Nama : Nurbani Ismei
Daryani
Kelas : 4EB12
NPM : 20208922
7. INTERNATIONAL ACCOUNTING
HARMONIZATION
Understand the differences in the harmonization and
standardization policies in accounting standards.
Harmonization is a process to improve the compatibility (suitability) accounting practices by setting limits on how large these practices may vary. Harmonization of standards will be free of conflicts of logic and can improve the comparability (comparability) of financial information from different countries.
Harmonization is a process to improve the compatibility (suitability) accounting practices by setting limits on how large these practices may vary. Harmonization of standards will be free of conflicts of logic and can improve the comparability (comparability) of financial information from different countries.
Efforts to harmonize accounting standards have been
started long before the establishment of the International Accounting Standards
Committee in 1973. More
recently, a number of companies seeking to raise capital in markets outside the
country of origin and the investors who seek to diversify their investments
internationally face increasing problems as a result of national differences in
terms of accounting, disclosure, and audit.
Sometimes people use the term harmonization and
standardization as if both have the same meaning. However,
contrary to the harmonization, standardization generally means the
determination of a group of rigid rules and narrow and may even be the
application of a single standard or rule in any situation. Standardization
does not accommodate the differences between countries, and therefore more
difficult to implementasion internationally. Harmonization
is much more flexible and open, do not use one size fits all approach, but to
accommodate some of the differences and have experienced great progress
internationally in recent years.
DIFFERENCES BETWEEN HARMONIZATION AND STANDARDIZATION
Harmonization
- The process to improve the compatibility (kesesuian) accounting practices to determine the limits of how much these practices may vary
- Not using a one size fits all
- But accommodates be some agreement and has experienced great progress internationally in recent years
- Hamonisasi much more flexible and open
Standardization
- Determination of a group of rigid rules and narrow
- Application of a single standard or rule in any situation
- Standards do not accommodate the differences between countries
- More difficult for the international implementasion
Include the harmonization of accounting harmonization
1. Accounting standards (which relates to the measurement
and disclosure
2. Disclosures made by public companies associated with the securities offering and listing on the stock exchange, and
3. Auditing standards
2. Disclosures made by public companies associated with the securities offering and listing on the stock exchange, and
3. Auditing standards
Advantage of international harmonization
• Languages
Those who use English as their mother may feel fortunate that English be the language that is widely used around the world.
• Harmonization of taxation's social security system
• Languages
Those who use English as their mother may feel fortunate that English be the language that is widely used around the world.
• Harmonization of taxation's social security system
Profits. Businesses
will experience great benefits cukuo in planning, systems and training costs,
and so of harmonization.
Losses. Taxation and social security systems have a strong influence on economic efficiency. Different systems have different effects. The ability to compare how the different approaches in different countries led to the countries capable of increasing their respective systems. Countries competing and competition forced them to adopt an efficient system through the operation of such market power. Approval of the tax system would be like establishing a cartel and would eliminate the potential benefits of interstate competition.
PROS AND CONS HARMONIZATION OF INTERNATIONAL ACCOUNTING STANDARDS
Proponents say that the harmonization of international harmonization (even standardized) has many advantages. Sir Bryan Carsberg, former Secretary General of the IASC, written sometime in September 2000:
Losses. Taxation and social security systems have a strong influence on economic efficiency. Different systems have different effects. The ability to compare how the different approaches in different countries led to the countries capable of increasing their respective systems. Countries competing and competition forced them to adopt an efficient system through the operation of such market power. Approval of the tax system would be like establishing a cartel and would eliminate the potential benefits of interstate competition.
PROS AND CONS HARMONIZATION OF INTERNATIONAL ACCOUNTING STANDARDS
Proponents say that the harmonization of international harmonization (even standardized) has many advantages. Sir Bryan Carsberg, former Secretary General of the IASC, written sometime in September 2000:
Cautious approach to analyze the desire for international
harmonization shows that the costs and benefits vary from case to case. Those
who use English as their mother may feel fortunate that English be the language
that is widely used around the world. However,
although it can be done, we can not obtain an agreement that the British or
other common language should be used to replace the 6800 or so languages currently
used in the world. We
recognize that language is the vehicle of an irreplaceable cultural and
distinct culture that removal would cause huge losses in the field of
literature and other cultural expressions.
What about the harmonization of taxation and social
security systems? Businesses
will have considerable benefits in planning, systems and training costs, and so
of harmonization. But
this case shows us that the harmonization of other losses.
Taxation and social security systems have a strong
influence on economic efficiency. Different systems
have different effects. The
ability to compare how the different approaches in different countries led to
the countries capable of increasing their respective systems. Countries
competing and competition forced them to adopt an efficient system through the
operation of such market power. Approval
of the tax system would be like establishing a cartel and would eliminate the
potential benefits of competition between countries.
A recent article also supports the existence of a
"global GAAP" harmonized. Some of the benefits
mentioned include:
1. Into global capital markets and investment capital can move across the world without any fuss. High-quality financial reporting standards that are used consistently throughout the world will improve the efficiency of capital allocation.
2. Investors can make better investment decisions; portfolio will be more diverse and less financial risk.
3. Companies can improve decision making strategies in the areas of mergers and acquisitions
4. The best ideas arising from the creation of standards activities can be deployed in developing high-quality global standard.
1. Into global capital markets and investment capital can move across the world without any fuss. High-quality financial reporting standards that are used consistently throughout the world will improve the efficiency of capital allocation.
2. Investors can make better investment decisions; portfolio will be more diverse and less financial risk.
3. Companies can improve decision making strategies in the areas of mergers and acquisitions
4. The best ideas arising from the creation of standards activities can be deployed in developing high-quality global standard.
JOINT RECONCILIATION AND RECOGNITION (RECIPROCITY)
DIFFERENCES ACCOUNTING STANDARDS
Two approaches are proposed as a solution to overcome the problems associated with cross-border financial report:
(1) Reconciliation
(2) Recognition of joint (referred to as the "payoff" / reciprocity)
Two approaches are proposed as a solution to overcome the problems associated with cross-border financial report:
(1) Reconciliation
(2) Recognition of joint (referred to as the "payoff" / reciprocity)
Reconciliation lower cost when compared with the full
financial statements based on different accounting principles. But
only provides a summary, not a complete picture of the company.
Mutual recognition occurs when the regulator outside the country of origin to receive the financial statements of foreign companies which are based on the principles of country of origin. Payoff does not increase the cross-country comparisons of financial statements and can lead to "unequal playing field" which allows foreign companies to apply less stringent standards than those applied to domestic firms.
Mutual recognition occurs when the regulator outside the country of origin to receive the financial statements of foreign companies which are based on the principles of country of origin. Payoff does not increase the cross-country comparisons of financial statements and can lead to "unequal playing field" which allows foreign companies to apply less stringent standards than those applied to domestic firms.
The debate over harmonization may never be fully
resolved. Most
companies are voluntarily adopting International Financial Reporting Standards
(International Financial Reporting Standards-IFRS). And
many countries have adopted IFRS as a whole.
International accounting standards are used as a result of:
(A) international agreements or political;
(B) Compliance is voluntary (or driven professionally);
(C) The decision by the national accounting standards-making body.
International accounting standards are used as a result of:
(A) international agreements or political;
(B) Compliance is voluntary (or driven professionally);
(C) The decision by the national accounting standards-making body.
Efforts of other international standards in accounting is
essentially voluntary. Those
standards will be accepted or not depends on the people who use the accounting
standards. Current
international standards and national standards are not the same, do not be a
problem, but when these two different standards, national standards should be
the first reference (to have the advantage).
PROMOTER ORGANIZATION OF HARMONISATION OF INTERNATIONAL ACCOUNTING STANDARDS
International Organizations That Promote Harmonization and become a major player in the international accounting standard setting and in promoting international harmonization of accounting:
1) International Accounting Standard Board (IASB)
2) The Commission of the European Union (EU)
3) The International Organization of the Capital Market Commission (IOSCO)
4) The International Federation of Accountants (IFAC)
5) intergovernmental expert working group of the United Nations on the International Standard Accounting and Reporting, part of the United Nations conference on trade and development.
6) Working Group in the Accounting Standard Organisation of Economic cooperation and Development (OECD working group)
PROMOTER ORGANIZATION OF HARMONISATION OF INTERNATIONAL ACCOUNTING STANDARDS
International Organizations That Promote Harmonization and become a major player in the international accounting standard setting and in promoting international harmonization of accounting:
1) International Accounting Standard Board (IASB)
2) The Commission of the European Union (EU)
3) The International Organization of the Capital Market Commission (IOSCO)
4) The International Federation of Accountants (IFAC)
5) intergovernmental expert working group of the United Nations on the International Standard Accounting and Reporting, part of the United Nations conference on trade and development.
6) Working Group in the Accounting Standard Organisation of Economic cooperation and Development (OECD working group)
Also important is the International Federation of Stock
Exchanges (FIBV) trade organization for securities and derivatives markets are
organized around the world. One
goal is to establish standards FIBV harmony to business processes in
cross-border securities trading, including cross-border public offerings.
DESCRIBE A NEW APPROACH TO THE EUROPEAN UNION AND RELATE IT TO THE EUROPEAN FINANCIAL MARKET INTEGRATION.
The European Union (EU)
Treaty of Rome established the EU in 1957, with the aim to harmonize the legal and economic systems of its member countries. The EU goal is to Achieve integration of European financial markets.
International Federation of Accountants (IFAC)
IFAC is a world-class organization has 159 member That Organizations in 118 countries, representing more than 2.5 Million Accountants. Founded in 1957, IFAC's mission is to support the development of the Accountancy profession with harmonized standards so can Accountants That Provide consistently high quality services in the public interest.
The Intergovernmental Working Group of the United Nations expert in the International Standard for Accounting and Reporting Isar
Isar was formed in 1992 and is the only inter-governmental working group to discuss accounting and auditing at the corporate level. Isar is an early supporter of the environment reporting and a number of recent initiatives focused on corporate governance and accounting for small and medium sized companies.
Organization for Economic Cooperation and Development (OECD)
OECD is an international organization of industrialized countries developed market-oriented economy. With a membership consisting of the advanced industrial countries are larger, OECD opponents Often Becomes tanggh to other agencies (Such as the United Nations or the International Confederation of Free Trade Union) the which has a Tendency to perform acts Contrary to the interests of member
Source :
DESCRIBE A NEW APPROACH TO THE EUROPEAN UNION AND RELATE IT TO THE EUROPEAN FINANCIAL MARKET INTEGRATION.
The European Union (EU)
Treaty of Rome established the EU in 1957, with the aim to harmonize the legal and economic systems of its member countries. The EU goal is to Achieve integration of European financial markets.
International Federation of Accountants (IFAC)
IFAC is a world-class organization has 159 member That Organizations in 118 countries, representing more than 2.5 Million Accountants. Founded in 1957, IFAC's mission is to support the development of the Accountancy profession with harmonized standards so can Accountants That Provide consistently high quality services in the public interest.
The Intergovernmental Working Group of the United Nations expert in the International Standard for Accounting and Reporting Isar
Isar was formed in 1992 and is the only inter-governmental working group to discuss accounting and auditing at the corporate level. Isar is an early supporter of the environment reporting and a number of recent initiatives focused on corporate governance and accounting for small and medium sized companies.
Organization for Economic Cooperation and Development (OECD)
OECD is an international organization of industrialized countries developed market-oriented economy. With a membership consisting of the advanced industrial countries are larger, OECD opponents Often Becomes tanggh to other agencies (Such as the United Nations or the International Confederation of Free Trade Union) the which has a Tendency to perform acts Contrary to the interests of member
Source :
1.
http://muhamadramdani17.wordpress.com/2011/02/27/harmonisasi-akuntansi-internasional/
2. http://alindamartha.blogspot.com/2011/02/harmonisasi-standar-akuntansi.html
2. http://alindamartha.blogspot.com/2011/02/harmonisasi-standar-akuntansi.html
8. INTERNATIONAL FINANCIAL
ANALYSIS
UNDERSTANDING THE DIFFICULTIES OF INTERNATIONAL BUSINESS STRATEGY ANALYSIS AND BASIC STRATEGY FOR THE COLLECTION OF INFORMATION
Analysis of business strategy is an important first step in the analysis of financial statements. This analysis provides a qualitative understanding of the company and its competitors related to the economic environment. By identifying the drivers of profit and risk factor is the main business, business strategy or business analysis will help the analyst to make a realistic prediction.
UNDERSTANDING THE DIFFICULTIES OF INTERNATIONAL BUSINESS STRATEGY ANALYSIS AND BASIC STRATEGY FOR THE COLLECTION OF INFORMATION
Analysis of business strategy is an important first step in the analysis of financial statements. This analysis provides a qualitative understanding of the company and its competitors related to the economic environment. By identifying the drivers of profit and risk factor is the main business, business strategy or business analysis will help the analyst to make a realistic prediction.
The difficulties of analysis of international business
strategy:
a. Availability of information
Analysis of business strategy particularly difficult in some countries due to lack andalnya information about macroeconomic developments. Obtain information about the industry is also very difficult in many countries and the number and quality of information companies are very different. Availability of specific information about the company is very low in developing countries. Lately, many large companies that keep records and raise capital in foreign markets and have expanded their disclosure voluntarily switch to accounting principles that are recognized globally as an international financial reporting standards.
b. Recommendations for analysis
Data limitations make the effort to analyze the business strategy by using traditional research methods to be difficult. Often frequent trips to study the local business climate and real bagaimanan industry and company operations, particularly in emerging market countries.
EXPLAINING STEPS ACCOUNTING ANALYSIS
The purpose of accounting analysis is to analyze the extent to which the company reported results reflect the economic reality. Analysts need to evaluate kebujakan and accounting estimates, and analyze the nature and flexibility lungkup accounting of a company. The managers of the company is allowed to make a lot of considerations related to the accounting, because they know more about the financial condition and operations of their companies. Reported earnings is often used as a basis for evaluating the performance of their management.
Step-langah in doing evalusai accounting quality of a company:
a) Identify the main accounting policies
b) Analyze the flexibility of accounting
c) Evaluate the accounting strategy
d) Evaluate the quality of disclosure
e) Indentifikasikanlah potential problems
f) Make adjustments for accounting distortions
UNDERSTANDING THE EFFECT OF THE ACCOUNTING ANALYSIS OF THE ACCOUNTING BETWEEN COUNTRIES AND THE DIFFICULTY IN OBTAINING THE NECESSARY INFORMATION
a. Availability of information
Analysis of business strategy particularly difficult in some countries due to lack andalnya information about macroeconomic developments. Obtain information about the industry is also very difficult in many countries and the number and quality of information companies are very different. Availability of specific information about the company is very low in developing countries. Lately, many large companies that keep records and raise capital in foreign markets and have expanded their disclosure voluntarily switch to accounting principles that are recognized globally as an international financial reporting standards.
b. Recommendations for analysis
Data limitations make the effort to analyze the business strategy by using traditional research methods to be difficult. Often frequent trips to study the local business climate and real bagaimanan industry and company operations, particularly in emerging market countries.
EXPLAINING STEPS ACCOUNTING ANALYSIS
The purpose of accounting analysis is to analyze the extent to which the company reported results reflect the economic reality. Analysts need to evaluate kebujakan and accounting estimates, and analyze the nature and flexibility lungkup accounting of a company. The managers of the company is allowed to make a lot of considerations related to the accounting, because they know more about the financial condition and operations of their companies. Reported earnings is often used as a basis for evaluating the performance of their management.
Step-langah in doing evalusai accounting quality of a company:
a) Identify the main accounting policies
b) Analyze the flexibility of accounting
c) Evaluate the accounting strategy
d) Evaluate the quality of disclosure
e) Indentifikasikanlah potential problems
f) Make adjustments for accounting distortions
UNDERSTANDING THE EFFECT OF THE ACCOUNTING ANALYSIS OF THE ACCOUNTING BETWEEN COUNTRIES AND THE DIFFICULTY IN OBTAINING THE NECESSARY INFORMATION
Analysts need to evaluate policies and accounting estimates, and analyze the nature and scope of a company's accounting flexibility. Effect on the measurement of quality of accounting, and auditing are very dramatic.
In obtaining the data of International Accounting, there are several difficulties, among others:
a. Depreciation adjustment
Depreciation will affect profits, it is necessary to consider the age of the functions that must be decided manajemen.b assets. LIFO to FIFO inventory adjustment
Inventories should be converted in FIFOc method. Reserve
Reserves are the company's ability to pay or cover expenses for removing beban.d. Reformulation of Financial Statements
Adjustment of some of the changes after a few calculations on the points above TSB.
RECOGNIZE THE MECHANISM TO RESOLVE DIFFERENCES BETWEEN STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
SEVERAL APPROACHES CAN BE DONE AS FOLLOWS:
- Some analysts present the foreign accounting resize according to a group of internationally recognized principles or according to other, more general basis.
- Some others develop a complete understanding of accounting practices in a particular group of countries and limited their analysis to firms located in these countries.
UNDERSTAND THE DIFFICULTIES AND WEAKNESSES IN INTERNATIONAL FINANCIAL STATEMENT ANALYSIS
a. Access to information
Information about thousands of companies from around the world have been widely available in recent years. Sources of information in countless numbers up through the World Wide Web (WWW). Companies in the world today have a website and annual report are available for free of charge from various other sources.
b. Timeliness of information
Timeliness of financial statements, annual reports, reports to regulators vary in each country.
c. Barriers of language and terminology.
d. Foreign currency issues.
e. Differences in the type and format of financial statements.
UNDERSTANDING HOW TO USE THE WWW FOR INFORMATION RESEARCH COMPANY
a. The majority of companies have their own Web site and the majority use their homepage to inform the financial statements, especially financial information, namely the principal balance sheets and profit and loss. Not much, less than 40% of companies that provide additional financial information (notes to financial statements, auditors opinions and analysis of management).
b. The majority of companies only provide information or partial duplication of hard copy reports of historical information which is converted in the form of hypertext or pdf format.
c. Not many companies that really take advantage of Internet features optimally. This is evident, less than 10% of the company that delivered the information about the stock movement. In addition, although the majority of the home page displays the press release, but less than 35% is to update the information displayed.
d. The majority of companies have used technology is quite advanced. This is evidenced by the speed of displaying the information (94%), the use of JAVA applications to enhance the appearance, the use of hyperlinks and external links in home page. In addition, the majority view (interface) of the sample firms are well structured.
Source :
1.
AICPA, 1994 ‘Improving Business Reporting – A Customer Focus’ New York: Report
of the AICPA Special Committee on Financial Reporting
2. Baldwin, A.A. & Williams, S.L.M., 1999 ‘The Future of Intelligent Internet Agents in European Financial Reporting’ The European Accounting Review, Vol. 8, Iss. 2, pp. 303 - 319
3. Choi, F.D.S., Frost, C.A., & Meck, G.K. 2002 ‘International Accounting’, 4th Ed., Pearson Education Ltd.
4. Choi, Frederick D.S., and Gerhard D. Mueller, 2005., Akuntansi Internasional – Buku 1, Edisi 5., Salemba Empat, Jakarta.
5. Choi, Frederick D.S., and Gerhard D. Mueller, 2005., Akuntansi Internasional – Buku 2, Edisi 5., Salemba Empat, Jakarta.
6. Pirchegger, B. & Wagenhofer, A., 1999 ‘Financial Information on The Internet: A Survey of The Homepages of Austrian Companies’ The European Accounting Review, Vol. 8, Iss. 2, pp. 383 – 395
2. Baldwin, A.A. & Williams, S.L.M., 1999 ‘The Future of Intelligent Internet Agents in European Financial Reporting’ The European Accounting Review, Vol. 8, Iss. 2, pp. 303 - 319
3. Choi, F.D.S., Frost, C.A., & Meck, G.K. 2002 ‘International Accounting’, 4th Ed., Pearson Education Ltd.
4. Choi, Frederick D.S., and Gerhard D. Mueller, 2005., Akuntansi Internasional – Buku 1, Edisi 5., Salemba Empat, Jakarta.
5. Choi, Frederick D.S., and Gerhard D. Mueller, 2005., Akuntansi Internasional – Buku 2, Edisi 5., Salemba Empat, Jakarta.
6. Pirchegger, B. & Wagenhofer, A., 1999 ‘Financial Information on The Internet: A Survey of The Homepages of Austrian Companies’ The European Accounting Review, Vol. 8, Iss. 2, pp. 383 – 395
9. MANAGEMENT PLANNING
AND CONTROL
FOUR-DIMENSIONAL STATES IN THE MODELING BUSINESS
The latest survey found that management accountants spend more time in strategic planning issues than before. Determination of the business model of the big picture, and consists of the formulation, implementation and evaluation of long-term business plan of a company. It includes four main dimensions.
1. Identify the major factors relevant to the company's progress in the future.
2. Formulate an adequate technique to predict future developments and analyze the company's ability to adapt or take advantage of these developments.
3. Develop data sources for menditkung strategic choices.
4. Certain choices translate into a series of specific actions.
UNDERSTANDING THE DIFFERENCE BETWEEN STANDARD COST CONCEPT AND KAIZEN
Determining the standard cost system tries to minimize the variance between budgeted costs with actual costs. Kaizen Costing ynag stressed to do what is necessary to achieve the desired levels of performance in a competitive market conditions.
FOUR-DIMENSIONAL STATES IN THE MODELING BUSINESS
The latest survey found that management accountants spend more time in strategic planning issues than before. Determination of the business model of the big picture, and consists of the formulation, implementation and evaluation of long-term business plan of a company. It includes four main dimensions.
1. Identify the major factors relevant to the company's progress in the future.
2. Formulate an adequate technique to predict future developments and analyze the company's ability to adapt or take advantage of these developments.
3. Develop data sources for menditkung strategic choices.
4. Certain choices translate into a series of specific actions.
UNDERSTANDING THE DIFFERENCE BETWEEN STANDARD COST CONCEPT AND KAIZEN
Determining the standard cost system tries to minimize the variance between budgeted costs with actual costs. Kaizen Costing ynag stressed to do what is necessary to achieve the desired levels of performance in a competitive market conditions.
Returns from
these two viewpoints may differ significantly because of several things:
1. Government restrictions on repatriation of profits and capital
2. License fees, royalties and other payments are income to the parent company but is a burden for subsidiaries
3. Differences in national inflation rate
4. Changes in foreign exchange rates
5. Differences in tax
1. Government restrictions on repatriation of profits and capital
2. License fees, royalties and other payments are income to the parent company but is a burden for subsidiaries
3. Differences in national inflation rate
4. Changes in foreign exchange rates
5. Differences in tax
MEASURE ESTIMATES THE RETURN OF FOREIGN INVESTMENT
The decision to invest abroad is a very important element in the global strategy of a multinational company. Foreign direct investment generally involves a large number of modaldan prospects uncertain. Investment risk, followed by the foreign environment, complex and constantly changing. Formal planning is a must and is generally performed in a capital budgeting framework that compares the benefits and costs of the proposed investment.
The decision to invest abroad is a very important element in the global strategy of a multinational company. Foreign direct investment generally involves a large number of modaldan prospects uncertain. Investment risk, followed by the foreign environment, complex and constantly changing. Formal planning is a must and is generally performed in a capital budgeting framework that compares the benefits and costs of the proposed investment.
In the international environment, investment planning is
not as simple as that. Differences
in tax law, accounting systems, the rate of inflation, the risk of
nationalization, currency framework, market segmentation, restrictions on the
transfer of retained earnings, and differences in language and culture adds to
the complexity of elements that are rarely found in domestic environments. The
difficulty for the quantification of these data make existing problems worse.
UNDERSTANDING THE PROCESS OF CALCULATING THE CAPITAL COSTS OF MULTINATIONAL COMPANIES
UNDERSTANDING THE PROCESS OF CALCULATING THE CAPITAL COSTS OF MULTINATIONAL COMPANIES
If foreign investment is evaluated by using a discounted cash flow models, the appropriate discount rate should be developed. The theory of capital budgeting in particular using cost of capital as the level diskontonya, thus a project must generate returns at least equal to the cost of capital in order to be acceptable. The level of the benchmark (hurdle rate) is related to the proportion of debt and equity in the company's financial structure as follows.
It is not easy to measure the cost of capital of a
multinational company. The cost of
equity capital can be calculated in several ways. One
popular method that combines the expectations of return on the dividend by the
dividend growth rate expectations. Although
capital is to measure the price of the shares present, in most countries where
shares of listed multinational companies, is often quite difficult to measure
in and g. In
the first place because of the expectations.
Expected dividend depends on the company's operating cash
flow as a whole. Measuring
the cash flow is complicated by the consideration of environmental factors. Moreover
measurement of the dividend growth rate a function of expectations of future
cash flows is complicated by the exchange control and other pemerntah
restrictions in cross-border transfer of funds.
UNDERSTAND THE PROBLEMS AND COMPLEXITIES IN DESIGNING INFORMATION SYSTEMS AND FINANCIAL CONTROL OF MULTINATIONAL CORPORATIONS
UNDERSTAND THE PROBLEMS AND COMPLEXITIES IN DESIGNING INFORMATION SYSTEMS AND FINANCIAL CONTROL OF MULTINATIONAL CORPORATIONS
Management
accountants to prepare some information for the management of companies,
ranging from data collection to reporting of liquidity and operational
forecasts of the various types of expenditure weights. For each group of data
submitted by the company management should determine the relevant time period
for the report, the level of accuracy required, the frequency of reporting and
the costs and benefits of depreciation and timely delivery.
Here also the environmental factors affecting the use of information in translational dihasilakn. Reports from overseas operations multinasioanal perusaaan U.S. generally translated into an equivalent value doalr that managers at the headquarters of the U.S. to evaluate their investment in dollars.
Information Management and hyperinflation
In an environment of high inflation, financial statements prepared in accordance with FAS 52 tends to cause destorsi reality through:
a. Rate is more or less rate of income and expenses
b. Reported a gain or loss on the translation of the which is difficult, to interpret
c. Distort the intertemporal comparison of performance.
Issues in Financial Control
Financial control system is a quantitative measurement and communication systems facilitate the control melelui That:
1. Financial goals are Appropriate communication within the organization
2. Refine the criteria and standards in the performance evaluation
3. Monitor performance
4. Communicate Between the deviation of actual performance and a plan to the Responsible Party
Domestic Versus Multinational Control Systems
Numerous studies have shown That the system used by many multinational companies to control its foreign operations in many ways similar to Those used domestically. Parts of the System Generally the which is sent out a budget That includes financial controls and a Tendency to apply the same standard was developed to evaluate That the domestic operations.
Operational Budgeting
Gains and losses from foreign currency translation is not Considered at the time of surgery was evaluated in the local currency. A comparable exchange rate can be used to track the relative performance against the budget. If the combination of different exchange rates used to prepare the budget and to track performance, this will cause differences in the allocation of responsibility for exchange rate changes and lead to the possibility of different management responses. Some possibilities are as follows:
A. Budgets and tracking performance based on the initial spot rate
2. Budget at the end of the exchange rate and tracking based on the closing exchange rate
3. Budgeting based on the initial rate and tracking based on the closing exchange rate
4. Budgets and tracking performance using the exchange rate projections
5. Budget based on the exchange rate projections and tracking based on the closing exchange rate
Determinants of Strategic Cost
The concept of strategic cost determination introduced by the Japanese is the determination of cost behavior. In determining the cost of the process, the overhead is applied to the goods or services by using a routine application of overhead rates. From the standpoint of traditional cost accounting, overhead manufaktr allocated to products on the basis of causation.
Consistency
The results showed That the main purpose of performance evaluation is to Ensure profitability. However, there is potential for conflict if the performance evaluation system does not correspond to the specific nature of foreign operations may have different goals That than short-term profits. Emphasis on short-term profitability and efficiency in diverting the attention of corporate strategy and an Important manufacturing and negate the company's employees.
Performance Criteria
In an evaluation study by the International Business before, both U.S. and non-MNCs from the U.S. That states the WHO studied the most crucial financial criteria used to evaluate the performance of foreign income units are budgeted versus actual income, Followed by ROI. Which is Considered the most Important is the budgeted sales versus actual sales, return on sales, return on assets, return on investment versua actual and budgeted operating cash flow.
Issues of Measurement and Evaluation of Changes in Price in
Designer Sitem evaluation for overseas operations also have to deal with issues of accounting measurement. Repeated presentation will directly affect the measurement of Various components of the ROI and performance statistics for evaluation and performance budgeting.
Evaluation of Practice Performance: ICI
ICI divides performance measures into two categories: long-term and short term. Cash flow generated by the product and long-term ROI is a measure of the primary. With a measure of cash flow, ICI sought to determine whether a product will generate enough to pay Cash plant replacement, parts for the company's costs and generate profits sufficient to characterize realistic growth.
Effect of Foreign Currency
Economic influences fostered by exchange rate changes on performance can be seen through Greater Than That of accounting measures alone. To be Able to more fully analyze the effects of inflation and currency volatility and Strengthen Their ability to React, companies need to conduct a competitive market share analysis and the influence of changes in the currency against the costs and revenues and to competition.
Performance Standards
A company may already have some standards in a corporate environment, Such as the minimum required level of ROI That APPLIES to its own subsidiaries or to its product line, or the company may specify different levels of ROI or other reference to the child or the Integration of different product lines. These standards can be incorporated into the budget and can then be compared with the results Achieved. Performance can also be Measured intertemporal. Companies can Establish an official increase of in specific ratios or earnings. Past performance is usually significantly used to the make the next budget period. Finally, companies can compare with the performance of Their Own performance of its foreign competitors, or compare Themselves with one unit to another unit.
Here also the environmental factors affecting the use of information in translational dihasilakn. Reports from overseas operations multinasioanal perusaaan U.S. generally translated into an equivalent value doalr that managers at the headquarters of the U.S. to evaluate their investment in dollars.
Information Management and hyperinflation
In an environment of high inflation, financial statements prepared in accordance with FAS 52 tends to cause destorsi reality through:
a. Rate is more or less rate of income and expenses
b. Reported a gain or loss on the translation of the which is difficult, to interpret
c. Distort the intertemporal comparison of performance.
Issues in Financial Control
Financial control system is a quantitative measurement and communication systems facilitate the control melelui That:
1. Financial goals are Appropriate communication within the organization
2. Refine the criteria and standards in the performance evaluation
3. Monitor performance
4. Communicate Between the deviation of actual performance and a plan to the Responsible Party
Domestic Versus Multinational Control Systems
Numerous studies have shown That the system used by many multinational companies to control its foreign operations in many ways similar to Those used domestically. Parts of the System Generally the which is sent out a budget That includes financial controls and a Tendency to apply the same standard was developed to evaluate That the domestic operations.
Operational Budgeting
Gains and losses from foreign currency translation is not Considered at the time of surgery was evaluated in the local currency. A comparable exchange rate can be used to track the relative performance against the budget. If the combination of different exchange rates used to prepare the budget and to track performance, this will cause differences in the allocation of responsibility for exchange rate changes and lead to the possibility of different management responses. Some possibilities are as follows:
A. Budgets and tracking performance based on the initial spot rate
2. Budget at the end of the exchange rate and tracking based on the closing exchange rate
3. Budgeting based on the initial rate and tracking based on the closing exchange rate
4. Budgets and tracking performance using the exchange rate projections
5. Budget based on the exchange rate projections and tracking based on the closing exchange rate
Determinants of Strategic Cost
The concept of strategic cost determination introduced by the Japanese is the determination of cost behavior. In determining the cost of the process, the overhead is applied to the goods or services by using a routine application of overhead rates. From the standpoint of traditional cost accounting, overhead manufaktr allocated to products on the basis of causation.
Consistency
The results showed That the main purpose of performance evaluation is to Ensure profitability. However, there is potential for conflict if the performance evaluation system does not correspond to the specific nature of foreign operations may have different goals That than short-term profits. Emphasis on short-term profitability and efficiency in diverting the attention of corporate strategy and an Important manufacturing and negate the company's employees.
Performance Criteria
In an evaluation study by the International Business before, both U.S. and non-MNCs from the U.S. That states the WHO studied the most crucial financial criteria used to evaluate the performance of foreign income units are budgeted versus actual income, Followed by ROI. Which is Considered the most Important is the budgeted sales versus actual sales, return on sales, return on assets, return on investment versua actual and budgeted operating cash flow.
Issues of Measurement and Evaluation of Changes in Price in
Designer Sitem evaluation for overseas operations also have to deal with issues of accounting measurement. Repeated presentation will directly affect the measurement of Various components of the ROI and performance statistics for evaluation and performance budgeting.
Evaluation of Practice Performance: ICI
ICI divides performance measures into two categories: long-term and short term. Cash flow generated by the product and long-term ROI is a measure of the primary. With a measure of cash flow, ICI sought to determine whether a product will generate enough to pay Cash plant replacement, parts for the company's costs and generate profits sufficient to characterize realistic growth.
Effect of Foreign Currency
Economic influences fostered by exchange rate changes on performance can be seen through Greater Than That of accounting measures alone. To be Able to more fully analyze the effects of inflation and currency volatility and Strengthen Their ability to React, companies need to conduct a competitive market share analysis and the influence of changes in the currency against the costs and revenues and to competition.
Performance Standards
A company may already have some standards in a corporate environment, Such as the minimum required level of ROI That APPLIES to its own subsidiaries or to its product line, or the company may specify different levels of ROI or other reference to the child or the Integration of different product lines. These standards can be incorporated into the budget and can then be compared with the results Achieved. Performance can also be Measured intertemporal. Companies can Establish an official increase of in specific ratios or earnings. Past performance is usually significantly used to the make the next budget period. Finally, companies can compare with the performance of Their Own performance of its foreign competitors, or compare Themselves with one unit to another unit.
Source
of: Federick D.S Choi and Gary K. Meek. , 2005. International accounting. The
fifth edition. jakarta - Salemba four.
10. FINANCIAL RISK MANAGEMENT
It
Fundamental
The main objective of financial risk management is to minimize the potential loss arising from unexpected changes in currency rates, credit, commodities and equities. The risk of price volatility faced is known as market risk. There is market risk in various forms. Although the focus of the volatility of prices or rates, management accountants need to consider other risks such as:
1. Liquidity risk arises because not all financial risk management products can be traded freely.
2. Market discontinuity refers to the risk that the market does not always lead to price changes gradually.
3. Credit risk is the possibility that the other party in contract management resikotidak can meet its obligations.
4. Regulatory risk is the risk arising from public authorities banned the use of a financial product for a particular purpose.
5. Tax risk is the risk that certain hedging transactions can not obtain the desired tax treatment.
6. Accounting risk is the chance that a hedging transaction can not be recorded as part of a transaction that seeks to protect the value.
Why Manage Financial Risk?
The growth of risk management services that quickly shows that management can enhance shareholder value by controlling the financial risk. If the company equal the present value of future cash flows, active management of potential risks can be justified in a number of reasons. Stable earnings reduce the probability of default and bankruptcy risk or the risk that profits may not be able to cover contractual debt service.
The Role of Accounting
Management accounting plays an important role in the risk management process. They assist in the identification of market exposure, quantified the balance associated with alternative risk response strategies, measure the potential risks facing the company against certain, noting certain hedging products and evaluate the effectiveness of the hedging program.
Identification of Market Risk
The basic framework is useful for identifying different types of market risk could potentially be referred to as risk mapping.
Balancing quantify
The role played by accountants in the process of risk management involves balancing the quantification process relating to the alternative risk response strategies. Leih management may prefer to maintain some of the risks involved rather than have to do when the cost of hedging the perceived risk protection higher than the benefits.
Risk Management in the World with a Floating Exchange Rate
In a world of floating exchange rates, risk management include:
1. Anticipation of exchange rate movements
2. Measurement of exchange rate risk faced by companies
3. The design of an adequate protection strategy
4. Preparation of internal risk management control
Forecasting the exchange rate changes
In developing the program exchange rate risk management, financial managers must have information about the possible direction, time, and magnetudo changes in exchange rates. Aware of the previous exchange rate outlook, financial management can develop adequate defensive measures with a more efficient and effective. However, is it possible to predict accurately the movement of currency remains a problem.
If the exchange rate forecasting is not possible or too expensive to do, then the manager
finance and accounting have to adjust their corporate problems in such a way as to minimize the adverse effect of exchange rate changes. This process is known as the management of potential risks.
Management of Potential Risks
Potential for foreign exchange risk arises when the foreign exchange rate changes also change the net asset value, earnings and cash flows of the company.
Potential Risk of Translation
Translational gauge potential risk of exchange rate changes impact on the domestic currency equivalent value of assets and liabilities denominated in foreign currency held by the company.
Protection Strategy
These strategies include:
1. Balance sheet hedging
2. Operational hedging
3. Contractual hedging
Strategies for Hedging Products
Product contractual hedge is a contract or financial instrument that allows the user to minimize, eliminate, or at least divert the market risk on the shoulders of others.
Forward Foreign Currency Contracts
Currency forward contract is an agreement to send or receive a certain amount of currency is exchanged for domestic currency, at a date in the future, based on fixed exchange rates are referred to as the forward exchange rate.
Future of Finance
A financial futures contract has properties similar to a forward contract. As a case of forward, futures are commitments to buy or deliver a series of foreign currency at a specified future date at a price that has been specified.
Currency Options
Currency option entitles the buyer to buy or sell a currency based on the seller's specified price on or before the specified expiration date. European type options can be exercised only on expiration date.
Currency Swap
Currency swap involves an exchange of present and future of two different currencies based on a pre-determined exchange rate. Currency swaps allow companies to gain access to capital markets can not be obtained before access to a relatively low cost. Swap is also possible for companies to hedge against exchange rate risks arising from international business activities.
Accounting Treatment
FASB issued FAS No.. FAS 133 is clarified through 149 in April 2003, transform and provide a single approach that kompherensif on accounting for derivatives and hedging transactions. No IFRS. 39 contains the newly revised guidelines for the first time provide universal guidance on accounting for financial derivatives. Before the two standards made global accounting standards for the products of incomplete and inconsistent developed gradually.
Practice Issues
Although the guiding rules issued by the FASB and IASB have a lot to clarify the recognition and measurement of derivatives, there are still some problems. The first relates to the determination of fair value. Wallance says there are 64 possible calculations to measure the change in fair value of the risk being protected and the value of hedging instruments.
Speculate in Foreign Currencies
Accounting treatment for foreign currency instruments to be discussed is similar to treatment for forward contracts. The accounting treatment described here is based on the nature of the hedging activities is whether the company's commitment to protect the value of derivatives, the transaction will occur, the net investment in foreign operations, and so forth.
Disclosure
Analyzing the potential impact of derivative contracts are reported on the performance and characteristics of the rumor of a company is difficult. Disclosures required by FAS 133 and IAS 39 has more or less solved this problem.
Disclosure, among others:
1. Objectives and risk management strategies for hedging transactions
2. Description of the items hedged
3. Identification of the market risk of the posts which the hedged item
4. Description of the hedging instrument
5. Amount not included in the assessment of hedge effectiveness
6. Initial justification that the hedging relationship will be very effective to minimize the risk of market
7. Runs on hedge effectiveness assessment of the actual value of all derivatives that are used during the period
The finer points of Financial Control
Performance evaluation system proved useful in various sectors. These sectors include but are not limited to the corporate treasury, purchasing and overseas subsidiaries. Control of the treasury company-wide performance measurement program include exchange rate risk management, hedging is used to identify and report the results of the hedge. The evaluation system also includes documentation on how and to what extent the company tresury help other business units within the organization.
Proper reference
The object of risk management is to achieve a balance between risk and cost reduction. Thus the proper standard by which to judge the actual performance is a necessary part of any performance appraisal system. This should make clear reference section at the beginning before the creation and protection program should be based on the concept of opportunity cost.
Reporting System
Financial risk reporting system should be able to reconcile the internal and external reporting systems. Risk management activities have a future orientation. But in the end they have to reconcile with the measurement of the potential risks and financial accounts for external reporting purposes.
Source
of: Federick D. Choi S and Gary K. Meek. , 2005. International accounting. The
fifth edition. jakarta - Salemba four.
11. TRANSFER PRICING AND TAXATION INTERNATIONAL
Early concept
The complexity of the laws and rules that determine the tax for foreign companies and the profits generated abroad actually derived from some basic concepts. This concept includes the term:
1. Neutralists tax means the tax has no effect on resource allocation decisions
2. Tax equity, meaning taxpayers who are facing similar situations should pay similar taxes the same but there are disagreements between how to interpret this concept.
Diversity of the National Tax System
Effective management requires an understanding of the potential tax on the national tax system is very different from one country to another.
Various Kinds of taxes
Five kinds of taxes, namely:
1. Corporate income tax
2. Tax levy
3. Value added tax
4. Border tax
5. Transfer tax
Tax Burden
As more and more companies are reducing the marginal corporate tax rate, many states are expanding the tax base of the company. In the real world is rarely effective tax rate equal to the nominal tax rate. Thus it is inappropriate to base the comparison between countries on tax rates must be. Besides low tax rate does not necessarily mean a lower tax burden. Internationally, the tax burden must always be determined by observing the effective tax rate.
Tax Administration System
For simplicity there are two systems, namely:
1. Classical system
2. Integrated system
Foreign tax incentives
Many states offer tax incentives to attract foreign investment. Incentives may include tax-free cash grants are used for the cost of fixed assets of new industrial processes or remission of taxes to pay for some period of time.
Tax competencies that are Hazardous
Diseluh world trends that lead to a reduction in corporate income tax rate is the direct impact of tax competition. The competition is conducted by a tax haven country would benefit if it can make government more efficient. While the harmful effects if the transfer tax revenue for governments that actually requires these revenues to provide services required by businesses.
Taxation Of Income From Foreign Sources and Double Taxation
Most countries apply the principle of the world and impose taxes on profits or income of companies and citizens in it, regardless of the country. The underlying idea is that a foreign subsidiary of a local company is a local company that happens to operate overseas.
Foreign Tax Credit
Foreign tax credit can be counted as a direct credit on income tax paid on earnings branch or subsidiary and any tax withheld at source such as dividends, interest, and royalties are sent back to domestic investors. The tax credit can also in the estimate if the amount of foreign income tax paid is not too clear.
Tax Credit Restrictions
Foreign tax credit limitation applies separately to U.S. tax on foreign source income tax for each of the following types of income:
1. Passive income
2. Financial services revenue
3. Income levy high taxes
4. Transportation revenue
5. Dividend for each of the foreign company with a share of ownership by 10% to 50%
Tax Treaty
Tax treaties affect the tax levy on dividends, interest and royalties paid by companies in the country to foreign shareholders. These agreements typically provide a reciprocal reduction of tax levies on dividends and royalties are often exempt from taxes and interest charges.
Consideration of Foreign Currencies
Gains or losses in foreign currencies are generally located between U.S. sources and foreign sources with reference to the domicile of the taxpayer in its accounting books reflect the assets or liabilities in currencies asing. Source gain or loss is the United States.
Dimensions Tax Planning
Observations on the issue of tax planning starts with two basic things:
1. Tax considerations should never have control of the business strategy
2. Constant changes in tax laws limit the tax benefit in the long-term planning
Organizational Considerations
If the overseas operations initially predicted to cause harm may be advantageous if the taxes are organized in a branch at an early stage. If the subsidiary is organized in a tax haven country that does not tax at all, then the tax deferral will increasingly look attractive.
Controlled Foreign Company Profits And Subdivision F
United States to close the hole this weakness with a controlled foreign company and the provision of income Subdivision F. Profit Subdivision F includes several sales and services revenue associated with the special.
Parent Company Abroad
Parent company concerning taxes, among others:
1. Maintaining the benefits of the tax rate levies on dividends, interest, royalties, and other similar payments.
2. Defer U.S. taxes on overseas profits until those profits repatriated to the U.S. parent company (ie to reinvest these earnings outside the country)
3. Defer U.S. taxes on gains from the sale of shares of subsidiaries of foreign operations
Overseas Sales Company
United States created the company's overseas sales of FSC to encourage exports and improve the U.S. balance of payments position continued to deteriorate. Under the FSC provisions of U.S. export earnings in part by FASC exempted by the U.S. income tax.
Funding decisions
As shown by the following diagram of affiliates of foreign funding can also be used to shift profits from high-tax state with the location of the parent company or companies afiliasike state that low tax jurisdictions where affiliates who provide funding.
Merger Tax Credit
The combined profit of the many possible sources of excess credits generated from countries with high tax rates to reduce the income received from areas with low tax rates. excess tax credit can be extended for taxes paid relating to dividends distributed by foreign companies second and third tier in a multinational network.
Allocation of Cost Accounting
Internal cost allocation between the companies was another means to shift profits from high tax countries to low tax countries. The most common is the allocation of corporate overhead expenses to affiliates in countries with high taxes.
Location and Transfer Pricing
Location of production and distribution systems also offer tax advantages. Profit for the company as a whole system can be improved by determining the transfer price is high for the components were shipped from subsidiaries in countries with relatively low tax rates and low transfer rates of components are shipped from our subsidiaries located in countries with a relatively high tax rates.
Transfer Pricing International: A COMPLEX VARIABLE
Transfer pricing is anything new lately arise. Transfer pricing in the United States evolved along with the decentralization movement that influenced many American businesses during the first half of the 20th century. Once the company expands internationally transfer pricing issues are also expanding rapidly. There are factors such as:
1. Tax factor
2. Factor Tariff
3. Competitiveness Factors
4. Job Evaluation factors
Transfer Pricing Methodology
In a world with a highly competitive market, there will be a big deal when they wanted to transfer pricing resources and services between companies. Transfer pricing can be based on the difference in cost increases or market price. Environmental influences on transfer pricing also raises several questions regarding the pricing methodology.
Price Versus Cost Versus
Cost-based transfer pricing system can overcome this deficiency. After all this is simple untukdigunakan system, based on data readily available, easy to explain to the tax authorities, it is routinely carried out so as to avoid occurrence of internal friction that often occurs when the system arbiter is used.
Cost-based systems rely too much on historical costs that ignores the relationship of demand and supply on a competitive basis and does not allocate costs to products or services in a satisfactory manner. Problem of determining the costs are felt in the international level because of these cost accounting concepts are from country to country.
Principle of Fair
OECD identifies some broader meode to ensure a fair price is. Method are:
1. Uncontrolled price method is equivalent
2. Uncontrolled transaction method is equivalent
3. Resale price method
4. Cost plus method
5. Comparable profits method
6. Method of income splitting
The complexity of the laws and rules that determine the tax for foreign companies and the profits generated abroad actually derived from some basic concepts. This concept includes the term:
1. Neutralists tax means the tax has no effect on resource allocation decisions
2. Tax equity, meaning taxpayers who are facing similar situations should pay similar taxes the same but there are disagreements between how to interpret this concept.
Diversity of the National Tax System
Effective management requires an understanding of the potential tax on the national tax system is very different from one country to another.
Various Kinds of taxes
Five kinds of taxes, namely:
1. Corporate income tax
2. Tax levy
3. Value added tax
4. Border tax
5. Transfer tax
Tax Burden
As more and more companies are reducing the marginal corporate tax rate, many states are expanding the tax base of the company. In the real world is rarely effective tax rate equal to the nominal tax rate. Thus it is inappropriate to base the comparison between countries on tax rates must be. Besides low tax rate does not necessarily mean a lower tax burden. Internationally, the tax burden must always be determined by observing the effective tax rate.
Tax Administration System
For simplicity there are two systems, namely:
1. Classical system
2. Integrated system
Foreign tax incentives
Many states offer tax incentives to attract foreign investment. Incentives may include tax-free cash grants are used for the cost of fixed assets of new industrial processes or remission of taxes to pay for some period of time.
Tax competencies that are Hazardous
Diseluh world trends that lead to a reduction in corporate income tax rate is the direct impact of tax competition. The competition is conducted by a tax haven country would benefit if it can make government more efficient. While the harmful effects if the transfer tax revenue for governments that actually requires these revenues to provide services required by businesses.
Taxation Of Income From Foreign Sources and Double Taxation
Most countries apply the principle of the world and impose taxes on profits or income of companies and citizens in it, regardless of the country. The underlying idea is that a foreign subsidiary of a local company is a local company that happens to operate overseas.
Foreign Tax Credit
Foreign tax credit can be counted as a direct credit on income tax paid on earnings branch or subsidiary and any tax withheld at source such as dividends, interest, and royalties are sent back to domestic investors. The tax credit can also in the estimate if the amount of foreign income tax paid is not too clear.
Tax Credit Restrictions
Foreign tax credit limitation applies separately to U.S. tax on foreign source income tax for each of the following types of income:
1. Passive income
2. Financial services revenue
3. Income levy high taxes
4. Transportation revenue
5. Dividend for each of the foreign company with a share of ownership by 10% to 50%
Tax Treaty
Tax treaties affect the tax levy on dividends, interest and royalties paid by companies in the country to foreign shareholders. These agreements typically provide a reciprocal reduction of tax levies on dividends and royalties are often exempt from taxes and interest charges.
Consideration of Foreign Currencies
Gains or losses in foreign currencies are generally located between U.S. sources and foreign sources with reference to the domicile of the taxpayer in its accounting books reflect the assets or liabilities in currencies asing. Source gain or loss is the United States.
Dimensions Tax Planning
Observations on the issue of tax planning starts with two basic things:
1. Tax considerations should never have control of the business strategy
2. Constant changes in tax laws limit the tax benefit in the long-term planning
Organizational Considerations
If the overseas operations initially predicted to cause harm may be advantageous if the taxes are organized in a branch at an early stage. If the subsidiary is organized in a tax haven country that does not tax at all, then the tax deferral will increasingly look attractive.
Controlled Foreign Company Profits And Subdivision F
United States to close the hole this weakness with a controlled foreign company and the provision of income Subdivision F. Profit Subdivision F includes several sales and services revenue associated with the special.
Parent Company Abroad
Parent company concerning taxes, among others:
1. Maintaining the benefits of the tax rate levies on dividends, interest, royalties, and other similar payments.
2. Defer U.S. taxes on overseas profits until those profits repatriated to the U.S. parent company (ie to reinvest these earnings outside the country)
3. Defer U.S. taxes on gains from the sale of shares of subsidiaries of foreign operations
Overseas Sales Company
United States created the company's overseas sales of FSC to encourage exports and improve the U.S. balance of payments position continued to deteriorate. Under the FSC provisions of U.S. export earnings in part by FASC exempted by the U.S. income tax.
Funding decisions
As shown by the following diagram of affiliates of foreign funding can also be used to shift profits from high-tax state with the location of the parent company or companies afiliasike state that low tax jurisdictions where affiliates who provide funding.
Merger Tax Credit
The combined profit of the many possible sources of excess credits generated from countries with high tax rates to reduce the income received from areas with low tax rates. excess tax credit can be extended for taxes paid relating to dividends distributed by foreign companies second and third tier in a multinational network.
Allocation of Cost Accounting
Internal cost allocation between the companies was another means to shift profits from high tax countries to low tax countries. The most common is the allocation of corporate overhead expenses to affiliates in countries with high taxes.
Location and Transfer Pricing
Location of production and distribution systems also offer tax advantages. Profit for the company as a whole system can be improved by determining the transfer price is high for the components were shipped from subsidiaries in countries with relatively low tax rates and low transfer rates of components are shipped from our subsidiaries located in countries with a relatively high tax rates.
Transfer Pricing International: A COMPLEX VARIABLE
Transfer pricing is anything new lately arise. Transfer pricing in the United States evolved along with the decentralization movement that influenced many American businesses during the first half of the 20th century. Once the company expands internationally transfer pricing issues are also expanding rapidly. There are factors such as:
1. Tax factor
2. Factor Tariff
3. Competitiveness Factors
4. Job Evaluation factors
Transfer Pricing Methodology
In a world with a highly competitive market, there will be a big deal when they wanted to transfer pricing resources and services between companies. Transfer pricing can be based on the difference in cost increases or market price. Environmental influences on transfer pricing also raises several questions regarding the pricing methodology.
Price Versus Cost Versus
Cost-based transfer pricing system can overcome this deficiency. After all this is simple untukdigunakan system, based on data readily available, easy to explain to the tax authorities, it is routinely carried out so as to avoid occurrence of internal friction that often occurs when the system arbiter is used.
Cost-based systems rely too much on historical costs that ignores the relationship of demand and supply on a competitive basis and does not allocate costs to products or services in a satisfactory manner. Problem of determining the costs are felt in the international level because of these cost accounting concepts are from country to country.
Principle of Fair
OECD identifies some broader meode to ensure a fair price is. Method are:
1. Uncontrolled price method is equivalent
2. Uncontrolled transaction method is equivalent
3. Resale price method
4. Cost plus method
5. Comparable profits method
6. Method of income splitting
Future
Each state will impose a tax on most income tax rates are deemed appropriate. Clearly the future of taxation faced many changes and challenges.
Each state will impose a tax on most income tax rates are deemed appropriate. Clearly the future of taxation faced many changes and challenges.
Source
of: Federick D. Choi S and Gary K. Meek. , 2005. International accounting. The
fifth edition. jakarta - Salemba four.
