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evaluate the potential impacts of various accounting issues associated…

- - - - The identification and assessment of these issues can span both the external and internal analyses.
      - increased costs:
        increased overhead costs fro new systems
        and
        increased costs to get personnel due to dealing with complexity:
        .
- - - - If an organisation changes its operating strategy to incorporate online or international sales or purchases, there can be a risk of exchange losses or gains occurring. These risks can be from both the customer and supplier side of the business, and must be considered as part of any business expansion strategy.
        
        Entering a new international market by establishing a wholly owned enterprise. When an organisation establishes a physical presence in a foreign country on its own behalf, it will be exposed to significant exchange risks. In its new market the organisation will be carrying on operations in the local currency. This means the financial statements for the foreign operation will reflect minimal exchange risks. However, the process of consolidating these reports into the reports of the parent organisation will reflect any exposure to such risks.
        
        The initial funds to establish the foreign operation would have been provided by the parent organisation to pay establishment costs in the foreign currency.
        
        Senior staff would be likely to have been sent from the parent organisation and would therefore have significant salary costs.
        
        Product development and diversification. Where a decision is made to diversify into new products, there is often a high probability that the capability to manufacture all or part of the new product does not exist in the home country. .
        
        The introduction of exchange risk to the costing of a product can create complications in that it introduces an aspect of uncertainty to the production costs, which must be acknowledged in all costing activities
      - Where any of these issues arise, it is likely that the organisation will encounter foreign exchange risks associated with the contracts entered into.
        
        The addition of exchange risks can add significantly to the costs of products due not only to fluctuations in exchange rates, but also to
        the increased need for specialised staff to account for such transactions.
        
        This can add to the complexity of the reporting process
        as, in order to manage the exchange risk, the organisation may decide to enter into currency hedging, including forward exchange contracts or other tools
        
        most organisations (if they carry out hedging at all) do not carry out complete hedging over all of their currency risks. Hence, following an international expansion strategy, increased volatility in the reported financial results should be anticipated, as not only may the risks of investing in new and relatively unfamiliar markets be present, but there will also be an increased degree of volatility in the reported financial results due to currency movements.
      - The complexities and costs of operating in multiple currencies need to be foreseen at the time of strategy formulation and included as a factor when deciding on a market development strategy.
  - - - However, if an organisation uses a market development strategy of acquiring an existing operation in a new market, it must factor into the acquisition cost any costs related to changes required in the IT systems which already exist in that operation.
        
        Greater complexity is added when acquiring new businesses which use different accounting packages from those used by the acquiring entity, especially if the parent entity is trying to consolidate reports from different operating entities.
        Of particular note is the instance where data from one entity needs to be manually entered into a second system to report consolidated performance.
        
        While it may appear that the answer is to simply ensure the preferred accounting package is implemented across all entities, this is more complex than it may initially seem.
        
        Some of the factors to be considered include the:
        cost of installing and establishing the package at the new location, including any relevant licensing fees, potential software or other system upgrades required to operate the package, and the
        
        availability of qualified staff to implement the package and train existing staff in the use of the new system.
        
        data integrity
        Once a decision has been made as to how to address the issue, another key factor is that of data integrity. If a decision is made to transfer all current year information to a new system, it is essential that decision-makers take into account how the annual reports will be prepared and by whom. There can be serious problems if this transition is not managed correctly.
  - - - Corporate legislation
        
        Corporate legislation governs business in such areas as :check:appointment and duties of a board,
        issue and trading of shares and reporting requirements. Such legislation is generally quite strictly enforced, with breaches often resulting in hefty fines and/or custodial sentences.
        It is imperative that organisations and associated individuals adhere to the relevant legal requirements of each country in which the organisation is operating, as penalties vary significantly between countries and can be severe.
      - careful evaluation of these issues prior to market entry is vital.
        
        Regulation can add a significant cost to operations, including the need to have qualified staff to establish any required frameworks and monitor regulatory compliance.
        
        The legal consequences for the business should be carefully assessed in terms of the internal capabilities of the organisation prior to implementing any strategy of international expansion.
        
        Some organisations prefer to make sales via distributors in highly regulated and complex markets as a result of the additional costs they can incur.
        
        The strategy should foresee and allow for the fact that a range of business practices will already be in place in the acquired
        business, which the existing customers, suppliers and other stakeholders of that business will be familiar with and expect to continue.
        these business practices may be fundamental to the continued ongoing operations of the business,
  - - - variations can add significant levels of complexity and costs to business operations and reporting requirements.
        
        securing such expertise will add a further cost to the business.
        
        the taxation consequences of expanding into an overseas location can vary significantly. Additional constraints or concessions may apply, depending upon the type and nature of your industry.
        
        If your industry typically incurs losses during the start-up stages, you would be well served by choosing a country that allows losses to be carried forward.
        If your industry typically incurs losses at various stages throughout its life cycle, you may be best served by selecting a country which allows both the carry-back and carry-forward of losses.
        
        If your organisation is operating in more than one country, it may be advantageous to choose a country with the same year end date as your home country or one which allows the use of a substituted accounting period so you can align the year ends for all your businesses and simplify reporting.
      - Any plan to enter a new national market requires careful investigation of the taxation requirements, and benefits, applicable at that time and for your specific industry.
  - - - Transfer pricing relates to the prices set for the internal exchange of goods or services between different parts of an organisation (which may be in different countries).
        
        All prices must be set at market value, and market value often depends on the geographic location in which it is operating.
      - governments are not keen on organisations limiting their tax bill in this manner and take action to limit abuses of transfer pricing. Many countries impose significant fines and penalties for breaches in this area.