International Accounting and Multinational Operations Ch. 1

Vocabulary flashcards covering key concepts from international accounting, foreign exchange risk, foreign direct investment, transfer pricing, and global financial standards.

General Level International Accounting

The study of standards, guidelines, and rules of accounting, auditing, and taxation within and across countries.

Supranational Accounting

Standards, guidelines, and rules issued by supranational organizations such as IASB, IFAC, and OECD.

Company Level International Accounting

Standards, guidelines, and rules followed by a company, specifically relating to its international business activities and foreign investments.

Foreign Exchange Risk

The risk created when credit sales are made to foreign customers who will pay in their own foreign currency.

Foreign Credit Sale Journal Entry

The initial accounting entry made on the date of sale to record a sale of $\text{U.K. }\frac{\text{Pound Sterling}}{1}$ at an exchange rate of $\text{U.K. }\frac{\text{Pound Sterling}}{1} = \text{US}\text{1.35}$ dollars, debiting Accounts Receivable for $\text{US}\text{135,000}$ and crediting Sales Revenue for $\text{US}\text{135,000}$.

Foreign Settlement Journal Entry with Loss

The accounting entry made when payment is received at a lower exchange rate of $\text{U.K. }\frac{\text{Pound Sterling}}{1} = \text{US}\text{1.30}$ dollars, debiting Cash for $\text{US}\text{130,000}$, debiting Loss on Foreign Exchange for $\text{US}\text{5,000}$, and crediting Accounts Receivable for $\text{US}\text{135,000}$.

Foreign Currency Option

A technique to manage exposure that gives the option owner the right, but not the obligation, to sell foreign currency at a predetermined exchange rate and time.

Forward Contract

A technique to manage exposure involving an obligation to exchange foreign currency at a future date.

Foreign Direct Investment

The ownership and control of foreign assets, executed either through acquisition or greenfield investment.

Acquisition

A form of Foreign Direct Investment involving investment in existing operations in foreign countries.

Greenfield Investment

A form of Foreign Direct Investment involving the creation of a new operation in foreign countries.

U.S. Foreign Tax Credit

A tax credit given by the U.S. for foreign tax paid as relief against double taxation on a company's foreign-based income.

Discretionary Transfer Pricing

The practice by multinational companies of shifting profits from high-tax countries to low-tax countries when price negotiation between buyer and seller is not feasible.

Foreign Corrupt Practices Act (FCPA)

A regulation that internal and external auditors must abide by as part of management's control process and internal auditing of foreign operations.

Cross-Listing

The practice of having a company's stock listed and traded on several foreign stock exchanges.

Sustainability Report

A Corporate Responsibility Report, mostly voluntary but required in several countries, that provides information on environmental impact, labor practices, product safety, and corporate governance.

Global Financial Reporting Standards

A common set of financial reporting standards adopted across countries to eliminate GAAP conversion and simplify evaluation of foreign investment opportunities.