MULTINATIONAL ACCOUNTING AND TAX FUNCTIONS
MULTINATIONAL ACCOUNTING AND TAX FUNCTIONS
In 1989 Daimler-Benz was the second-largest corporation in Germany in terms of market value, the forty-second-largest corporation in the world in terms of market value, and the fifth most profitable firm in the world with profits of $3.8 billion. Its primary product divisions are Mercedes-Benz, AEG (which focuses on automation systems, office and communications systems, electrotechnical systems and components, electrical consumer products, microelectronics, and transportation systems), and Deutsche Aerospace. In 1989 Daimler-Benz derived 61 percent of its sales from abroad. As illustrated in Map 19.1, Daimler-Benz lists its principal subsidiaries and affiliated companies in the annual report and provides several pieces of financial information for its major subsidiaries around the world.
Daimler-Benz stock has been listed on all German stock exchanges and the Swiss stock exchanges in Basel, Geneva, and Zurich. In 1990 Daimler-Benz stock was introduced on the London and Tokyo exchanges. Thus it must comply with the listing requirements for exchanges in all four countries.
Daimler-Benz provides some interesting information not always seen in a U.S. annual report. Consolidated sales information is provided for the period 1985—1989, as shown in Fig. 19.1. However, it is not possible to find profit and identifiable asset information as would be the case for U.S. and U.K. firms.
Management also breaks down employment into foreign and domestic operations and provides a great deal of information on the major factors causing changes in employment from year to year. Daimler-Benz also includes a value-added statement as shown in Fig. 19.2. The value-added statement separates sales revenues into different categories so that one can see how much value was added to the inputs purchased from the outside.
This type of statement is seen in Europe on occasion but is totally lacking in U.S. reports.
As illustrated in Fig. 19.3, Daimler-Benz's balance sheet is very different from what one would see in the United States, but is more similar to what would be seen in the European Community. The EC directive on the format and content of financial statements has created a more uniform set of financial statements for European firms.
Daimler-Benz also does a good job of describing how world events have affected its operations. For each of its divisions, there is a discussion of the performance of the division and what the key sources of influence were. Although market demand was more a function of economic growth in export markets than in currency values in 1989, that was not the case in other years. In 1985-1987, when the dollar began its first long drop against the Deutsche mark and other hard currencies, the weak dollar was making it very difficult for Daimler-Benz to sell in the United States.
Because Daimler-Benz is a German company, the financial statements are in Deutsche marks rather than in dollars, and the financial statements are generated according to generally accepted accounting standards in Germany. In its notes to the financial statements, management describes the key accounting principles and methods followed. The following statement from the 1989 annual report illustrates the difficulties that an MNE faces as it tries to satisfy financial statement users from around the world.
Due to the requirements arising from its restructuring into a globally operating, integrated high-technology group, Daimler-Benz has brought the application of accounting principles more closely into line with national and international practice. When operating purely as an automobile company, a conservative accounting and valuation policy was applied; this, however, led to a situation whereby the newly structured Daimler-Benz group could no longer be appropriately judged in international comparison. It is for this reason that we have made the following specific valuation changes... .
Management then goes on to describe the key changes in valuation that it made for the 1989 annual report.
In 1990 Daimler-Benz announced that it was discussing different forms of cooperation with some of the divisions of the Mitsubishi Group. The sharing of financial information between a German and Japanese firm could result in problems in interpreting that information, even though the Japanese accounting system was significantly influenced by the Germans in the latter part of the nineteenth century and the early part of the twentieth century.
INTRODUCTION The finance and accounting functions of Daimler-Benz, like those of any mu tinational enterprise, are very closely related. Each relies on the other in fu mionnj- filling its own responsibilities. The financial manager of any firm, whether
be domestic or international, is responsible for procuring and managing tr company's financial resources. But these functions cannot be performe without the availability of adequate and timely information from the accour tant.
The actual and potential flow of assets across national boundaries con plicates the finance and accounting functions. The MNE must learn to cop with differing rates of inflation, changes in exchange rates, currency control the risk of expropriation, and different customs, levels of sophistication, an local requirements.
The international control- A firm's accounting or controllership function is responsible for collectir
and analyzing data for internal and external users. To manage assets, the co porate treasurer needs accounting information on the nature and extent i those assets. As noted in Chapter 17, local managers and operations are usi ally evaluated with information provided by the controller's office. Repor
also must be generated for internal consideration, local governmental needs, creditors, shareholders, and prospective investors. The controller must be concerned about the impact of many different currencies and varied rates of inflation on the statements as well as be familiar with different countries' accounting systems.
In 1989 Daimler-Benz was the second-largest corporation in Germany in terms of market value, the forty-second-largest corporation in the world in terms of market value, and the fifth most profitable firm in the world with profits of $3.8 billion. Its primary product divisions are Mercedes-Benz, AEG (which focuses on automation systems, office and communications systems, electrotechnical systems and components, electrical consumer products, microelectronics, and transportation systems), and Deutsche Aerospace. In 1989 Daimler-Benz derived 61 percent of its sales from abroad. As illustrated in Map 19.1, Daimler-Benz lists its principal subsidiaries and affiliated companies in the annual report and provides several pieces of financial information for its major subsidiaries around the world.
Daimler-Benz stock has been listed on all German stock exchanges and the Swiss stock exchanges in Basel, Geneva, and Zurich. In 1990 Daimler-Benz stock was introduced on the London and Tokyo exchanges. Thus it must comply with the listing requirements for exchanges in all four countries.
Daimler-Benz provides some interesting information not always seen in a U.S. annual report. Consolidated sales information is provided for the period 1985—1989, as shown in Fig. 19.1. However, it is not possible to find profit and identifiable asset information as would be the case for U.S. and U.K. firms.
Management also breaks down employment into foreign and domestic operations and provides a great deal of information on the major factors causing changes in employment from year to year. Daimler-Benz also includes a value-added statement as shown in Fig. 19.2. The value-added statement separates sales revenues into different categories so that one can see how much value was added to the inputs purchased from the outside.
This type of statement is seen in Europe on occasion but is totally lacking in U.S. reports.
As illustrated in Fig. 19.3, Daimler-Benz's balance sheet is very different from what one would see in the United States, but is more similar to what would be seen in the European Community. The EC directive on the format and content of financial statements has created a more uniform set of financial statements for European firms.
Daimler-Benz also does a good job of describing how world events have affected its operations. For each of its divisions, there is a discussion of the performance of the division and what the key sources of influence were. Although market demand was more a function of economic growth in export markets than in currency values in 1989, that was not the case in other years. In 1985-1987, when the dollar began its first long drop against the Deutsche mark and other hard currencies, the weak dollar was making it very difficult for Daimler-Benz to sell in the United States.
Because Daimler-Benz is a German company, the financial statements are in Deutsche marks rather than in dollars, and the financial statements are generated according to generally accepted accounting standards in Germany. In its notes to the financial statements, management describes the key accounting principles and methods followed. The following statement from the 1989 annual report illustrates the difficulties that an MNE faces as it tries to satisfy financial statement users from around the world.
Due to the requirements arising from its restructuring into a globally operating, integrated high-technology group, Daimler-Benz has brought the application of accounting principles more closely into line with national and international practice. When operating purely as an automobile company, a conservative accounting and valuation policy was applied; this, however, led to a situation whereby the newly structured Daimler-Benz group could no longer be appropriately judged in international comparison. It is for this reason that we have made the following specific valuation changes... .
Management then goes on to describe the key changes in valuation that it made for the 1989 annual report.
In 1990 Daimler-Benz announced that it was discussing different forms of cooperation with some of the divisions of the Mitsubishi Group. The sharing of financial information between a German and Japanese firm could result in problems in interpreting that information, even though the Japanese accounting system was significantly influenced by the Germans in the latter part of the nineteenth century and the early part of the twentieth century.
INTRODUCTION The finance and accounting functions of Daimler-Benz, like those of any mu tinational enterprise, are very closely related. Each relies on the other in fu mionnj- filling its own responsibilities. The financial manager of any firm, whether
be domestic or international, is responsible for procuring and managing tr company's financial resources. But these functions cannot be performe without the availability of adequate and timely information from the accour tant.
The actual and potential flow of assets across national boundaries con plicates the finance and accounting functions. The MNE must learn to cop with differing rates of inflation, changes in exchange rates, currency control the risk of expropriation, and different customs, levels of sophistication, an local requirements.
The international control- A firm's accounting or controllership function is responsible for collectir
and analyzing data for internal and external users. To manage assets, the co porate treasurer needs accounting information on the nature and extent i those assets. As noted in Chapter 17, local managers and operations are usi ally evaluated with information provided by the controller's office. Repor
also must be generated for internal consideration, local governmental needs, creditors, shareholders, and prospective investors. The controller must be concerned about the impact of many different currencies and varied rates of inflation on the statements as well as be familiar with different countries' accounting systems.
Comments
Post a Comment