Chapter #15 Acc-301
Faisal
Globalization is the process of managers becoming aware of financial activities on the future of their company.
Globalization is a continuous process;
Manger always try to cope with the changes
Basic level of globalization is that the domestic company manage must know change in the foreign exchange rate.
Manager must know about then
international technological advances.
Globalization
Information about the cultural diversity.
Must know about the political, economical and cultural issues.
The complete knowledge of all the above mentioned issues have a great impact on the capability of mangers.
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Globalization includes a series of stages.
It starts with exporting process. (process of selling goods and services to foreign
customer).
International Licensing
It is an agreement between companies and foreign parties.
This agreement allows the use of patent,
trademark , technology, design and process etc for a fee.
How Globalization starts?
A company own by two or more people from different countries.
For Example: Pakistan and China made Jet airplanes by Joint Venture.
If one country cant meet the needs
individually then the other country can help them.
It benefits the country to minimize the cost.
International Joint Venture
When a company purchases 100% control over foreign subsidiaries.
OR When a company uses its own funds to create 100% equity control over foreign
subsidiaries.
Global Sourcing:
When a company starts a) manufacturing b)Marketing c)research and development.
Manager must know about the accounting information.
Wholly and Subsidies company
The manager of international companies as a need of fulfilling strategic objectives need to understand how international
environmental forces affect the accounting information measured and difficulties faced by the managers.
There are four environmental forces.
Political and Legal System:
When a manager operates in foreign setting.
Environmental Forces shaping
Globalization (difficulties)
He must attempt to manage the political and legal situation.
A) Political Risk:
Manager must examine the political risk while started operation in any country.
“Political risk occurs when the Govt. shift ownership of assets from company to the Govt.
When the Govt take control of all assets of the company in that country.
E.g, in 1970 Iran took all industries in his custody, Due to this risk manager can’t collect accounting information.
Political and Legal System
It is a part of political system.
In NAFTA (Political agreement Stands for North America free trade agreement.
Regional value is a condition means the member countries of NAFTA are provided favorable tariff, custom, taxes services etc.
Agreement between the countries if buying and selling is done with in the countries
involved in the agreement, they are provided services of customs etc.
Trade Agreement
Accountant must know about the countries who are involved in the trade agreement and law of that country musty also be examined.
A manager must collect any political of
country and examine the trade agreement.
Capital:
A manager issue equity shares when he
wants to open industry or any company in the foreign country whose currency is strong and stable. E.g. USA
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In low capital countries the Govt. and the banks provide capita to start the business.
E.g. Sudan
The procedure for acquiring capital is different with in different countries.
Foreign Trade zone:
The areas in the country where tariff, taxes are not charged.
The manager should examine the trade before launching a new product.
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When a company sell its securities in the foreign stock market.
The manager must examine whether they sell
their shares in stock market of that country or not.
F) Harmonization of Accounting Standards:
Usage of methods/procedure of accounting in the foreign country
Manage must know whether standard of both
countries are same or not and the procedures of accounting are same as they are performing in their own country.
Cross border financing
Market economics and Planned economics
Capitalist, Socialist and communist
Cultural system
Think of culture as the mental mindset that affects the way individuals in a society act and perceive each other actions.
US cultural practices have significant affects on the foreign companies conduct business in US
Economic system
Like wise certain forms of advertising, methods of acquiring business, and the
hierarchical organizational structures which are common practice in US would not be acceptable in some international settings.
