JOURNAL OF INTERNATIONAL ACCOUNTING RESEARCH Vol. 7, No. 1 2008 pp. 97–104 Book Reviews Robert K. Larson, Editor

Editor’s Note: Books for review should be sent to Robert K. Larson, University of Downloaded from http://meridian.allenpress.com/jiar/article-pdf/7/1/97/2785497/jiar_2008_7_1_97.pdf by guest on 27 September 2021 Dayton, School of Business Administration, 300 College Park, Dayton, Ohio 45469-2242. While unsolicited reviews will not be considered for publication, in- dividuals may volunteer to be reviewers by emailing Dr. Larson at [email protected].

KEITH ALFREDSON, KEN LEO, RUTH PICKER, PAUL PACTER, JENNIE RADFORD, AND VICTORIA WISE, Applying International Financial Reporting Standards,En- hanced Edition (Milton, Queensland, Australia: John Wiley & Sons Australia, 2007, xx, 1235 pp). According to its preface, Applying International Financial Reporting Standards [IFRSs] was written specifi- cally to meet the needs of accounting students and practitioners in understanding the ‘‘complexities of IFRSs and applying the stable platform of standards.’’ Specifically, it is intended to meet the needs of these readers in Australia and New Zealand. At the time of the publication of this text, some aspects of IFRS as promulgated by the International Accounting Standards Board (IASB) had been modified in these jurisdictions. This focus may cause the text to be less useful in other jurisdictions. The writing style and level of exercises and problems at the end of chapters make it appropriate for an introductory course in accounting rather than an upper level course. The six authors comprise a mix of practitioners and academics. Keith Alfredson and Ken Leo are former members of the Australian Accounting Standards Board. Paul Pacter was a member of the staff of the IASB and the U.S. Financial Accounting Standards Board (FASB). Partners from Ernst & Young and Deloitte & Touche also collaborated on the text. The book is organized into four parts. The first chapter in Part 1, Framework, is a relatively brief overview of the history of the IASB, its structure, and due process. Chapter 2 discusses the Conceptual Framework: the purpose, qualitative characteristics, and elements and measurement bases of financial statements. It also includes short discussion questions that would be useful in an introductory accounting class. Part 2, Elements, has 13 chapters that present the requirements of most of the accounting topics covered by IFRS. Chapter 3 discusses the issues relating to the accounting and presentation of shareholders’ equity, capital, and reserves. It also covers accounting for share issues as well as movements among and decreases in share capital accounts. Chapter 4 presents the criteria for revenue recognition and measurement (IAS 18). It provides very brief conceptual discussions of issues such as trade discounts, volume rebates, value-added taxes (VAT), sales taxes, exchanges of goods and services, barter transactions for advertising (SIC 31), and publication subscriptions. The chapter also includes several short vignettes illustrating real-world concerns with revenue recognition, specifically channel stuffing and internet-advertising fraud. End-of-chapter problems are mostly conceptual in nature rather than requiring students to account for specific transactions and events. The issues and requirements of IAS 11, Construction Contracts, (including interest capitalization) are not covered. IAS 11’s only mention is in a listing of IFRSs that address revenue recognition issues. Chapter 5 covers provisions, contingent liabilities, and contingent assets (IAS 37). This chapter provides a very useful decision tree for deciding whether an entity would be required to recognize a liability, disclose a contingent liability, or do nothing. This chapter provides clear examples of how to account for a provision with the requisite journal entries. It also discusses the key issues addressed in IAS 37, including an extensive discussion of the issues surrounding and the accounting for a restructuring. How to account for a restructuring is one of the most controversial issues addressed by IAS 37. The end-of-chapter exercises and problems are sparse, and many of them are conceptual rather than quantitative in nature.

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Chapter 6 covers financial instruments: recognition, measurement, presentation, and disclosure (IAS 32, 39) (The text was written before IFRS 7, Financial Instruments: Disclosure, was issued). It provides a high-level overview of issues involved in accounting for financial instruments and hedge accounting. Most of the discussion focuses on the definitions of a hedging instrument, hedged item, and the conditions for hedging. In eight pages, the authors provide an excellent distillation of this complex topic that would be useful as an introduction or overview of financial instruments accounting. They also provide two simple examples: how to account for a fair value hedge using a forward contract, and how to account for a foreign-currency cash flow hedge. Chapter 7 addresses share-based payments (IFRS 2), including recognition and the accounting for equity-settled, cash-settled transactions, and transactions with alternative settlements. Unfortunately, there are not enough exercises and prob- lems at the end of these chapters for students to test their understanding of the material covered. Chapter 8 covers accounting for income taxes, including the basic concept of temporary differences between carrying values and tax bases, calculation of deferred taxes, changes in tax rates, and amended prior years tax Downloaded from http://meridian.allenpress.com/jiar/article-pdf/7/1/97/2785497/jiar_2008_7_1_97.pdf by guest on 27 September 2021 figures. It includes an excellent flowchart of the decisions necessary in determining when to recognize deferred taxes and when income tax effects are recorded in income and equity. It briefly addresses tax issues arising in a business combination. This chapter has useful end-of-chapter exercises for students that require computation of current tax and deferred tax amounts as well as adjusting journal entries. Chapters 9 through 11 address accounting for various assets. Chapter 9 covers straightforward issues of accounting for inventory, including cost flow assumptions and valuation at net realizable value. Chapter 10, Prop- erty, Plant and Equipment, covers initial recognition and subsequent measurement under both the cost and reval- uation models available under IAS 16 and provides some guidance for how a company might choose between these two models. It also discusses de-recognition. Accounting for intangible assets (IAS 38) is covered in Chapter 11, including the process of identifying an intangible, determining when an intangible can be recognized, subse- quent measurement under the cost and revaluation models, as well as the treatment of intangibles with indefinite estimated useful lives. Although the number of end-of-chapter exercises and problems could be increased, there are several excellent ones that will test a student’s understanding of the different accounting treatments. Accounting for business combinations (IFRS 3) is discussed in Chapter 12, including the nature of a business combination and the accounting by both the acquirer and acquiree. It also discusses the IASB convergence project with the FASB (‘‘Business Combinations II’’) to improve the overall accounting for these transactions. Chapter 13 covers asset impairment (IAS 36), including the concept of cash generating units, testing goodwill for impairment, and the circumstances under which an impairment loss can be reversed. Chapter 14 covers accounting for leases (IAS 17) by both lessees and lessors, finance leases, and operating leases. It also briefly discusses sale and leaseback transactions. In four chapters, Part 3, Disclosure, covers the requirements for presentation in the balance sheet and income statement, accounting policy selection and disclosure, changes in accounting policies, estimates and error correction. The cash flow statement is discussed in detail and a comprehensive example is provided. The text was written before issue of IFRS 8, Operating Segments, so there is a chapter on the requirements of its predecessor, IAS 14. Part 4, Economic Entities, comprises eight chapters on accounting for investments. Six chapters are devoted to the consolidation process and presentation of consolidated financial statements, including a review of the recent IASB proposed amendments to IAS 27. While it is good to have such a comprehensive discussion of these topics, it would probably be more useful in a more advanced course rather than an introductory course on IFRS. The final two chapters in Part 4 cover accounting for associates (equity method) and jointly controlled assets, operations, and ventures, respectively. The exercises and problems at the end of these chapters provide students with quanti- tative information and require them to make recognition and measurement decisions and to prepare journal entries. This is one of the first IFRS books specifically designed for an educational, rather than a practitioner, setting. Although other books may be more comprehensive and address issues that are more complex, it is a welcome addition to the available books specifically addressing IFRS. The treatment of the topics may be too condensed for students, whether graduate or undergraduate. There are fewer exercises, questions, and problems, either in quantity or quality, than would be found in a comparable text on U.S. Generally Accepted Accounting Principles (GAAP). Finally, the text does not cover certain IFRSs that would need to be addressed in an IFRS course. For example, there is no discussion of IAS 23, Borrowing Costs, IAS 11, Construction Contracts, or IAS 40, Investment Property. Despite these limitations, this textbook is an important addition to an educator’s IFRS library. Since Australia and New Zealand have announced they are adopting ‘‘full IFRS’’ as promulgated by the IASB, it is hoped that the next edition will be more comprehensive on the primary accounting issues and will include sufficient supple- mental material to fulfill its potential as an effective tool in the classroom. Patricia Doran Walters Fordham University and Disclosure Analytics, Inc. USA

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GREG N. GREGORIOU AND MOHAMED GABER (editors), International Accounting: Standards, Regulations, and Financial Reporting (Oxford, U.K.: Elsevier, 2006, xx, 596 pp). In my opinion, one of the research directions in which academics can have the biggest impact on future policy development is that of international financial reporting and regulation of global capital markets. I make this claim because I expect that during the next decade we will achieve near-global standards and that the cross-border flow of capital will continue to expand. Yet, we know relatively little about traditional research topics such as earnings management, investor response, and market efficiency when applied to a global stage. The generalizability of major segments of previous research can—and perhaps should be—revisited in an international context. As a result, I welcomed the opportunity to review the volume edited by Gregoriou and Gaber on this topic. Downloaded from http://meridian.allenpress.com/jiar/article-pdf/7/1/97/2785497/jiar_2008_7_1_97.pdf by guest on 27 September 2021 This book is composed of 24 chapters, each containing a scholarly paper with a complete list of references, but with no other interpretive or supporting material. Each paper stands on its own. As such, the book is much more a compilation of research around very broad international themes than a traditional text for classroom use. The focus of the papers is more or less on current issues in international financial reporting and their relation to standard-setting, auditing, financial instruments, and more. Most notable is the breadth of topics addressed by the authors and the variety of research methods used. For example, the collection includes papers on implementation of fair value accounting, reporting of employee stock options, convergence and harmonization within specific geographic regions (including Australia, Estonia, and Italy), earnings management, and an extensive assessment of the curriculum for accounting education in Australia. The methods used include small-sample surveys, large-sample empirical work, and theoretic-analytical. In addition, the works reflect both positive and normative writings by authors representing all political and economic regions of the globe. I found several of the chapters to be of particular topical interest or to offer the most potential research contribution. One that stands out is ‘‘Lobbying towards a global standard setter ...’’ by Jorissen, Lybaert, and Van de Poel. This study illustrates how to use existing research frameworks, developed in a largely U.S./U.K. context, to examine similar phenomenon at a global level. The authors consider a mix of economic, political, and cultural factors to investigate lobbying activity (comment letters) directed at the International Accounting Standards Board (IASB). In addition, they examine lobbying across a broad range of stakeholders, including audit firms, stock exchanges, national standard-setting bodies, and reporting entities. I found quite interesting the results from a country-level analysis of lobbying effort. One insight from the analysis is that regional influences on the IASB processes appear to vary systematically by cultural dimensions (as defined by Hofstede). What is important about the study is that, given the emergence of the IASB, the authors offer insights on the sources and nature of political influence on the development of global standards. Apparently, as with most global endeavors, the ‘‘playing field’’ for international standards might not be level. Another notable paper is ‘‘Determinants of bias in management earnings forecasts: Empirical evidence from Japan’’ by Ota. The paper investigates numerous factors that could be associated with pessimism/optimism in the annual earnings forecast by the management of listed Japanese firms, including industry, firm size, firm perform- ance, capital structure, and historical forecast accuracy. Interestingly, the results suggest a systematic persistence in the forecast error, meaning that Japanese managers appear to remain optimistic or pessimistic over time in their earnings outlook. The contribution of this study is that it examines what appears to be a fundamental regional difference in the importance of management forecasting. The author notes that, unlike in the U.S., management forecasting is a significant component of annual disclosures in Japan. Future research could investigate whether this emphasis on management forecasting is exhibited elsewhere, including the Asian region, or how investors react to the suggested bias in forecasts. Furthermore, the results illustrate one of many apparent regional differences that could affect the successful implementation of global standards. While the book is ambitious in its scope, I found myself wishing the editors had done more with it. For example, the editors could have included an introduction in which they preview what they see as the overarching themes and importance of the collection. In their view, what future research directions should be inspired by this collection? What do they see as the contribution of the wide array of topics, methods, and authors’ backgrounds? Some reflection on each article, such as discussant comments, would have provided a helpful perspective. An alternate approach could have been to attempt to organize the chapters around themes with an editorial preface to each theme’s section. Furthermore, a few of the articles appear to be much less relevant to international accounting than others, detracting from the overall contribution of the collection. Nonetheless, I commend the editors and authors for their work. The book provides a model for conducting and communicating broad-based research on difficult international accounting issues. Because of the breadth and level of writing, the book seems appropriate for other scholars interested in international research or perhaps a

Journal of International Accounting Research, Volume 7, No. 1, 2008 100 Book Reviews doctoral seminar. However, I do not view it as a potential textbook for traditional masters or undergraduate courses on international accounting. Terry A. Baker Wake Forest University USA

HENNIE VAN GREUNING, International Financial Reporting Standards: A Practical Guide, Fourth Edition (Washington, D.C.: The World Bank, 2006, x, 299 pp). Consistent with the preceding Newly Revised Edition (2005), the fourth edition of International Financial Reporting Standards: A Practical Guide sets out to provide a ‘‘consolidated and simplified reference’’ (vii) on Downloaded from http://meridian.allenpress.com/jiar/article-pdf/7/1/97/2785497/jiar_2008_7_1_97.pdf by guest on 27 September 2021 the International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS) issued by the International Accounting Standards Board (IASB) as of May 2006. Its stated objective is to present the standards in nontechnical language so as to address the needs of managers and analysts who may lack the ac- counting background necessary to comprehend the technical literature enough to be able to readily apply the provisions of the standards. The book’s target audience, therefore, is ‘‘executives and financial analysts ... who might not have a strong accounting background’’ (ix), but who must contend with the surging international con- vergence in accounting and reporting standards, and the attendant ‘‘steady stream of revisions to accounting stan- dards by the IASB and the Financial Accounting Standards Board (FASB).’’ Like the previous edition, the fourth edition is organized into four parts and 38 chapters, covering the IASs, the Framework, and IFRS 1 through IFRS 7. IFRS 6 and IFRS 7 are new to the fourth edition. The pronouncements, which invariably form the chapters, are grouped into the four parts based on homogeneity of the accounting and reporting issues addressed, rather than in numeric order. For example, Part I, Presentation, contains chapters 1–5, covering the Framework, IFRS 1, IAS 1, IAS 7, and IAS 8, respectively. Part II contains the standards that address business combination or group issues, Part III focuses on the standards that address the balance sheet and income statement issues, and Part IV focuses on the standards on disclosure. This organization makes for an effective and quick reference guide for the intended users. All IFRSs and IASs existing as of May 2006 are included in the book. Chapter 30 discusses IAS 14, Segment Reporting, which has been superseded by new IFRS 8. Each standard is outlined to summarize the problems addressed, the scope of the standard, key concepts, the accounting treatment, presentation and disclosure requirements, and financial analysis and interpretation. Every chapter, except for Chapter 2 (IFRS 1—First-Time Adoption of IFRS) and Chapter 11 (IFRS 4—Insurance Con- tracts), concludes with practical application examples. Part III of the book, which centers on the balance sheet and income statement related IFRSs and IASs, is the longest of the four parts. In practical terms, it may also be considered the core of the book. The 18 chapters in this section offer some of the more illustrative examples of transactions dealing with measurement and reporting issues on items reported in the balance sheet and income statement. In keeping with the book’s elected strategy of excluding detailed discussions of certain topics, coverage does not extend to interpretations by the erstwhile Standing Interpretations Committee (SIC) or the current International Financial Reporting Interpretations Committee (IFRIC). The book is indeed written in nontechnical language that can be easily understood by the unsophisticated user. It is doubtful, however, that taken by itself, it can serve as a sole resource for those who may undertake to apply IFRS in practice. Even though the primary audience is not the classroom, the book should prove valuable as supplementary material to undergraduates in accounting, as well as to MBA students who may only need cursory familiarity with international accounting and reporting standards. Some of the detailed end-of-chapter examples and the accom- panying questions and answers may actually be useful material in teaching a survey course on IFRS. For many of the examples, the suggested solutions to the accompanying questions include explanations. Practitioners and teach- ers needing more in-depth coverage that addresses some of the nuances of the IFRSs and IASs may look to other sources, such as Alfredson et al. (2006). [Editor’s note: Alfredson et al. [2006] is also reviewed in this issue.] Hennie van Greuning’s book is a useful contribution in the burgeoning field of international accounting and financial reporting, but only as a simplified practical guide. Its presentation in simple and practical terms should indeed serve the needs of the naı¨ve and the not-so-naı¨ve reader. Felix E. Amenkhienan Radford University USA

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ROBERT J. KIRSCH, The International Accounting Standards Committee: A Political His- tory (Surrey, U.K.: Wolters Kluwer Ltd., 2006, xx, 465 pp). This book covers the history of the International Accounting Standards Committee (IASC), which was the predecessor to the current International Accounting Standards Board (IASB). In chronological fashion, the author focuses on the principal individuals and political and economic factors underlying its development. The main themes of this book include, but are not limited to, the following: (1) the importance of the art of politics and compromise in the life of the IASC, (2) the IASC’s insistence upon maintaining autonomy and preeminence in international standard setting, (3) the growth in technical complexity and detail of accounting standards, (4) the growth in importance and acceptability of the standards, (5) the role of the IASC chairs in setting its strategy, (6) the allegation of Anglo-Saxon dominance over the IASC, and (7) the role of the major international accounting firms. Downloaded from http://meridian.allenpress.com/jiar/article-pdf/7/1/97/2785497/jiar_2008_7_1_97.pdf by guest on 27 September 2021 Chapter 1 offers an overview of the contents of this book. Chapter 2 deals with the Accountants’ International Study Group, which was formed in 1966 prior to the development of the IASC. Chapter 3 considers issues that the IASC confronted from its formation in 1973 to 1977. Chapter 4 focuses on challenges to the IASC’s autonomy from 1978 to 1982. Chapter 5 examines the period from the end of 1982 to mid-1985, and the productivity of the IASC during this period. Chapter 6 considers linkages between the IASC and national standard setting bodies as well as negotiations with the International Organization of Securities Commissions (IOSCO). Chapter 7 deals with the project to revise IASC standards and the responses of the constituents in Europe and Japan. Chapter 8 covers organizational changes in the final seven years of the IASC while Chapter 9 focuses on standard setting projects in those final years. Chapter 10 delineates the formation of the IASB, and Chapter 11 provides overall conclusions. The tables throughout the book include: a list of who attended various IASC meetings, such as IASC personnel and representatives of accounting professional organizations in particular countries; time tables for producing standards; outlines of proposed standards; chronology of standards; standards published in other countries; the work of chairs and secretariat; and IASC income and sources. The figures in the chapters include the IASC organizational structure at different times and proposals for change. The chapters also contain ‘‘vignettes’’ to provide sidebars on the subject matter discussed. The appendices provide: a list of IASC officers; biographical notes on chairs and secretaries-general; representatives and technical advisors; dates and locations of IASC meetings; a history of international standards; and the 1973, 1977, 1982, 1992, and 2000 IASC constitutional documents. As the author observes, the IASC developed in response to the need for harmonization in international accounting. There have been too many differences in accounting standards from country to country. The IASC was flexible in adopting standards, permitting alternative approaches in its earlier years more so than in its later years. However, the IASC never resolved the major issue of how to measure assets and liabilities (nor has the current IASB, for that matter). The only criticism this reviewer has is that the author could have devoted more attention and space to the process of how the IASC attempted to tackle the thorniest issues in financial accounting and reporting, such as the overall treatment of uncertainty in the financial statements proper and the accompanying schedules and foot- notes, the measurement of income and how it should be reported, and the different bases for valuation and their disclosures. Furnishing a wealth of detail, the book has been meticulously researched, replete with tables, charts, diagrams, and footnotes in each chapter as well as appendices containing key documents in the history of the IASC. As such, this volume constitutes a valuable reference source for accounting scholars and students, both graduate and un- dergraduate, in researching the evolution of the IASB. In light of the growing importance of IASB standards and the current FASB/IASB convergence efforts, this book represents a timely publication. A future research idea on the broad subject of the history of the IASC could be to examine the evolution of a particular standard, from start to finish, including all the main steps in its development, such as interaction between the IASC and national standard setting bodies on the issues in question. Robert Bloom John Carroll University USA

JIAN LI AND ALAN PAISEY, International Transfer Pricing in Asia Pacific: Perspectives on Trade between Australia, New Zealand and China (Hampshire, U.K.: Palgrave Mac- millan, 2005, xxx, 265 pp). Li and Paisey’s book answers four questions that should be in the minds of their potential readers: What is transfer pricing? Why is transfer pricing important? How do you organize a research project involving multinational

Journal of International Accounting Research, Volume 7, No. 1, 2008 102 Book Reviews enterprises (MNEs) and transfer pricing? Why is the Asia Pacific perspective on trade and transfer pricing of importance to the reader? Who is the potential reader of this succinct but data-packed book? The authors identify ‘‘both academics and practitioners, such as managers, accounting and tax professionals who are interested in and/or are dealing with international transfer pricing’’ (252) as their target audience. The book is well-written, informative, and an excellent addition to the library of anyone interested in transfer pricing and international tax issues in general, and in the behavior of Asia Pacific MNEs, particularly Chinese MNEs. I would add that Chapters 1 though 6 are also quite relevant for, and easily understood by, the casual reader who has minimal knowledge of transfer pricing and the desire to understand what it is and how it works. In this exhaustive study of transfer pricing and trade practices of MNEs with subsidiaries in three major Asia Pacific countries, Li and Paisey provide much information of interest to all readers, regardless of their previous knowledge of transfer pricing. The 17 chapters are organized to provide answers to the four questions posed earlier, Downloaded from http://meridian.allenpress.com/jiar/article-pdf/7/1/97/2785497/jiar_2008_7_1_97.pdf by guest on 27 September 2021 with information for the reader new to transfer pricing earlier in the book. Chapters 1 through 4 effectively answer the first two questions: What is transfer pricing and why is it important? These four chapters introduce transfer pricing and its global trading environment; the differences be- tween the MNE and a given country’s governmental tax authority; the major players in transfer pricing regulations; and the factors determining the eventual choice of a transfer pricing method by an MNE. So, what is transfer pricing? Transfer pricing is both a management tool and an international tax strategy used by MNEs to maximize profits while simultaneously minimizing tax liabilities in the countries in which it has a presence. This presence can be a subsidiary, division, affiliate, or other organizational unit in one or more host countries, each with its own tax authority and its own transfer pricing regulations. Transfer prices are assigned to tangible goods, intangible assets, and services that are transferred across borders from one MNE unit to a related MNE unit. Transfer prices for tax purposes must be set at arm’s-length, meaning that the price charged for an internally transferred good or service must be comparable to the price the MNE would have charged an unrelated customer. Li and Paisey discuss transfer pricing from both the management tool and tax strategy perspectives, addressing environmental variables ranging from performance evaluation to tax-rate differentials. Their primary concern, however, is the actual transfer pricing practices on MNEs, and how transfer pricing decisions are affected by differences in country (tax jurisdiction) regulations and tax rates. In the study presented in later chapters, Li and Paisey surveyed MNEs with at least one subsidiary (unit) in Australia, China, or New Zealand, regardless of the home country of the parent MNE. Why is transfer pricing important? In various surveys over the past decade, tax executives from MNEs worldwide have consistently identified transfer pricing as the primary international tax issue facing their companies. Its importance stems from the goals of transfer pricing: to maximize profits and minimize tax liabilities in the countries in which it has a presence. Transfer pricing affects the bottom line of the MNE, drawing the interest of the tax authorities of the countries in which the MNE has a presence. The MNE risks transfer pricing audits if their transfer pricing strategy is deemed not in compliance with a given tax authorities’ transfer pricing regulations. Li and Paisey devote Chapter 3 to just this issue. The third question of how to undertake transfer pricing research is discussed in chapters 5 and 6. The authors build on the factors discussed in Chapter 4 to develop 17 environmental variables to be included in their study. As with most prior research into MNE transfer pricing practices, a questionnaire was used to gather data on these variables directly from MNE tax executives. Additional questions collected data on industry classification; location of parent MNE; net sales; nature, frequency, and volume of intercompany transactions; transfer pricing audit history; advance pricing agreement status; and preferred versus actual transfer pricing methods implemented by MNEs. The difficulties of gathering data via survey instruments and from countries with more conservative cultures that value secrecy are addressed, and suggestions are made to ameliorate those difficulties. Chapter 5 deals with the construction of the questionnaire, the sample of MNEs identified by the authors, and the response rates of the mailings to the sample of MNEs. Additional data were collected from in-depth interviews with Chinese tax authorities and from a separate second questionnaire sent to other Chinese tax au- thorities. Chapter 6 provides initial details about the respondent MNEs gathered from the non-environmental factor questions on the questionnaire. The remaining chapters answer the final question ‘‘Why is the Asia Pacific perspective on trade and transfer pricing of importance to the reader?’’ in much detail. Chapter 7 presents the current and recent statistics on international trade, imports, and exports for Australia, China, and New Zealand, laying the groundwork for the remaining chapters. Now, I am suggesting the first of two divergences from the original ordering of the chapters. After Chapter 7, I would skip to Chapter 16, ‘‘Foreign enterprises in China.’’ The authors themselves describe this chapter as ‘‘an overview of the legal and financial system within which foreign enterprises must operate to base their operations in China’’ (245). Now the reader has a fuller sense and better understanding of the complicated

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Chinese environment in which many of the respondent MNEs operate and from which they based their responses to the original questionnaire. The reader can now tackle each country’s transfer pricing regulations as laid out in Chapter 8, as well as the legally mandated methods identified by the MNEs in the study. Chapter 9 looks at the actual transfer pricing methods employed by the sample MNEs, and presents a statistical analysis of cross-national comparisons of transfer pricing methods used in practice. Chapters 10 through 12 present the various and detailed statistical analyses of the 17 environmental variables by country and across countries to assess their impact on MNEs’ transfer pricing decisions. Here is where I suggest a second deviation from the authors’ order of chapters. I would recommend skipping to Chapter 14. Here are the qualitative data gathered through the interviews with Chinese tax authorities and the data from the second survey which was directed to Chinese tax authorities. Only then would I return to and read Chapter 13 on the MNEs’ transfer pricing audit experience. In this rearranged order, the results for Chinese MNEs Downloaded from http://meridian.allenpress.com/jiar/article-pdf/7/1/97/2785497/jiar_2008_7_1_97.pdf by guest on 27 September 2021 are more easily put into context and more fully appreciated by the reader. Chapter 15 continues the audit thread from Chapter 13, using the data from the first questionnaire to assess transfer pricing audits from the MNE perspective. Are MNEs that prefer a particular transfer pricing method more likely to be audited than MNEs that prefer a different method? To what extent are MNEs using available tools (such as advance pricing agreements) to minimize their risk uncertainty regarding audits? The final chapter, Chapter 17, ‘‘Pacific Trade Prospects,’’ discusses the current trade environment in Asia Pacific in light of the findings of the authors’ transfer pricing study, and the implications of those findings. Unlike some of the reviews of the most recent Harry Potter book, this review does not need a spoiler alert. I recommend that readers delve into Li and Paisey’s book themselves to find out what the results mean for MNEs in today’s transfer pricing world! Susan C. Borkowski La Salle University USA

SHAHROKH M. SAUDAGARAN (editor), Asian Accounting Handbook: A User’s Guide to the Accounting Environment in 16 Countries (Singapore: Thomson Learning Asia, 2005, xxix, 895 pp). The book comprises 16 chapters, each being devoted to an Asian country or administrative region, which are grouped into four regions: East Asia (People Republic of China, Hong Kong, Japan, Korea, and Republic of China [Taiwan]), South-East Asia (Indonesia, Malaysia, Philippines, Singapore, and Thailand), South Asia (Bangladesh, India, Pakistan, and Sri Lanka), and West Asia (Bahrain and United Arab Emirates). The use of the terms ‘‘handbook’’ and ‘‘international accounting’’ in many cases heralds a collection of previously published papers with a consequent lack of consistency. As each paper has been written specifically for this book, it has been possible to achieve a high level of consistency. The task is approached from a user perspective (users being identified as accounting professionals, educators, corporate executives, and students), not a preparer’s perspective. Each chapter has the same structure: country overview, capital markets regulation and enforcement, accounting policy making, accounting profession, auditing standards, and looking ahead. The description of the accounting policy making and the accounting profession is suboptimal in those countries where there is a close interrelationship between the two, mainly in countries with Anglo heritage. Given the considerable differences between the countries, the ordering of topics is the most appropriate one. Changing their order depending on local factors would not assist users. Within this general structure, the authors of the individual chapters are given an opportunity show their command of the subject matter being covered. Fortunately, for the reader, there is consid- erable flexibility shown in the emphasis and level of detail in the various chapters which help in getting a feel for the accounting environment of each country or administrative region. The structuring has, for example, allowed extensive discussion of the implications of the Islamic tradition on accounting in Malaysia, Bahrain, and United Arab Emirates, which may not have been possible if a less flexible structure had been adopted. Consistent with the user perspective, each chapter contains sample financial statements that allow an appreciation of the how financial statements are structured and the complexity of required disclosures. Many of the companies chosen will be familiar to the reader and this makes them all the more useful. Companies used include Infosys Technologies Ltd (India), Nissan Motor Co, Ltd (Japan), San Miguel Corporation (Philippines), and Singapore Airlines Ltd (Singapore). While no cut-off date is given for either the book or individual chapters, it appears that in most cases mid- 2004 is the cutoff. This being so, they were written during the build-up to the implementation of International Financial Reporting Standards (IFRSs) in the European Union and Australia (January 1, 2005), and the structure

Journal of International Accounting Research, Volume 7, No. 1, 2008 104 Book Reviews adopted is one that allows an appreciation of whether national standard setters and regulators will survive glob- alization of standard setting and the global regulation of capital and securities markets. For this reason, the focus has been on ‘‘the institutions and processes in individual countries ... with a view to providing a sound appreciation of the accounting environment’’ (xviii). While there have been some significant post-publication changes, partic- ularly in relation to financial reporting standards (for example in China), the Handbook is, and will continue to be for some years, a valuable resource to the intended users because of this focus on institutions and processes. This shows the advantages of the structure adopted, as it provides a context within which users can appreciate subsequent developments that are described in sources that are more recent. Other than in the most general terms, it is difficult to provide either an overview or a synthesis of the matters covered due to the diversity of the subject matter covered. In general, the level of detail is appropriate given the broad coverage. Individual readers may be disappointed that more detail has not been provided on the aspects in which they are most interested and may question the level of detail provided on areas in which they are not Downloaded from http://meridian.allenpress.com/jiar/article-pdf/7/1/97/2785497/jiar_2008_7_1_97.pdf by guest on 27 September 2021 interested. For example, I have relatively little interest in the process by which professional qualifications are achieved, but I can see how that topic fits within the approach taken in the book; in many cases, it gives valuable insights into the way in which accountants and accounting operate in the country or administrative region. While the Handbook is impressive, there are some aspects which could be improved. Given the large number organizations discussed, it becomes difficult to keep track of the acronyms used for them. In future editions, the inclusion of a listing of abbreviations/acronyms (either chapter based or consolidated) would significantly assist the reader (the intention of publishing future editions is flagged [xix]; however, it is uncertain if the new owners of Thomson Learning share this intention). While having authors with an intimate knowledge of the each country is one of the books strengths, it creates a risk that the authors will on occasions express themselves in a manner that is clear to fellow experts but unclear to the novice. For instance, in many countries professional associations of accountants are created under special legislation. Absent elaboration, it is unclear what inference should be drawn from the existence of such legislation. For example, in Sri Lanka the Institute of Chartered Accountants of Sir Lanka (ICASL) was formed under the Institute of Chartered Accountants Act of 1959. Does this mean that the ICASL is dominated by government functionaries or is it a true professional association as we would expect to find in the United States or United Kingdom? The footnotes on Page 780 suggest the latter. For India, we are told that the Institute of Chartered Accountants of India was created by the Chartered Accountants Act 1949 (684), but it is unclear if this was a government initiative (implying a degree of government control) or at the instigation of the profession. The situation is clearer in Pakistan, where it is stated that the Institute of Chartered Accountants of Pakistan was formed as a statutory autonomous body in 1961, the board of which had 12 members elected by members and four members appointed by the government (739). There can also be uncertainty about the authority of financial reporting standards when we are told that the power to make such standards has been delegated under legislation to the profession without clearly identifying whether those standards have force of law or are merely subject to enforcement by the profession. In some cases this is made clear, for example, for Sri Lanka the language used on Page 777 indicates that the standards have force of law. The interrelationships between the stakeholders in the accounting process can be very complex. A full ap- preciation of roles and level of influence exercised can be conveyed through appropriately structured diagrams. This can be particularly useful when the relative power of stakeholders has changed over time. While some dia- grams are included in the Handbook, they are the exception. Any future edition would benefit greatly from appro- priately targeted diagrams. In summary, the Handbook is a valuable resource for those within the target audience. While it does not cover all Asian countries, it includes all of the major economic powers from the region. It is not designed as a textbook; although it provides a useful supplement to whichever textbook one selects when teaching international accounting, as it goes into detail that is unsuitable for textbooks. It provides many insights (sometimes uninten- tionally) into the institutions and culture. The chapter on Pakistan deals with bouts of military governments (726) and the one on the Philippines discusses the problems of crony-capitalism (434–435). Crony-capitalism and political instability, including the role of the military in government, are not limited to Pakistan and the Philippines; however, the fact that the authors either did or did not consider it important to mention these matters provides powerful insights. Ian Langfield-Smith Monash University Australia

Journal of International Accounting Research, Volume 7, No. 1, 2008