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Block 2: Finances IMG_0039, (Developed by IASB), All 3 accounts must be…
Block 2: Finances
Balance of payments
Capital account
Financial account
Current account
Economic indicator
International Financial Institutions
The World Bank
International Monetary Fund (IMF)
Designed for international financial cooperation
Global imbalances
Deficit countries
Government spends more than it collects (i.e. in taxes)
Surplus countries
More exports and incoming payments than imports and outgoings
Result if all three accounts from the balance of payments do not balance
Financial reporting
International Accounting Standard Board (IASB)
Accounting rules differ from one jurisdictions to another
International Financial Reporting Standards Foundation (IFRS)
Set of standards for the preparation of financial statements by businesses
Process for development of standards internationally
Tax rates
Tax evasion
Illegal
Not paying taxes owed & not reporting income/expenses
Tax avoidance
Legal
Moving profit to a country with lower tax
Cross border tax - difficult to collect all tax receipts owed
Foreign direct investment (FDI)
Investment of buildings in other countries which produce/sell their products
Operational control
Element of global trade
Exchange rates
price of one currency in terms of another
determined by Foreign Exchange Market
affects sales abroad & cost of buying supplies abroad
Transfer pricing
Multinationals
two companies of the same multinational trade with each other and decide a price
Form of tax avoidance
(Developed by IASB)
All 3 accounts must be balanced
More surplus countries result in deficit countries asking to borrow or sell assets
