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Chapter 3 - Legal, Technological and Political environments - Coggle…
Chapter 3 - Legal, Technological and Political environments
The accounting environment (p92-98)
The differences in law affects the way accounting procedures are set
IE Common law countries and code law countries set different accounting standards and have different accounting bodies
A legal system of a country affecting the accounting system
What has to be legally reported?
Accounting system is affected by its culture
The French detailed accounting procedures laid down by French government mirror France's statist tradition
International policies are important determents of a country's accounting procedures
Most of the British commonwealth have adopted the same accounting principles as the UK
A country's economic system influences it's accounting systems
In centrally planning economy the accounting system is driven by the need to provide output-orientated information to state planners
This shows how state fund are used.
Capital markets
This affects accounting standards through the need of provision of accurate and useful information to help MNE's/investors to make appropriate investment decisions
Different countries have different standards
There are many differences in accounting between countries
Tax
Valuation of inventories
The political environment
Changes in political environment poses a risk for businesses
Political risk assessment is utilised
3 categories of political risk
Ownership risk - property of the firm is threatened through confiscation or expropriation
Operating risk - ongoing operations of the firm or the safety of its employees are threatened through changes in law, environmental standards, tax codes, terrorism etc
Transfer risk - Government interferes with the firms ability to move funds in and out the country
Macropolitical risk
affects all firms in the country - such as wars
Micropolitical risk
only affects the specific firm or firms within a specific industry
What is the political situation in that economy?
Policies and laws they have in place?
How stable is their government?
How politically influenced are the exchange rates?