Outsourcing And International Business Analysis

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Outsourcing and offshoring practices present trends and challenges to global businesses. Outsourcing involves a business subcontracting a production of their industry to a third party; whereas, offshoring involves the transferring of an organizational function to a third party (Gasper et al., 2014). Outsourcing rose in businesses due to financial performance. About 70 percent of 250 CFOs and CIOs believed that outsourcing increased their financial performance (Gobble, 2013). Pharmaceutical companies look for Asian firms to assist them in reducing drug development cost. Some companies such as P&G outsourced in search for product ideas. Outsourcing benefited the businesses by reducing costs, speed development times, and getting the best product …show more content…
The IFRS is a set of international accounting standards that state how specific types of transactions should be reported in a financial statement (Gasper et al., 2014). IFRS are intended to deliver a single set of GAAP that can be used throughout globe by businesses. The main objectives to provide these reports include: increasing organization of accounting principles and disclosure to meet the needs of global market, providing an financial basis for underdeveloped industrialized countries to follow as the accounting profession arises, and increasing the compatibility of domestic and international accounting requirements (Gasper et al., 2014). Investors and multinational companies will benefit from these IFRS financial reports that companies use. These statements are aimed to reflect the needs of the professional and business communities globally (Gasper et al., 2014). In other advantages, the statements will enhance comparability from one firm to another …show more content…
Transactions risk occurs from short-term changes in exchange rates that affect operating costs and revenue of businesses (Gasper et al., 2014). Transactions risk affects business that export goods and business that import goods. For example, consider that a firm pays for its labor and material in U.S. dollars and sells its product in Europe. If the euro decreases in value to the dollar, the firm will experience no chance in dollar-based operating costs, but its dollar revenue would decrease (Gasper et al., 2014). Therefore, the firm would be making little or no profit. Translation risks associates with short-term effects of exchange movements on consolidation accounting statements of a firm (Gasper et al., 2014). Translation risk can affect businesses reporting their accounting information with operations overseas. Multinational corporations are required to report in their financial statements the financial performance of all their operations overseas (Gasper et al., 2014). Accounting values can be affected by the change in currency rates over time. For example, if a total assets of a firm increases from $100 million to $110 million in one year, this 10% increase in can change over time (Gasper et al., 2014). If the assets were in euros the dollar value would

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