GLOBAL BUSINESS. a series of stages that include: 1. Exporting. 4. Wholly owned subsidiaries 5. Global sourcing.

Transcription

1 GLOBAL BUSINESS AND ACCOUNTING Chapter 8 To define four mechanisms companies use to globalize their business activities Occurs as managers become aware of and engage in cross-border trade and operations. A high level of globalization is a multinational enterprise that begins with raw material extraction and ends with final product assembly and sales in multiple foreign locations. typically progresses through a series of stages that include: 1. Exporting 2. Licensingi 3. Joint ventures 4. Wholly owned subsidiaries 5. Global sourcing.

2 8-5 Shaping 8-6 To identify how global environmental forces (a) political and legal systems, (b) economic systems, (c) culture, and (d) technology and infrastructure affect accounting practices. Political and legal system Culture system Technology and infrastructure Shaping 8-7 Shaping 8-8 Planned Economy Government owns factors of production Market Economy People owns factors of production

3 8-9 Harmonization of Financial Reporting Standards 8-10 To explain why there is demand for harmonization of global financial reporting standards. The International Accounting Standards Board (IASB) has as one of its stated goals the harmonization of accounting standards. Harmonization is used to describe the standardization of accounting methods and principles used in different countries throughout the world. Harmonization of Financial Reporting Standards Country/Standards IFRS Global Variation in Accounting Practices Auditors per 100,000 Asset Valuation Method LIFO Used allowed Used United States 168 Historic cost Used United Kingdom 352 allowed Not Used Depreciation Basis Segment Diclosure Required Germany 26 Historic cost Not Used Tax based Limited Brazil 1 allowed Not Used based No To demonstrate t how to convert an amount of money from one currency to another. Japan 10 Historic cost Used Tax

4 Foreign Currencies and Exchange Rates An exchange rate is the amount it costs to purchase one unit of currency with another currency. Foreign Exchange Rate Exchange Country/Region Currency Exchange Rate (in dollars) Rate (in foreign currency) Britain Pound ( ) $ Europe Euro ( ) Japan Yen ( ) Mexico Peso ($) India Rupee (Rs) To discuss how global sourcing increases product cost complexity. 1,000,000 $ = $7, Global Sourcing Differences in exchange rates in many different countries can create significant complexities for firms practicing global sourcing. Many companies underestimate the cost of globalizing their business operations because they are not familiar with the environmental characteristics ti previously discussed. d Customs duties Tax treaties Import fees Multicountry tax laws To explain the importance of the Foreign Corrupt Practices Act.

5 Foreign Corrupt Practices Act 8-17 Ethics, Fraud, and Corporate Governance 8-18 In many countries around the world, bribery is part of doing business. In many countries, this officially sanctioned corruption is not viewed as wrong or unethical. However, U.S.-based businesses are prohibited from influence peddling. The IMF and World Bank instituted policies to cut off funding to countries ignoring corrupt practices. The Foreign Corrupt Practices Act (FCPA) applies to U.S. companies and foreign companies operating in the United States, t their affiliates, and their agents. Violations of the FCPA expose companies and individuals to both civil and criminal liability End of Chapter 8