lCHAPTER 15
l GOING INTERNATIONAL
AND
INTERNATIONAL ACCOUNTING STANDARDS
AND
INTERNATIONAL ACCOUNTING STANDARDS
lFOCUS OF CHAPTER 15
l Globalization of Business:
n Ways to Export
n Ways to Manufacture Overseas
n Reasons for Manufacturing Overseas
l International Accounting Standards:
n The Diversity of Worldwide GAAP
n Efforts to Harmonize Worldwide GAAP
l Going International: Ways to Export (Choices Galore)
lIndependent distributor:
lForeign commission agent.
lForeign marketingbranch.
lForeign marketingsubsidiary.
lExport trade vehicle (FSC or IC-DISC).
l Ways to Export: The Concept of Physical Presence
l Defined: Having an “operation” overseas. Examples: SALES OFFICE, WAREHOUSE, FACTORY, EMPLOYING FOREIGN CITIZENS AS SALES PERSONNEL.
l To make a determination:
n Review foreign tax laws.
n Review tax treaty.
l Significance: Subject to taxation in the foreign country.
l Foreign Earnings:
DOUBLE Corporate Taxation???
DOUBLE Corporate Taxation???
l Income of foreign units are taxed overseas and in the U.S--BUT DON’T PANIC.
l U.S. tax laws allow a “foreign tax credit.”
l Foreign Earnings: When Are U.S. Taxes Actually Paid?
l3 possibilities exist:
nForeign branches:
s When INCOME is earned.
nForeign subsidiaries:
s When DIVIDENDS are paid.
s When INCOME is earned (applies to “Subpart F” income)
l Reasons for Manufacturing Overseas: The List is Long
lThe lure of cheap labor
.
.
lTax holidays.
lTo establish a visible presence.
lLax environmental laws.
l Reasons for Manufacturing Overseas: The List is Long
lHigh literacy rates & safe environments.
lA Strong work ethic.
lLoan guarantees, grants, subsidies.
lThe fluctuating exchange rate problem.
l Risks of Investing Overseas:
All That Glitters Is Not Gold
All That Glitters Is Not Gold
lExpropriation--the seizure of assets by the foreign government.
lDevaluations/weakening of the foreign currency.
lCurrency transfer restrictions Wouldn’t it be nice to be able to bring the profits home?
lWars and civil disorders.
lGovernment mandated changes in the investment climate.
lThe Diversity of Worldwide GAAP: An Almost Unbelievable Cornucopia
lEverything from soupto nuts.
lThe United States is part of the problem--many U.S. standards are either rarely used or not used at all overseas:
nLIFO inventory method.
nDeferred income taxes.
nGoodwill capitalization.
l Internationalize Accounting Standards: The Grand Dream
lWorld GAAP--so many hurdles.
lAll are for it--BUT few countries are willing to change their own GAAP.
l International Accounting Standards: World GAAP’s Advantages
lHaving a Uniform World GAAP:
nWould greatly streamline the quarterly and year-end consolidation process for the accountants of publicly-owned companies.
l Efforts To Internationalize Accounting Standards: Progress Has Been Slow
l The International Accounting Standards Board [“Committee” prior to 2001] (created in 1973--London based)
l IASB Standards to date: Minimal impact--
still fairly easy to comply with virtually all IASB Standards.
still fairly easy to comply with virtually all IASB Standards.
lEfforts To Internationalize Accounting Standards: Capital Market Forces
lThe Capital Markets--
A much-needed injection:
A much-needed injection:
n Relatively recent trend of raising capital in world markets has given greatly added emphasis to the desirability of having a world GAAP. The BIG advantage:
s Would greatlystreamline the process by eliminating the need to comply with multiple GAAPs in offering securities.
l Efforts To Internationalize Accounting Standards: The FASB Hops Aboard
l2/97: FASB issues FAS 128
“Earnings Per Share” conforming
U.S. GAAP with world GAAP.
“Earnings Per Share” conforming
U.S. GAAP with world GAAP.
l6/01: FASB abolished the
pooling of interests method
conforming U.S. GAAP
with world GAAP.
pooling of interests method
conforming U.S. GAAP
with world GAAP.
lEnd of Chapter 15
lTime to Clear Things Up--
Any Questions?
Any Questions?
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