...include foreign currency transactions and foreign operations in the financial statements of an entity and how to translate financial statements into a presentation currency. [IAS 21.1] The principal issues are which exchange rate(s) to use and how to report the effects of changes in exchange rates in the financial statements. [IAS 21.2] (IASPlus, Deloitte) Key definitions [IAS 21.8] -Functional currency: the currency of the primary economic environment in which the entity operates. (The term 'functional currency' was used in the 2003 revision of IAS 21 in place of 'measurement currency' but with essentially the same meaning.) -Presentation currency: the currency in which financial statements are presented. Exchange difference: the difference resulting from translating a given number of units of one currency into another currency at different exchange rates. -Foreign operation: a subsidiary, associate, joint venture, or branch whose activities are based in a country or currency other than that of the reporting entity. (IASPlus, Deloitte) An entity considers the following factors in determining its functional currency: (a) The currency: (i) that mainly influences sales prices for goods and services (this will often be the currency in which sales prices for its goods and services are denominated and settled); and (ii) of the country whose competitive forces and regulations mainly determine the sales prices of its goods and services. (b) the currency that mainly influences...
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...Chapter 10 Translation of foreign Currency financial statements Chapter Outline I. In today's global economy, many companies have invested in operations in foreign countries. A. In preparing consolidated financial statements on a worldwide basis, the foreign currency accounts prepared by foreign operations must be restated into the parent company's reporting currency. B. There are two major issues related to the translation of foreign currency financial statements. 1. Which method should be used? 2. How should the resulting translation adjustment be reported on the consolidated financial statements? C. Translation methods differ on the basis of which accounts are translated at the current exchange rate and which are translated at a historical exchange rate. Translating accounts at the current exchange rate creates a translation adjustment. D. Historically, accountants have experimented with a number of different translation methods. The dominant methods currently in use are the temporal method and the current rate method. E. Translation adjustments can be either (1) reported as a gain or loss in income or (2) deferred in the stockholders' equity section of the balance sheet. II. The primary objective of the temporal method is to maintain the underlying valuation method used by the foreign entity to account for its assets and liabilities. A. Assets and liabilities carried at current or future value are translated at the current...
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...Chapter 8 Translation of foreign Currency financial statements Chapter Outline I. In today's global economy, many companies have invested in operations in foreign countries. A. In preparing consolidated financial statements on a worldwide basis, the foreign currency accounts prepared by foreign operations must be restated into the parent company's reporting currency. B. There are two major issues related to the translation of foreign currency financial statements. 1. Which method should be used? 2. How should the resulting translation adjustment be reported on the consolidated financial statements? C. Translation methods differ on the basis of which accounts are translated at the current exchange rate and which are translated at a historical exchange rate. Translating accounts at the current exchange rate creates a translation adjustment. D. Historically, accountants have experimented with a number of different translation methods. The dominant methods currently in use are the temporal method and the current rate method. E. Translation adjustments can be either (1) reported as a gain or loss in income or (2) deferred in the stockholders' equity section of the balance sheet. II. The primary objective of the temporal method is to maintain the underlying valuation method used by the foreign entity to account for its assets and liabilities. A. Assets and liabilities carried at current or future value are translated at the current exchange...
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...When the implied value exceeds the aggregate fair values of identifiable net assets, the residual difference is accounted for as goodwill. Long-term debt and other obligations of an acquired company should be valued for consolidation purposes at their fair value. On January 1, 2010, Lester Company purchased 70% of Stork Corporation's $5 par common stock for $600,000. The book value of Stork net assets was $640,000 at that time. The fair value of Stork's identifiable net assets were the same as their book value except for equipment that was $40,000 in excess of the book value. In the January 1, 2010, consolidated balance sheet, goodwill would be reported at $177,143. When the value implied by the purchase price of a subsidiary is in excess of the fair value of identifiable net assets, the workpaper entry to allocate the difference between implied and book value includes a 1. debit to Difference Between Implied and Book Value. 2. credit to Excess of Implied over Fair Value. 3. credit to Difference Between Implied and Book Value. c. 3 If the fair value of the subsidiary's identifiable net assets exceeds both the book value and the value implied by the purchase price, the workpaper entry to eliminate the investment account debits Difference Between Implied and Book Value. The entry to amortize the amount of difference between implied and book value allocated to an unspecified intangible is recorded 1. on the subsidiary's books...
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...Page 1 of 20 IEN Exam 2 Table of contents: IEN : International entry Strategies ERP Risk management Page 2. LAW: CISG 3 IPL Problems INCOTERMS 2000 Page 7. Marketing 4: Perception, Motivation and learning Attitudes, personality and lifestyle Group influence and opinion leadership Page 10. Simon Roland Hermans Page 2 of 20 International entry strategies Market entry strategy chapter 9 Hollensen Types of entry modes are: Export Intermediate Hierarchical Rules for selection: Naïve rule Pragmatic rule Strategy rule Factors that affect foreign market entries: Internal factors Desired mode characteristics Transaction specific factors External factors Internal factors are: Product Experience Size Desired mode characteristics: Risk averse Control Flexibility Transaction specific factors affecting: Tacit nature of know how Opportunistic behavior vs transaction costs External factors influencing the strategy are: Sociocultural distance Country risk/demand uncertainty Market size /growth Simon Roland Hermans Page 3 of 20 Direct/indirect trade barriers and regulations Intensity of competition Number of intermediaries Major types of exporting: Indirect export Direct export Cooperative export Indirect export modes: Sale is like a domestic Most appropriate for firms with limited expansion objectives Indirect entry mode: Export buying agent Broker...
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...US GAAP vs. IFRS The basics March 2010 Table of contents 2 5 7 8 11 13 14 16 18 20 26 28 31 33 35 38 40 42 43 44 46 47 Introduction Financial statement presentation Interim financial reporting Consolidations, joint venture accounting and equity method investees Business combinations Inventory Long-lived assets Intangible assets Impairment of long-lived assets, goodwill and intangible assets Financial instruments Foreign currency matters Leases Income taxes Provisions and contingencies Revenue recognition Share-based payments Employee benefits other than share-based payments Earnings per share Segment reporting Subsequent events Related parties Appendix — The evolution of IFRS Introduction It is not surprising that many people who follow the development of worldwide accounting standards today might be confused. Convergence is a high priority on the agendas of both the US Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) — and “convergence” is a term that suggests an elimination or coming together of differences. Yet much is still made of the many differences that exist between US GAAP as promulgated by the FASB and International Financial Reporting Standards (IFRS) as promulgated by the IASB, suggesting that the two GAAPs continue to speak languages that are worlds apart. This apparent contradiction has prompted many to ask just how different are the two sets of standards? And where differences exist, why do they exist...
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...Abstract As the world continues to expand into a global marketplace, the necessity for standardizing financial reports has become prominent. Companies with branches in multiple countries are currently reporting their financial statements based on the criteria for that country. For example, a European based organization is reporting under the IFRS standard while their branch in the United States is using US-GAAP. While the differences do not outweigh the similarities, GAAP and IFRS standards have caused some concerns in financial reporting. These concerns have led to the evaluation of these two reporting standards and the discussion on whether to move IFRS worldwide. This paper will outline a few of the differences between GAAP and IFRS as well as review the discussion of standardized reporting using IFRS. Introduction Historically, accounting and reporting standards in the United States have been set by the AICPA (American Institute of Certified Public Accounts) as laid out by the regulations set by the Securities and Exchange Commission (SEC). In 1973, the Financial Accounting Standards Board (FASB) was developed by the AICPA as a council for establishing standards for reporting for all United States companies. Under FASB, GAAP was reorganized into approximately 90 accounting standards offering concise methods to follow for financial reporting. This not only allowed for ease of access when reading US financials statements, but also allowed for comparison of documentation...
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...International Business & Economics Research Journal Volume 3, Number 3 Effects of Exchange Rates On International Transfer Pricing Decisions Canri Chan (E-mail: canri.chan@miis.edu), Monterey Institute of International Studies Steven P. Landry (E-mail: steve.landry@miis.edu), Monterey Institute of International Studies Terrance Jalbert (E-mail: jalbert@hawaii.edu), University of Hawaii at Hilo Abstract Events leading to the passing of the Sarbanes-Oxley Act have led to increased concern with and scrutiny of potential management manipulation of financial statements. From an agency theory perspective, managers have incentives to manipulate organizational methods and choices in order to produce financial statements that those managers believe will maximize their incentive compensation. Transfer pricing represents one possible choice that managers can manipulate. This paper investigates whether exchange rates affect transfer pricing particularly as it relates to maximizing overall corporate profitability. The effects of taxes and government regulations have been explored in considerable depth in the transfer pricing literature. However, while transfer prices should also be affected by exchange rates in predictable ways, this variable has received comparably little attention in the literature. Inclusion of exchange rates in an analysis of transfer pricing and corporate profitability presents an opportunity to add to the literature. We conducted an experiment to examine how...
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...The financial accounting standards board (FASB) has developed a research tool to assist people in finding the correct guidelines and generally accepted accounting principles (GAAP) that apply to companies not ran by the government. [ (multiple, FASB Accounting Standards Codification, 2009) ] The Codification is to give up to date releases of standard-setting activity, ensure accurate codified material, and simply access of all authoritative US GAAP into one centralized location. The Codification does not have standards for state and local governments just standards set by the FASB, EIT, APB and AICPA to name a few standard setters. The SEC is included in the Codification standards, but just the technical information and not the entire rules, regulations or interpretive releases. Grandfathered content is excluded from the Codification. This would include information about pensions, business combinations and income taxes. The Codification is broken down into five main sections with multiple subsections. These sections are topics, subtopics, section, paragraphs, and subparagraphs. This use of a well organized approach to sorting and combining accounting standards and literature has made the Codification a primary resource for entities and other users alike. Comprehensive income is defined as “the change in equity (net assets) of a business entity during a period from transactions and other events and circumstances from nonowner sources. It includes all changes in equity during...
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...Introduction Transfer pricing has long been an important cost management topic for transactions among domestic subsidiaries. The concern is to promote actions and behaviors that seek to maximize the corporate performance and profitability rather than the subsidiary performance. Unlike transfer pricing between two divisions of the same company, this transactions between subsidiaries cross international boundaries, involve tax issues concerning the determination, analysis and adjustment of prices between this related entities. I. Transfer price 1. Transfer price definition The transfer prices are the prices at which an enterprise transfers physical goods and intangible property or provides services to associate enterprises. They are the prices charged for any transaction between affiliates entities. This transfer may be commercial, financial or technical. According to the OECD, two companies are associated if one of the enterprises participates directly or indirectly in the governance, management, control or the capital of the other or if the same persons participate directly or indirectly to the management, control or the capital of both enterprises. They can be defined simply as transactions prices between companies of the same group and resident in different states. This type of transactions involves intra-group transactions crossing borders. Example: Within a MNE group, a subsidiary A established in France sells computers to another subsidiary B established...
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...NIKE, INC. ANNUAL REPORT ON FORM 10-K Table of Contents Page PART I ITEM 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sales and Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United States Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . International Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....
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....4 Interim financial reporting ................................................6 Consolidation, joint venture accounting and equity method investees .............................................................7 Business combinations ...................................................11 Inventory .......................................................................13 Long-lived assets ...........................................................14 Intangible assets ............................................................16 Impairment of long-lived assets, goodwill and intangible assets ............................................................18 Financial instruments .....................................................20 Foreign currency matters ...............................................28 Leases ...........................................................................30 Income taxes..................................................................33 Provisions and contingencies ..........................................35 Revenue recognition.......................................................37 Share-based payments ...................................................39 Employee benefits other than share-based payments ......41 Earnings per share .........................................................44 Segment reporting .........................................................45 Subsequent events .........................................................46 Related...
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...Interim financial reporting................................................ 6 Consolidation, joint venture accounting and equity method investees/associates ........................................... 7 Business combinations................................................... 13 Inventory ....................................................................... 15 Long-lived assets ........................................................... 16 Intangible assets............................................................ 18 Impairment of long-lived assets, goodwill and intangible assets ............................................................ 20 Financial instruments..................................................... 23 Foreign currency matters .............................................. 30 Leases ........................................................................... 32 Income taxes ................................................................. 35 Provisions and contingencies ......................................... 37 Revenue recognition ...................................................... 39 Share-based payments................................................... 41 Employee benefits other than share-based payments ..... 43 Earnings per share ......................................................... 45 Segment reporting ......................................................... 46 Subsequent events ..................................................
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...of the system development after the system has been in production for a period of time (normally 6 months). The objectives are to determine if the system does what it is designed to do: Does it support the user as required in an effective and efficient manner? The review should assess how successful the system is in terms of functionality, performance, and cost versus benefits, as well as assess the effectiveness of the life-cycle development activities that produced the system. The review results can be used to strengthen the system as well as system development procedures. The review is scheduled to follow the release of a system or system revision by an appropriate amount of time to allow determination of the effectiveness of the system. A representative from the functional development group or other member of the major user organization participates in the review. The System Proponent ensures that all documentation and all personnel needed to participate in the review are accessible. The reviewer and an assigned team collect the information needed for the Post-Implementation Review by interviewing end users and their managers, system administrators, and computer operations personnel. The report is then prepared and provided to the user organization that requested it and the information systems organization, which may jointly use the findings to initiate other actions. The Post-Implementation Review is a free-form report, and not all sections are relevant or necessary...
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...The Consolidated Financial Statements are prepared in accordance with Inter national Financial Reporting Standards (IFRS) as adopted by the European Union (EU), the supplementary requirements of German law pursuant to Section 315a (1) of the German Commercial Code (Handels esetzbuch) and full IFRS as g issued by the Inter ational Accounting n Standards Board (IASB). They give a true and fair view of the net assets, financial position and results of operations of the group in accordance with these requirements. WWW.SIEMENS.COM/AR/CONSOLIDATED-F INANCIAL-STATEMENTS 246 248 D.1 249 D.2 250 D.3 251 D.4 252 D.5 254 D.6 Consolidated Statements of Income Consolidated Statements of omprehensive Income C Consolidated Statements of Financial Position Consolidated Statements of Cash Flows Consolidated Statements of hanges in Equity C Notes to Consolidated Financial Statements 254 NOTE 1 – Basis of presentation 254 NOTE 2 – S ummary of significant accounting policies 262 NOTE 3 – Critical accounting estimates 264 NOTE 4 – A cquisitions, dispositions and discontinued operations 273 NOTE 13 – Inventories 273 NOTE 14 – Other current assets 274 NOTE 15 – Goodwill 275 NOTE 16 – Other intangible assets 276 NOTE 17 – Property, plant and equipment 278 NOTE 18 – Other financial assets 278 NOTE 19 – Other current financial...
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