Quiz 15: Global Business and Accounting

Business

Here the foreign currency is to be converted into the Dollar hence it shall be done in following manner: To restate an amount of foreign currency in terms of the equivalent amount of U.S. dollars, we multiply the foreign currency amount by the exchange rate, as follows: img Hence, the dollars amount is as following: img Working Note : The conversion is made by multiplying the currency amount with the exchange rate.

Decisions to globalize: There are many factors that must be taken into account when faced with multiple globalization strategy choices. These factors include (but are not limited to) control issues, feasibility issues, cost, and fit between a particular choice and the firm's long-term global strategy. If Bristow chooses to simply export to Country Y to satisfy the needs of Kale, it will maintain strict control over production and quality, but will face high shipping costs and longer delivery times. If Bristow chooses to export, information on more efficient shipping options would be of greater importance. -To maintain a high level of control and reduce shipping times, Bristow may opt to purchase the local company and operate it as a wholly-owned subsidiary. This option would likely involve a substantial outlay of capital to update the facility's existing technology. Bristow would need to do an extensive analysis of this option to determine if the return on the investment in the subsidiary would be satisfactory. Bristow would need to address the questions of whether it had the necessary capital (or how to obtain it), how the subsidiary would be staffed, and whether enough business could be obtained to make operating the facility profitable. Bristow would also need information regarding taxes and other governmental laws and regulations. Given Bristow's lack of experience in international activities, establishing a wholly-owned subsidiary may prove very difficult. -If issues of control are not of primary importance, Bristow should consider licensing its technology to a domestic firm or establishing a joint venture with Kale. A licensing agreement would allow Kale to be supplied with Bristow products on a timely basis, but without a substantial investment of capital and with less risk. Before entering into such an agreement, Bristow would need to ensure that the licensed firm would not take away its "regular" business by selling its products to Bristow's customers in the U.S. -If Bristow intends to pursue a more aggressive globalization strategy, entering into a joint venture with Kale may prove beneficial even though it involves some relinquishment of control. Having operations in other foreign locations, Kale will likely be familiar with the complexities of doing business in other countries. Bristow's managers would have an opportunity to learn from Kale, allowing Bristow to more easily establish foreign operations in the future.

In general terms, Political, Legal, Economic, and Cultural systems are the factors that prompt different countries to develop different accounting principles.

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