . . . . . . . . Expenses . . . . . . . . . . . . . . . . . . . . . Pretax income . . . . . . . . . . . . . . . . .

BRL10,000 9,500 BRL 500

After translating the Brazilian real income statement into U.S. dollars, the condensed income statement for Acme Brush of Brazil appears as follows (amounts in thousands of U.S. dollars [US$]):

Sales . . . . . . . . . . . . . . . . . . . . . . . . Expenses . . . . . . . . . . . . . . . . . . . . . Pretax income (loss) . . . . . . . . . . . . .

US$3,000 3,300

US$ (300


a) Explain how Acme Brush of Brazil’s pretax income (in BRL) became a U.S.-dollar pretax loss.

The Acme Brush of Brazil pre tax income in BRL became a United States dollar pretax loss because the dollar if financially stronger as compared to the BRL; this is the reason as to why it became a United States dollar pretax loss.

b) Discuss whether Cooper Grant should be paid a bonus or not.

Cooper Grant ought to be paid a bonus mostly due to the simple fact that as the wholly owned Brazilian subsidiary of the United States based Acme Brush and as such they ought to be paid a compensation which consists of both a bonus as well as a salary. Another factor is that they also tend to incur a pretax loss as a result of translating the Brazilian Real each time they are compensated without the bonus (Saudagaran, 2009).


Saudagaran, S. M. (2009). International Accounting: a User Perspective. Toronto: CCH.

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