Reporting on international operations in annual reports;

              Reporting on International
In recent years a growing number of United States
companies have substantially increased their total dollar
investment in international operations. This increase
has represented an attempt by businessmen to partici­pate
in the rapidly expanding economy of the overseas
markets where private capital is not as readily available
as it is in the United States. The continuation of this
growth will depend primarily on the policies of the U. S.
government concerning overseas investment. To the
extent that expansion of overseas facilities requires a
further investment of U.S. dollars this growth may be
curtailed significantly. Previously established overseas
operations, however, and new organizations formed with
accumulated earnings from such operations, will un­doubtedly
provide an element of growth in the years to
come.
As the investment in international operations in­creases
it becomes necessary to review the reporting
policies and disclosure requirements relating to this
phase of the business organization. At the present time,
the methods used to report international operations are
almost as numerous as the number of companies in­volved.
Charles E. Wieser, administrative manager in the Detroit
office, joined Touche, Ross in 1954 after receiving B.S. and
MBA degrees from Ohio State University. He is a member
of the American Institute of CPA s, the NAA, the American
Accounting Association, and the Michigan Association of
CPA s where he is currently serving on the Committee on
Auditing Practices.
The variety of reporting and disclosure practices is
probably due to the individual peculiarities of the op­erations,
methods of control, and how familiar company
management is with the operations in each instance.
Another, and perhaps more significant, reason for this
difference in practices is the general feeling of caution
relating to any overseas operation . . . possibly because
it is "foreign" and therefore somewhat mysterious.
This cautious attitude is reflected, for example, by the
American Institute of Certified Public Accountants in
Chapter 12 of its last edition (1961) of the Accounting
Research and Technology Bulletins. Although there is
agreement that there should be disclosure of foreign
assets and operations if they are significant, the discus­sion
indicates that careful consideration should be given
the question of the propriety of consolidating the state­ments
of foreign subsidiaries. When one reviews the
background of this research, it appears that the origi­nal
consideration was the appropriate handling of ex­change
losses as a result of devaluations of foreign
currencies. This problem, in view of the world monetary
situation at that time, apparently prompted the very cau­tious
approach which was appropriate then. In the light
of present circumstances, however, it seems appro­priate
to reevaluate that philosophy.
COMMON PROBLEMS OF
U. S. BUSINESSMEN ABROAD
There were significant problems that confronted the
United States businessman in his first attempts to estab­lish,
operate, and control a business enterprise in
another country. In most cases laws and legal systems
were different from those to which he was accustomed.
Differences in government control of accounting prac­tices,
local taxing regulations, international tax treaties,
and customs of the taxing authorities presented a variety
of complications. These problems were in addition to the
general operating problems of business tradition, back­ground
of the people (both employee and customer),
sales techniques, production methods, and labor prac­tices.
In non-English speaking countries, the language
difference caused some difficulty. A particular barrier
34 THE QUARTERLY