國際商務環(huán)境課件-11

1、International Business EnvironmentLecture 11: Accounting in international businessMonday, May 18, 2015Organizational chart of a typical companyThe responsibilities of CFO (or controller)OverviewReview: accounting basicsAccounting in international businessDifferences in financial statementsHow they d

2、ifferWhy they differInternational convergence of accounting standards: IFRSSpecial issues: FX hedging, tax planning & accounting frauds.Financial statementA typical financial statement is composed of:A balance sheet (資產負債表)* A statement of stockholders equity (所有者權益變動表)An income statement (損益表)A sta

3、tement of cash flow (現金流量表)Footnotes to financial statements* Managerial discussion & analysisAttention: extensive footnotes = transparency* OptionalFinancial indicatorsROA (Return On Assets) = Before-tax income / Total assetsROE (Return On Earnings) = Net income / Common stockholders equityDifferen

4、ces:ROA is preferred by capital-intensive industries (Banks, telecom, etc.), while ROE is preferred by light-capital firms (e.g., high-tech start-ups)ROE is more important to investors and more prone to manipulation.OverviewReview: accounting basicsAccounting in international businessDifferences in

5、financial statementsHow they differWhy they differInternational convergence of accounting standards: IFRSSpecial issues: FX hedging, tax planning & accounting frauds.Accounting for international businessUnderstanding differences in financial statements between countriesLanguage & currencyFormat of s

6、tatementsExtent of footnote disclosureMeasurement: underlying GAAP on which the financial statements are basedSpecific issues related to International businessHedging strategies, tax planning, etc. FormatBalance format (US, China, etc.)Assets = Liabilities + Shareholders equityAnalytical format (Eur

7、opean countries, esp. UK)Fixed assets + current assets - current liabilities - noncurrent liabilities = capital and reservesThis is easy!DisclosureDisclosure = footnotes (p. 8)Two things should be specified in footnotes:How are different components, esp. income & assets, calculated, based on which a

8、ccounting standards, etc.Any events that could have an impact on the companys financial perspective: M&A negotiations, pending lawsuits, etc. Measurement: how to value assets & recognize incomeClassifying accounting systemsWhat makes accounting systems different?Financial statementsInvestorsEmployer

9、sGovern-ment and other agenciesThe publicLendersSuppliers and other trade creditorsCustomersThe relative strength of these 3 stakeholders determines what the financial statement looks likeInvestors vs. lenders: optimistic vs. conservativeInvestors vs. government(s): consolidated financial statement

10、vs. separate statement for each subsidiaryOther environmental influences on accounting standardsCulture, legal origin & colonial history (e.g. Hong Kong)Convergence of accounting standards driven by globalization Accounting scandals (e.g. Enron & SoX act)Forces driving the convergence of accounting

11、standardsInvestors needOpenning up of domestic capital markets (e.g. QFII & QDII in China)MNEs needPreparing a different financial statement for each exchange on which it is listedProfessionals pressureInternational mobilityDevelopment of services trade Global convergence of accounting standardsBody

12、 in charge: International Accounting Standards Committee (IASC)Proposal: International Financial Reporting Standards (IFRS) IFRS of IASC is very close to US GAAP (Generally Accepted Accounting Principles, 會計準則) due to:The predominance of the US capital marketThe rise in popularity of direct financin

13、g on a global scaleIFRS is becoming the international standards, but with some variations in each jurisdiction which adopts it (e.g., EU IFRS, US IFRS, HK IFRS, etc.)The Enron scandalIn Dec. 2001, the American energy giant, Enron Corp. (安然) filed for bankruptcy.Following investigations revealed a se

14、ries of accounting frauds which shocked US and the whole world.Consequences:Downfall of Arthur Anderson (安達信), the worlds 5th largest audit firm.Public distrust following the disclosure of similar scandals in Worldcom, Xerox, Merck, etc., led to the stock market downturn in 2002.The passage of the S

15、arbanes-Oxley Act (薩班斯-奧克斯利法案) The Sarbane-Oxley ActThe SOX Act was enacted in July 2002, just 7 months after the outbreak of the Enron scandal.Major elements: Creating Public Company Accounting Oversight Board (PCAOB) to oversee public accounting firms.Setting up standards for auditing independence

16、, e.g., restricting auditing firms from providing consulting services to the same clients.Enhanced disclosure requirements for financial transactions, including off-balance-sheet transactions.Requiring senior executives to take individual responsibilities for the accuracy and completeness of the com

17、panys financial reports. Increasing criminal penalties for manipulation, destruction or alteration of financial records or other interference with investigations, while providing certain protections for whistle-blowers.OverviewReview: accounting basicsAccounting in international businessDifferences

18、in financial statementsHow they differWhy they differInternational convergence of accounting standards: IFRSSpecial issues: FX hedging, tax planning, etc.Hedging activitiesTax planning: Google and its Irish sandwishIn 2010, Google used its corporate income tax to 2.4%.First, Google funnelled its corpor