Southern New Hampshire University
Globalization has been an ever growing factor and therefore there are serious issues that govern the accounting systems of a particular country. The factors are based on culture of a particular society.
The environmental issues that may have an impact on the diversity will be tax law. This is set by the state since it is where it generates money that it will use to run its affairs. The law will therefore be set so as to enable the state to collect sufficient revenues. The political system plays a crucial role since it is what dictates how the polices of country are going to be formulated. The economic history of a country will determine the method of accounting that is going to be used. For instances countries that were colonized by the Britain’s will tend to use the same concept being used in Britain
Hofstede’s major research was traditionally meant to be used in cross-cultural psychology it has however been drawn upon by researchers and consultants in many fields such as international business and communication. The theory has been applied in several fields as a model for research, mainly in cross-cultural psychology, cross-cultural communication and international management.
Potential issues on business
Accounting Standards (Difference between IFRS and GAAP)
IFRS does not allow the accounting method of inventory where the last in, first out method is used, whereas the GAAP can either use the First in, first out or even the Last In, first out method, this is done so as to carry out an estimation of the inventory.
Intangible assets that have been acquired through GAAP are recognized through a fair value, whereas, the IFRS only recognizes assets that have future economic value and has a measured reliability.
the provisions of writing down an inventory under the GAAP, I that if an inventory has been written down, then under no circumstance can it be reversed while the IFRS provides that an inventory which had been written down can be reversed I future, this will only occur when laid down criteria have been achieved.
The IFRS is considered to be principle based accounting standard whereas on the other hand GAAP is considered to be rule-based
IFRS is able to effectively represent the economic factors of a transaction compared to GAAP.
On definition of an asset the IFRS looks at it as a resource from which economic benefit will arise from in future to the company. This therefore odes not under look the value of an asset but rather it future benefit that will be realized by the company. This therefore, makes this framework important since it sees the business as a tool of generating income through the existing assets that the business possesses.
With regards to disclosure, the GAAP provides that companies should disclose the information that pertains to their accounting choices and expenses in footnotes. Whereas under IFRS it is not clear on how the disclosure should be made.
Disclosure is also important because it will also the company to assess itself. It will also provide an assessment to be used by finical intuitions when the company is looking for finances to expand its businesses.
the standards convergence of the U.S. GAAP together with the IFRS largely affects corporate management, investors, stock markets, accounting professionals and accounting standards setters. This therefore has the impact of affecting the international standards of accounting. It will be hard to formulate a reporting methodology that will able to work effectively for the convergence this sis because one I based on rules whereas the other one is based on principles.
International financial statement Analysis will provide a more updated detail, which will be very crucial in the assessment of a company’s performance and its position financially. This will be regardless of the of the country in which the company is based. It therefore provides international investors with insight of the financial position f a company and acts as guide which can be used by investors.
International Business Practice:
It is therefore important to note that the economic exposure focuses on changes in exchange rates which are unpredictable and therefore it may be impossible to predict. This is because the company makes its budget on certain exchange rates assumptions, this therefore represents the expected exchange rate that the company will be working with
Recommendation of the risks
It is therefore important for the business owners to carry out an economic awareness this will help them to mitigate the risks associated with economic exposure
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