Finance Relations in a Global Context

Economic and Financial Flows

Institutions

Balance of Payments #

Multinationals

Tax Considerations and Exchange Rates

Tax Rates #

Exchange Rates

Fundamentals of Financial Reporting #

Regulation Evolvement

Rules of Jurisdictions #

The International Accounting Standards Board (IASB)

Capital Account

Financial Account

Current Account

Registers import and export payments

Records all transfers to and from abroad.

Records inflows and covers claims or liabilities to financial assets.

Registers money incomes and transfers

The International Monetary Fund

The World Bank

Ensures stability of international exchange rates and payments #

Promote shared prosperity

Enabling transactions between countries.

End extreme poverty.

Provides customers with innovative products and free services

Financial Problems

Some organisations may have increased concentration of power

Tax avoidance

Can choose the currency for cash storage

Can choose where their expenses and profits are recorded - transfer pricing.

International: taxes and contributions by employer

Multinational corporations #

Corporate income tax

Labour tax

Social contributions

Volatile exchange rates can affect companies

Value of assets and liabilities in foreign currencies.

Operating profit.

Schemes of profit shifts

Taking advantage of lower tax rates for profit in the country of origin.

Tax reporting requirements

Country-by-country

Details of revenues, profits, taxes, assets, costs, capital, earnings, and intercompany payments.

Transfer pricing

Method of reducing tax liabilities

Financial Reporting Standards Foundation (IFRS)

Design reporting standards, ensuring company accounts are understandable and comparable across organisations globally.

Legal system influences of accounting

Tax courts

Tax measurement rules

Accounting compliance rules: Requires consistency, transparency, and easily comparable globally.