Global Incorporated
Pala Samba
Mazoea Kundayo
Balasundaram Gautam
Tyson Hendrix
Global Incorporated
The Growth of
Multinationals
&
The Internationalization of
Accounting Firms
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History of the
Growth of Multinationals
• 1880 – 1930
– Raw materials
– United Kingdom dominance
• 1930 – 1940
– Great Depression
– World Wars
• 1950’s
– Emergence of United States
• 1980’s
– Growth of Asian Countries
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Jones’ Factors
•
•
•
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Overall Macro Economic Conditions
Receptivity to Foreign Companies
Capital Liberalization
Trade Protectionist Policy
Transportation and Communication
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Multinationals and Natural Resources
• Mining Industry
• Petroleum and Oil
• Outsourcing
– Human Resources
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Organizations
• World Bank
– July 1st, 1944
– IBRD & IDA
For
– Fund Generation
– Loans
– Grants
Against
- Loans not Aid
- One size fits all
• WTO
– January 1st, 1995
- GATT
For
– WTO agreements
– Trade negotiations
– Trade disputes
Against
- Big Boys
- Free trade not in best interest
- Agriculture
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Organizations
• IMF
– July 1st,1944
Do’s
– International Monetary Cooperation
– Growth of International Trade
Don'ts
– Dominated by Large players
– Keynesian approach
• OECD
– 1961
– Provide data, analysis and
forecasts
– Compare experiences
– Co-ordinate Policies
– Foster open trade
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International Mergers and Acquisitions
• International mergers and acquisitions have grown at
tremendous rate
• The overall merger activities represented by cross
region are approximately to be 17% to 19%
• Most significant cross-border mergers that have
occurred are those of, BP’s mergers with Amoco and
DaimlerBenz’s merger with Chrysler
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International Mergers and Acquisitions
• Business factors that contributed the increase crossborder mergers and acquisitions
-Pressures of international competition
financial innovation
-Economic growth and expansion
-Political and economic integration
-Technological changes
-Deregulation and Privatization
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International Mergers and Acquisitions
• Positive effects of mergers and acquisitions
– New or advanced technology is transferred to the country and to the
company acquired
– New management practices are introduced in the areas of finance,
marketing, human resources etc.
– The subsidiary gains access to new sources of capital
– The acquisition overcomes market entry barriers, reduces industry
concentration levels stimulates competition
– Subsidiary exports are increased through gaining access to wider
international distribution channels and the introduction of new
products.
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International Mergers and Acquisitions
• Other reasons for the Increase of Cross-Border Mergers and
Acquisitions
– Political Stability
– Political stability and regulatory climate has been
favorable in recent years
– Technological and Regulatory Changes
– cellular technologies
– Globalization of Industries and Markets
– Easy access to global market
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Joint Ventures
• A cooperative partnership or joint venture is another strategy
that has contributed the growth of multinationals
– Cross-border joint venture contributed to the market
integration
– Help a company to strengthen its ability to penetrate,
compete in, and integrate in global markets
– Bypass trade regulation and trade barriers
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Joint Ventures
• International joint ventures are preferred by multinationals because of the
following advantages:
– Access to well-established distribution networks
– Access to established customer base
– Lower capital outlay than mergers and acquisitions
– Rapid returns
– Good creation of awareness and brand image
– Local partners provide ‘know-how’ and market understanding
– Established demand through cross-selling to partner
– Easier to deal with local authorities
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Privatization and Deregulation
• Deregulation and adaptation of privatization policies
– Transforming economies to a market structure
– Rapid transfer of enterprises from state to private
ownership
– It provides opportunity to multinationals to enter
into new market and expand their operation by
acquiring state-owned companies
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Strategic Business Alliances
• In 1990s strategic business alliances contributed tremendously in the
growth of multinationals
– Especially in the service sector
– Essential for firms to survive and prosper in the intensifying global
competition
• Alliances are popular because mergers and acquisitions are not possible due
to authority regulation and government ownership
Examples:
– KLM & Northwest Airlines
– British Airways & USAir
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Internationalization of Accounting firms
• The growth of multinationals have lent support to the
expansion of services such as Accounting services
• Accounting firms overseas can traced back to the
investments in North America and Asia in the 18Th &
19th century
• The movement took on a new meaning after WWII as
firms strived for breakthrough to better serve their
clients
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Internationalization of Accounting firms
• Reasons
• “Accounting Firms may internationalize
because their clients internationalize”- Henk
Post
• This is a simplistic approach but there are others reasons
explaining the trend.
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Internationalization of Accounting firms
• Reasons
• The Desire to protect relationships with their home-based
clients
• The exploitation of information asymmetries between buyers
and sellers of services
• The transfer of competitive advantage to another country
• The competition amongst Accounting firms
– Mergers and acquisitions in the 1980’s
– Big Eight, Big six, Big four
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Internationalization of Accounting firms
• Entry Mode
– A relationship between motive and entry mode
– Accounting services are demander-located, the movement
on the part of supplier.
– The level of involvement indicates the entry mode chosen
– The consensus is Foreign Direct Investment is the main
form of entry.
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Internationalization of Accounting firms
• Accounting firms as Multinationals ?
• International Accounting firms are not multinational
corporations but multinational networks
• Hybrid structure with no equity base and financed through
cost-contribution system
– Less management problems
• Bilateral cooperation to come with collective international
business or marketing plan
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Internationalization of Accounting firms
• Common features with MNCs
– Strategic and global thinking
– A combination of internationally integrated operations to
remain competitive in the area of globalization
• Challenges for the international accounting firms
– The consistency of delivery of core services
– A stronger commitment to maintain a level of world wide
quality.
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Regulation & Influence
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•
•
Many Separate Bodies throughout the World
Most Influencing Body – SEC
IASB & IAASB
IOSCO
IFAC
Other Boards and Committees
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Regulation & Influence
International Accounting Standards
Securities Exchange Commission (SEC)
–
–
–
–
Within the United States
Working with many securities regulators around the world
Encourage high quality accounting and auditing standards
Enhance consistent application and enforcement of
standards
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Regulation & Influence
International Accounting Standards
International Accounting Standards Board (IASB)
– Main body in establishing international accounting standards
– Reconstructed in 2001, now serves as full time
– Global accounting influence – Along with FASB
International Auditing & Assurance Standards Board (IAASB)
– Main body in developing international auditing and assurance standards
– Develops standards in accordance with IASB’s International Accounting Standard
– Works alongside the Ethics Committee (EC) to develop high quality standards
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Regulation & Influence
International Accounting Standards
International Organization of Securities Commission (IOSCO)
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–
–
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Developed in 1983
Committed to promoting high standards of regulation
Looks over the IASB and the IAASB
Members comment on the projected standards and interpretations
International Federation of Accountants (IFAC)
– Worldwide organization for the Accounting Profession
– Sets international standards in Auditing, Education, Ethics, and Public Sector Financial Reporting
– Works along with other regulating and influential bodies
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Regulation & Influence
International Accounting Standards
Other Organizations with Power to Regulate and Influence
1.
2.
3.
4.
5.
World Bank
Committee of European Securities Regulators (CESR)
European Commission
Ethics Committee (EC)
Many Accounting Industry and User groups that deal with issues
outside their country’s boundaries
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Skills & Qualifications
International Accounting is a fairly new concept
– Proper education and training have yet been implemented
– Regulations have not been set
– Accountants with International Experience are rare
A SEC Presentation Understanding Financial Infrastructure for Globalization
“As we enter 2005, there are not many people in the world that could consider
themselves “experts” or even “experienced” with IFRS.”
“Substantial training, open communication and information sharing about IFRS
application will be needed to facilitate the growth and evolution of experience
and knowledge.”
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Skills & Qualifications
Skills and Qualifications needed to Implement IFRS
1.
Great Deal of Specialized Education
•
2.
3.
4.
Also with new standards the issue of Continuing Education comes
into play
Ability to acquire application of the IFRS
Interpretation
Constant Regulation
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Skills & Qualifications
Major Issues Concerning International Accounting
1.
2.
Language and Cultural Barriers
Different GAAP’s regulating separate countries
• Must have knowledge of each
3.
4.
5.
Many accounts are recorded differently between countries
Auditing Standards
Variances in a country’s set of ethics and professional judgment
standards
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Major Players
Key International Players in the development of International
Accounting Standards
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–
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World Trade Organization (WTO)
SEC
European Union (EU)
United Nations (UN)
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Major Players
Issues regarding these Key Players
– SEC and the FASB – not cooperating with the EU
• Both want new Standards bassed off their own set standards
– SEC – thinks new standards wont be implemented very
rigerously
• Wants strick system with little flexibility
– IASB followers believe flexibility is a positive
– EU’s main objective is to keep EU rules in line with
International Accounting Standards
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