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Case 1-1 Besserbrau AG
Discuss the various international accounting issues confronted by Besserbrau AG.
1. Foreign Direct Investment (FDI)
With all of the rapid growth and expansion into China, Besserbrau AG must account for FDI. In order to do this they must adapt their accounting standards to meet the requirements in China. They will need to convert profits made by their subsidiary, BB Pijio from Chinese GAAP to German GAAP. Then it will be important for them be able to translate the profits between the two currencies and more importantly the overall performance of BB Pijio. With FDI in China, Besserbrau AG will be taxed by both the German government and Chinese government on income earned. The goal here is to minimize the total amount of taxes incurred so they are able to maximize after tax cash flows. It will be important for Besserbrau to avoid double taxation. Many countries provide relief through a credit for taxes that may have already been paid to the foreign government.

2. Sales to Foreign Customers
Besserbrau AG exports their products to China. So the problem that arises is that both countries have a different currency. To account for their export sales, the Chinese Yuan sale and receivable must be translated into German Euros.

3. Hedges of Foreign Exchange Risk
A way Besserbrau AG could reduce their exposure to foreign exchange risk would be to set the requirement that all foreign customers must pay for products in Euros. Another way is by purchasing foreign currency giving them the option to sell it a predetermined exchange rate.

4. Cross-listing on Foreign Stock Exchanges
As the case mentions, Besserbrau AG negotiated a listing on the London Stock Exchange to help finance construction of their new facility. As a result of this listing, they must stay in compliance with and follow the regulations pertaining to the London Stock

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