International ing Ppt (1) 3b311o
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International ing M.com semester 4 Presented Click to edit Master subtitle style By Ashish Siddiqui, Assistant professor, Sanskriti School of Business, AICTE Approved
3/25/12
compiled by Ashish
Introduction v
•
•
Most ing students are familiar with financial ing and managerial ing, but many have only a vague idea of what international ing is. Defined broadly, the ing in international ing encomes the functional areas of financial ing, managerial ing, auditing, taxation, and ing information systems. The word international in international ing can be defined at three different
levels.1 The first level is supranational ing, which denotes standards, guidelines, and rules of ing, auditing, and taxation issued by supranational organizations. Such organizations include the United Nations, the Organization for Economic Cooperation and Development, and the International Federation of ants 3/25/12
compiled by Ashish
Introduction cont.. v
At the second level,
The company level, international ing can be viewed in of the standards, guidelines, and practices that a company follows related to its international business activities and foreign investments. These would include standards for ing for transactions denominated in a foreign currency and techniques for evaluating the performance of foreign operations v
•
•
At the third and broadest level, international ing can be viewed as the study of the standards, guidelines, and rules of ing, auditing, and taxation that exist within each country as well as comparison of those items across countries. Examples would be cross-country comparisons of (1) rules related to the financial reporting of plant, property, and equipment; (2) income and other tax rates; and (3) the requirements for becoming a member of the national ing profession. 3/25/12
compiled by Ashish
INTERNATIONAL ING DEFINITION •
INTERNATIONAL ING is the international aspects of ing, including such matters as ing principles and reporting practices in different countries and their classification; patterns of ing development; international and regional harmonization, foreign currency translation; foreign exchange risk; international comparisons of consolidation ing and inflation ing; ing in developing countries; ing in communist countries; performance evaluation of foreign subsidiaries.
3/25/12
compiled by Ashish
Importance of of International ing q
§
§
Emergence of globalization, growth of multinational corporation, development of world trade, Internationalization of capital markets, Expansion of European union All these have emphasized the importance of International ing recent years. Emergence of MNC: Emergence of MNC on the international scène is one of the most important factors that has increased importance of international ing. MNC contribution is 1/3rd of the world exports and also the contribution to the world GDP is Approx 10 %.. The efforts that ant has to put in preparing consolidation of financial statements if s all around the world are prepared on uniform basis. Development of world trade: In recent times international trade has increased to enormous figure and these lead to setting the transfer pricing for sale or transfer of raw materials between two international units
3/25/12
compiled by Ashish
Importance of of International ing §
Expansion of European union
European union has come long way now a political and economic union of 27 independent sovereign states. This growth in size has also increased the EU economic dominance .The combined EU generates an estimated 30% share of world’s nominal GDP later to implement financial reporting strategy adopted the international; financial reporting standard and insisted companies ed on regulated to prepare consolidated financial statements on the international reporting standard §
Internationalization of capital markets: There has been
tremendous increase in cross border financial transaction in the recent decade of two which has given rise to international capital market. The estimated value of the world’s outstanding bonds equities and banking assets stood at whooping USD 190 trillion at the end of 2006. All these development has given rise to application of international ing. 3/25/12
compiled by Ashish
Scope of International ing v
v
v
v
it covers a comparative study of financial ing practices and principles in important countries of the world and similarities and diversities prevailing therein. Financial ing coverage extends to problems foreign currency transactions and translation ,ing foreign inflation and consolidated financial reporting and its disclosure, segment reporting and preparation of multi financial reporting. The management ing coverage includes muitinational transfer, budgeting , forex risk management ,performance evaluation of foreign subsidiaries, foreign investment analysis ,international taxation. Analysis of new financial market issues and their managmetn through international derivative products. Derivative ing ,global corporate governance, environmental ing , integration of ethics and global t ventures etc…
3/25/12
compiled by Ashish
v
NEED FOR TRANSNATIONAL REPORTING AND DISCLOSURE The expanding horizon of business activity in recent years particularly as a consequences of opening up of economies has resulted in expansion in world trade.
v
Rapid growth in international capital market
v
Increase of cross border merger and acquisition
v
Predominance of MNC
v
Reporting to existing and new investors spread world wide.
v
v
Companies entering in to foreign capital market to list their securities in to foreign stock exchanges. Submission of reports as per requirement of foreign securities exchanges.
3/25/12
compiled by Ashish
Transnational reporting -complexities q
Reporting financial statements across he border is not an easy task it requires lot of efforts and cost. Some of the complexities encountered during transnational reporting are as follows;
§
Language and currency
§
ing principles
§
Disclosure requirement
§
Audit requirement
3/25/12
compiled by Ashish
Transnational reporting -complexities •
Language and currency
An enterprise would generally prepare its financial reporting in the language that its local investors would understand for eg a Japanese company would prepare its financial statement in Japanese language and similarly in India few would like to have a translated version of non-indian companies financial statement in Hindi script. In short local investors would find difficult to understand financial statement of other country’s companies. Similarly a companies listed on as stock exchanges which have different language than the companies reporting have to send translated version of their financial statement reports. In the same way reporting companies also finds difficulties since every has unique currency.
3/25/12
compiled by Ashish
Transnational reporting -complexities •
ing principles
The more serious problem the reporting company faces is in contemplating the ing principles of the another country. For eg indian company would prepare its financial statement in accordance ti indian coimpanies act 1956 and in accordance Indian GAAP. Therefore U.S investors would find difficult to understand further certain information would be lacking as required by US GAAP.
3/25/12
compiled by Ashish
Transnational reporting -complexities •
Disclosure requirement
Disclosure requirement is essential ingredient of proper functioning of capital market. Therefore it is utmost requirement of the company to disclose all required information in the financial statement to enable the investors to take appropriate decision. However the problem is that every nation has different disclosure requirement and so reporting company finds it difficult to cope up with different disclosure requirement .
3/25/12
compiled by Ashish
Transnational reporting -complexities •
Audit requirement
The function of audit is to lend credibility to financial statement. In order to do so auditing professionals itself need a set of well defined audit standards. This is particular so when financial statements are prepared in one country and used by s in another country. A great deal of diversity prevails in the international audit environment. However as we move towards harmonization and as international standard acquires authority auditors will have to conform the requirement of international standards of auditing.
3/25/12
compiled by Ashish
3/25/12
compiled by Ashish
Introduction v
•
•
Most ing students are familiar with financial ing and managerial ing, but many have only a vague idea of what international ing is. Defined broadly, the ing in international ing encomes the functional areas of financial ing, managerial ing, auditing, taxation, and ing information systems. The word international in international ing can be defined at three different
levels.1 The first level is supranational ing, which denotes standards, guidelines, and rules of ing, auditing, and taxation issued by supranational organizations. Such organizations include the United Nations, the Organization for Economic Cooperation and Development, and the International Federation of ants 3/25/12
compiled by Ashish
Introduction cont.. v
At the second level,
The company level, international ing can be viewed in of the standards, guidelines, and practices that a company follows related to its international business activities and foreign investments. These would include standards for ing for transactions denominated in a foreign currency and techniques for evaluating the performance of foreign operations v
•
•
At the third and broadest level, international ing can be viewed as the study of the standards, guidelines, and rules of ing, auditing, and taxation that exist within each country as well as comparison of those items across countries. Examples would be cross-country comparisons of (1) rules related to the financial reporting of plant, property, and equipment; (2) income and other tax rates; and (3) the requirements for becoming a member of the national ing profession. 3/25/12
compiled by Ashish
INTERNATIONAL ING DEFINITION •
INTERNATIONAL ING is the international aspects of ing, including such matters as ing principles and reporting practices in different countries and their classification; patterns of ing development; international and regional harmonization, foreign currency translation; foreign exchange risk; international comparisons of consolidation ing and inflation ing; ing in developing countries; ing in communist countries; performance evaluation of foreign subsidiaries.
3/25/12
compiled by Ashish
Importance of of International ing q
§
§
Emergence of globalization, growth of multinational corporation, development of world trade, Internationalization of capital markets, Expansion of European union All these have emphasized the importance of International ing recent years. Emergence of MNC: Emergence of MNC on the international scène is one of the most important factors that has increased importance of international ing. MNC contribution is 1/3rd of the world exports and also the contribution to the world GDP is Approx 10 %.. The efforts that ant has to put in preparing consolidation of financial statements if s all around the world are prepared on uniform basis. Development of world trade: In recent times international trade has increased to enormous figure and these lead to setting the transfer pricing for sale or transfer of raw materials between two international units
3/25/12
compiled by Ashish
Importance of of International ing §
Expansion of European union
European union has come long way now a political and economic union of 27 independent sovereign states. This growth in size has also increased the EU economic dominance .The combined EU generates an estimated 30% share of world’s nominal GDP later to implement financial reporting strategy adopted the international; financial reporting standard and insisted companies ed on regulated to prepare consolidated financial statements on the international reporting standard §
Internationalization of capital markets: There has been
tremendous increase in cross border financial transaction in the recent decade of two which has given rise to international capital market. The estimated value of the world’s outstanding bonds equities and banking assets stood at whooping USD 190 trillion at the end of 2006. All these development has given rise to application of international ing. 3/25/12
compiled by Ashish
Scope of International ing v
v
v
v
it covers a comparative study of financial ing practices and principles in important countries of the world and similarities and diversities prevailing therein. Financial ing coverage extends to problems foreign currency transactions and translation ,ing foreign inflation and consolidated financial reporting and its disclosure, segment reporting and preparation of multi financial reporting. The management ing coverage includes muitinational transfer, budgeting , forex risk management ,performance evaluation of foreign subsidiaries, foreign investment analysis ,international taxation. Analysis of new financial market issues and their managmetn through international derivative products. Derivative ing ,global corporate governance, environmental ing , integration of ethics and global t ventures etc…
3/25/12
compiled by Ashish
v
NEED FOR TRANSNATIONAL REPORTING AND DISCLOSURE The expanding horizon of business activity in recent years particularly as a consequences of opening up of economies has resulted in expansion in world trade.
v
Rapid growth in international capital market
v
Increase of cross border merger and acquisition
v
Predominance of MNC
v
Reporting to existing and new investors spread world wide.
v
v
Companies entering in to foreign capital market to list their securities in to foreign stock exchanges. Submission of reports as per requirement of foreign securities exchanges.
3/25/12
compiled by Ashish
Transnational reporting -complexities q
Reporting financial statements across he border is not an easy task it requires lot of efforts and cost. Some of the complexities encountered during transnational reporting are as follows;
§
Language and currency
§
ing principles
§
Disclosure requirement
§
Audit requirement
3/25/12
compiled by Ashish
Transnational reporting -complexities •
Language and currency
An enterprise would generally prepare its financial reporting in the language that its local investors would understand for eg a Japanese company would prepare its financial statement in Japanese language and similarly in India few would like to have a translated version of non-indian companies financial statement in Hindi script. In short local investors would find difficult to understand financial statement of other country’s companies. Similarly a companies listed on as stock exchanges which have different language than the companies reporting have to send translated version of their financial statement reports. In the same way reporting companies also finds difficulties since every has unique currency.
3/25/12
compiled by Ashish
Transnational reporting -complexities •
ing principles
The more serious problem the reporting company faces is in contemplating the ing principles of the another country. For eg indian company would prepare its financial statement in accordance ti indian coimpanies act 1956 and in accordance Indian GAAP. Therefore U.S investors would find difficult to understand further certain information would be lacking as required by US GAAP.
3/25/12
compiled by Ashish
Transnational reporting -complexities •
Disclosure requirement
Disclosure requirement is essential ingredient of proper functioning of capital market. Therefore it is utmost requirement of the company to disclose all required information in the financial statement to enable the investors to take appropriate decision. However the problem is that every nation has different disclosure requirement and so reporting company finds it difficult to cope up with different disclosure requirement .
3/25/12
compiled by Ashish
Transnational reporting -complexities •
Audit requirement
The function of audit is to lend credibility to financial statement. In order to do so auditing professionals itself need a set of well defined audit standards. This is particular so when financial statements are prepared in one country and used by s in another country. A great deal of diversity prevails in the international audit environment. However as we move towards harmonization and as international standard acquires authority auditors will have to conform the requirement of international standards of auditing.
3/25/12
compiled by Ashish
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