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18 Cards in this Set

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Development of Accounting Standards

Key Users of Financial Info
Customers
Govt
Public
Investors
Lenders
Employees
Suppliers
Development of Accounting Standards

FASB
Financial Accounting Standards Board

private sector body that establishes acctg standards in the US
Development of Accounting Standards

GAAP
Generally Accepted Accounting Principles

Established in each country that must be followed by companies when generating fin'l stmts
Development of Accounting Standards

CFO
Chief Financial Officer

Financial mgr of comp; responsible for procuring and managing comp's fin'l resources
Differences in Accounting among Culture

More Disclosure --> Less Disclosure
Anglo Saxon
Nordic
Asian colonial
African
Developed Latin
Japan
Germanic
Less Developed Latin
Differences in Accounting among Culture

Optimistic --> Conservative
Anglo Saxon
Nordic
Asian colonial
African
More developed Latin
Japan
Germanic
Less developed Latin
Translation
process of restating foreign currency fin'l stmts
functional currency
currency of the primary economic environment in which entity operates
Translation:

Current-rate method
Applies when local currency is functional currency

Translate all A/L at spot rate on the balance sheet date

Income stmt items use avg exchange rate

Owner's equity uses rates in effect when comp issued capital stock and accumulated retained earnings
Translation:

Temporal method
Applies when parent's reporting currency is functional currency

Only monetary A/L translated at spot

Inventory, prop, plant, and equipment at rates when acquired

Most income stmt items at avg exchange rate

COGS & depreciation at historical
Taxation:

Impact on choices
Location of initial investment
Operating form (export, license, etc)
Legal form (branch, subsidiary)
Method of financing (internal, debt,equity)
Method of setting transfer prices
Transfer Price
price on g/s one member of a corporate family sells to another
arm's length price
price btw two companies that do not have any ownership interest in each other
Reasons for transfer prices
diffs in taxation
competitive reasons
restrictions on currency flows
Non US Tax Practices:

Problems arise from
Lack of familiarity w/laws
Loose enforcement
Non US Tax Practices:

Issues
Variations in GAAP can lead to diffs in determination of taxable income, which affects cash flow req'd to settle tax obligations
Non US Tax Practices:

Separate entity approach
Govt taxes each taxable entity when it earns income
Non US Tax Practices:

Integrated system
Avoids double taxation of corporate income through split tax rates or tax credits