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18 Cards in this Set
- Front
- Back
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Development of Accounting Standards
Key Users of Financial Info |
Customers
Govt Public Investors Lenders Employees Suppliers |
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Development of Accounting Standards
FASB |
Financial Accounting Standards Board
private sector body that establishes acctg standards in the US |
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Development of Accounting Standards
GAAP |
Generally Accepted Accounting Principles
Established in each country that must be followed by companies when generating fin'l stmts |
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Development of Accounting Standards
CFO |
Chief Financial Officer
Financial mgr of comp; responsible for procuring and managing comp's fin'l resources |
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Differences in Accounting among Culture
More Disclosure --> Less Disclosure |
Anglo Saxon
Nordic Asian colonial African Developed Latin Japan Germanic Less Developed Latin |
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Differences in Accounting among Culture
Optimistic --> Conservative |
Anglo Saxon
Nordic Asian colonial African More developed Latin Japan Germanic Less developed Latin |
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Translation
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process of restating foreign currency fin'l stmts
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functional currency
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currency of the primary economic environment in which entity operates
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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 |
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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 |
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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 |
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Transfer Price
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price on g/s one member of a corporate family sells to another
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arm's length price
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price btw two companies that do not have any ownership interest in each other
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Reasons for transfer prices
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diffs in taxation
competitive reasons restrictions on currency flows |
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Non US Tax Practices:
Problems arise from |
Lack of familiarity w/laws
Loose enforcement |
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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
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Non US Tax Practices:
Separate entity approach |
Govt taxes each taxable entity when it earns income
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Non US Tax Practices:
Integrated system |
Avoids double taxation of corporate income through split tax rates or tax credits
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