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International Accounting, Finance, and Taxation - Coggle Diagram

- - - - Long-term financial markets are called capital markets, and include the equity market, sales of rights of ownership in the company, the debt market that includes borrowing from other firms, and the bank market.
  - - - A eurocurrency is not to be confused with the euro, the European-common currency, but is rather any foreign currency-denominated deposit or account at a financial institution outside the country of the currency’s issuance.
  - - - Financial reasons include the fact that a company might be able to obtain cheaper financing outside its own borders, lowering its overall cost of capital.
        
        Non-financial reasons to engage in cross-border financing might include a general desire to be a world-class company maintaining financial relationships in many countries.
- - - - Eurobonds
        
        This are sold in countries other than the one in whose currency the bond is denominated.
      - Global Bonds
        
        This is sold in many financial markets and is registered in each national market.
      - Foreign Bonds
        
        This are sold outside the borrower’s country but are denominated in the currency of the country of issue.
- - - - The various national equity markets are becoming more international themselves, aggressively seeking foreign issuers as a means of increasing their volume.
        
        The role of accounting is crucial in any equity market. The basis of any exchange or investment is trust, and trust is increased by the provision of timely, understandable, and accurate financial information about the investments.
        
        To provide such information to investors and potential investors.
- - - - There are six classes of variables that shape the accounting system of a particular country. These are :
        
        Political and economic ties with other countries
        
        Levels of inflation
        
        The Legal System
        
        The size and complexity of business enterprises sophistication of management and the financial community and general levels of education
        
        The source of external financing,
        
        Culture
- - - - A major trend worldwide is the rise of a global equity culture, necessitating the need for accounting information appropriate to international participants in the equity markets.
- - - - This unfortunate situation is a considerable barrier to the cross-border flow of capital.
- - - - Internationally, a milestone in the march toward accounting harmonization was the formation of the International Accounting Standards Commission (IASC) in 1973.
        
        In April 2001, the IASC was restructured and renamed the International Accounting Standards Board (IASB).
        
        Its objectives include: (1) developing a set of high quality, understandable, and enforceable global accounting standards,
        (2) promoting the use and rigorous application of these standards
- - - - The average rate over a particular period of
        time.
    - - The exchange rate in place when a particular
        transaction occurred.
    - - The exchange rate for the current date.
- - - - Language differences are obvious when an English-speaking user is confronted with a Spanish financial statement produced by a Mexican company, but there are even some subtle language differences that occur between nations that speak ostensibly the same language, such as the United States and the United Kingdom.
- - - - Tax treaty
        
        Is between nations, and establishes which items of income will and will not be taxed by each local taxing authority that is a party to the treaty.
      - Tax Haven
        
        Tax havens are sometimes used by multinationals to shift income from a high- tax country to a low-tax country.
      - Tax Credits
        
        A tax credit is a mechanism to mitigate the effects of a worldwide taxation philosophy on multinationals. A tax credit enables a multinational to reduce its home country tax paid by the amount of any taxes paid to foreign governments.
  - - - Internationally, the transfer price is the price paid for the transfer of goods and/or services between two subsidiaries of the same multinational corporation.
  - - - A multi- national must file a tax return in every country in which it operates, based on a profit calculated according to the laws and regulations of that country.
        
        A country-by-country examination of tax systems is certainly beyond the scope of this chapter, but some basic philosophical differences among the various national tax systems can be noted.
        
        The desire of multinationals to minimize the taxes they pay worldwide undoubtedly enters into decision-making in a significant fashion.