Question

THE COMPANY I CHOSE WAS APPLE

International Accounting: What are the reporting, standards, and responsibilities to consider?
B. Describe three factors that influence a country’s accounting and reporting system related to your chosen company.
C. Identify key problems in consolidating MNCs that the investor should be aware of. Specifically, identify these by looking at the footnotes to the
financial statements for the MNC you have chosen.
II. Industry and Organization: What are the accounting issues related to the MNC and industry chosen?
A. Describe the industry- and organization- specific issues—such as trade, foreign exchange, and taxation—in a foreign country your MNC operates
in.
B. Compare the capital and risk considerations of an investor in your MNC to a solely domestic company.

Answer 1

Ans - A	International Financial Reporting Standards (IFRS) set common rules so that financial statements can be consistent, transparent and comparable around the world. IFRS are issued by the International Accounting Standards Board (IASB). They specify how companies must maintain and report their accounts, defining types of transactions and other events with financial impact. IFRS were established to create a common accounting language, so that businesses and their financial statements can be consistent and reliable from company to company and country to country.
Ans - B	Followings are the factors that influence countries accounting and reporting system
	a) Type of Capital Market
	b) Financial reporting system
	c) Types of business entities
Ans - C	Followings are the key problems in consolidating MNCs that the investor should be aware of
	a) Language and currency - An enterprise would generally prepare its financial reporting in the language that its local investors would understand, for e.g., a Japanese company would prepare its financial statements in Japanese language and similarly in India few would like to have a translated version of non-Indian companies financial statements in Hindi script. Similarly a company listed on stock exchange which has different language than the companies reporting have to send translated version of their financial statements reports. In the same way reporting companies also find difficulties since very companies has unique currency.
	b) Accounting principles - The most serious problem the reporting company faces is in contemplating the accounting principles of another country. For eg Indian company would prepare its financial statement in accordance with Indian Companies Act 1956 and in accordance with Indian GAAP. Therefore, US investors would find difficult to understand further certain information would be lacking as required by USGAAP.
	c) Disclosure requirement - Disclosure requirement is essential ingredient of proper functioning of capital market. Therefore, it is utmost requirement of the company to disclose all required information in the financial statement to enable the investors to take appropriate decision. However the problem is that every nation has different disclosure requirement and so reporting company finds it difficult to cope with different disclosure requirement.
	d) Audit Rerquirement - The function of audit is to lend credibility to financial statement. In order to do so auditing professionals itself need a set of well defined audit standards. This is particular so when financial statements are prepared in one country and used by users in another country. A great deal of diversity prevails in the international audit environment. However as we move towards harmonization and as international standard acquires authority, auditors will have to conform the requirements of international standards of auditing
II - Industry and Oraganisation
	Given below are the accounting issues related to the MNC
	MNCs activities are conducted in locations other than their home countries, and are therefore exposed to the environment of their host countries. According to Owojori and Asaolu (2010), the many-sided activities of the MNC lead to a lot of activities reflected in the accounting system. Foremost among the activities, are the mechanisms and methodology of seeking cross border quotations on various stock exchanges and transnational financing activities.
	These activities entail the ability to capture the special information needs of creditors and investors all around the world. The accounting systems of MNCs are complex and somewhat difficult to manage because of the inter-connection and web of relationships with other companies and locations which lead to the production of financial reports. The MNCs have accounting systems whose responsibility it is to produce financial statements which reflect a true situation of transactions captured in the system. Such a system can be very multifaceted; problems relating to the preparation of international operation occur because businesses with transactions in more than one country have to deal with more than one currency, accounting principles and reporting practices of different countries. Given these scenarios, the system concept of accounting of MNCs is very crucial considering the environment they operate.
Ans - A	Trade - Trade barriers cause a limited choice of products and, therefore, would force customers to pay higher prices and accept inferior quality.Its generally favor rich countries because these countries tend to set international trade policies and standards.Economists generally agree that trade barriers are detrimental and decrease overall economic efficiency, which can be explained by the theory of comparative advantage.
	Foreign Exchanges - This may not be realistic because the exchange rate of the time of transaction may be different at the exchange rate of financial report. Beside what would be the basis of depreciating a long term assets that have been held. Through firm tend to minimize fluctuation in exchange rate to reduce the possibility of loss on the foreign currency involved in the original transaction, the problem is how to account for the benefits and/ or cost arising from hedging activates. Besides, overseas operations, as distinct from normal operation of the companies, pose a problem in terms of accounting for such overseas operations or transactions.
	Taxation - The principal problem with the current corporate tax system is the erosion of the corporate income tax base. Multinational corporations have used aggressive tax planning techniques to shift profits from the home countries (and other high-tax countries) to tax havens, which has led to a dramatic build-up of earnings in tax havens over the past 10 to 15 years. Consequently, many large corporations pay low or even no federal income taxes.15 And, despite rising corporate profits, corporate tax receipts have been falling as a proportion of total federal revenue.
Ans - B	Capital and risk Consideration between MNC and Domestic company
	If a domestic business owner need to raise additional outside equity capital, he could go to the existing shareholders or file the necessary legal documents and make an offer to other potential investors. In a foreign country, it might not be so easy. Regulations will be different. The rights of shareholders could be stiffer. The cost of capital might be higher. All of these issues add to the complexity of doing business in foreign countries.