1、,GLOBAL BUSINESS AND ACCOUNTING,Chapter 15,Learning Objective,LO1,To define four mechanisms companies use to globalize their business activities.,Globalization,Occurs as managers become aware of and engage in cross-border trade and operations. A high level of globalization is a multinational enterpr
2、ise that begins with raw material extraction and ends with final product assembly and sales in multiple foreign locations.,Globalization,Globalization typically progresses through a series of stages that include:,Exporting Licensing Joint ventures Wholly owned subsidiaries Global sourcing.,Learning
3、Objective,LO2,To identify how global environmental forces (a) political and legal systems, (b) economic systems, (c) culture, and (d) technology and infrastructure affect accounting practices.,Environmental Forces Shaping Globalization,Environmental Forces Shaping Globalization,Planned Economy Gover
4、nment owns factors of production,Market Economy People owns factors of production,Environmental Forces Shaping Globalization,Learning Objective,LO3,To explain why there is demand for harmonization of global financial reporting standards.,Harmonization of Financial Reporting Standards,The Internation
5、al 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,L
6、earning Objective,LO4,To demonstrate how to convert an amount of money from one currency to another.,Foreign Currencies and Exchange Rates,An exchange rate is the amount it costs to purchase one unit of currency with another currency.,1,000,000 $0.00764 = $7,640,Learning Objective,LO5,To compute gai
7、ns or losses on receivables or payables that are stated in a foreign currency when exchange rates fluctuate.,Accounting for Transactions with Foreign Companies,On January 1, 2007, a U.S. company purchases equipment from an Italian company for 100,000. The amount is payable in full on that date. On J
8、anuary 1, 2007, the exchange rate is $0.97 per Euro.,U.S. company purchases 100,000 from financial institution.,Accounting for Transactions with Foreign Companies,On January 1, 2007, a U.S. company purchases equipment from an Italian company for 100,000. The amount is payable in full on February 15,
9、 2007. On January 1, 2007, the exchange rate is $0.97 per Euro. At 1/31/07 the spot exchange rate is 1 = $0.96. On 2/15/07, the exchange rate is 1 = $0.98.,Accounting for Transactions with Foreign Companies,On January 1, 2007, a U.S. company purchases equipment from an Italian company for 100,000. T
10、he amount is payable in full on February 15, 2007. On January 1, 2007, the exchange rate is $0.97 per Euro. At 1/31/07 the spot exchange rate is 1 = $0.96. On 2/15/07, the exchange rate is 1 = $0.98.,Accounting for Transactions with Foreign Companies,On January 1, 2007, a U.S. company purchases equi
11、pment from an Italian company for 100,000. The amount is payable in full on February 15, 2007. On January 1, 2007, the exchange rate is $0.97 per Euro. At 1/31/07 the spot exchange rate is 1 = $0.96. On 2/15/07, the exchange rate is 1 = $0.98.,Learning Objective,LO6,To describe several techniques fo
12、r “hedging” against losses from fluctuations in exchange rates.,Hedging,Fair Value Hedge Any gain or loss is recognized currently in earnings. If the hedge is on available-for-sale securities, any gain or loss is reported in other comprehensive income on the equity section of the balance sheet.,Futu
13、re contracts are the right to receive a specified quantity of foreign currency at a future date.,Translation of Foreign Currency Financial Statements,This is the first year of operations for a 100% owned Mexican subsidiary of the U.S. enterprise, Matrix, Inc.,Translation of Foreign Currency Financia
14、l Statements,Translation of Foreign Currency Financial Statements,If dividends are paid, the translation is based on the historical rate when the dividend is paid. The translated ending retained earnings carries forward to the next accounting period.,Translation of Foreign Currency Financial Stateme
15、nts,The translation adjustment is reported in other comprehensive income in the equity section of the balance sheet,Learning Objective,LO7,To discuss how global sourcing increases product cost complexity.,Global Sourcing,Differences in exchange rates in many different countries can create significan
16、t 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 previously discussed.,Customs duties,Import fees,Multicountry tax laws,Tax treaties,Learning Object
17、ive,LO8,To explain the importance of the Foreign Corrupt Practices Act.,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 pe
18、ddling. The IMF and World Bank instituted policies to cut off funding to countries ignoring corrupt practices.,Foreign Corrupt Practices Act,Ethics, Fraud, and Corporate Governance,The Foreign Corrupt Practices Act (FCPA) applies to U.S. companies and foreign companies operating in the United States, their affiliates, and their agents.,Violations of the FCPA expose companies and individuals to both civil and criminal liability.,End of Chapter 15,
