A Comparative Analysis of Chinese and American Work Values - Free Essay Example

Sample details Pages: 6 Words: 1691 Downloads: 10 Date added: 2017/06/26 Category Economics Essay Type Compare and contrast essay Did you like this example? à ¢Ã¢â€š ¬Ã‹Å"à ¢Ã¢â€š ¬Ã¢â€ž ¢A Comparative Analysis of Chinese and American Work Valuesà ¢Ã¢â€š ¬Ã¢â€ž ¢Ãƒ ¢Ã¢â€š ¬Ã¢â€ž ¢ Introduction Discussion Bibliography Introduction Work values influence attitudes and behaviour at work which can have a major effect on productivity and performance especially if managers are aware of these work values. This research can be integral to human resource managers as it aides them when it comes to employing, predicting and managing behaviour. Much research has been carried out on Chinese work values but rarely have they been compared to the work values of Irish employees. In this paper, I will try to examine the differences or similarities between Irish and Chinese work values. It is hypothesized that the work values between these two nations will vary greatly. Don’t waste time! Our writers will create an original "A Comparative Analysis of Chinese and American Work Values" essay for you Create order Discussion Work related values refer to the goals or rewards people seek through their work. They can be divided categorically into four groups: intrinsic, extrinsic, social and power. These groups can be defined as (1) intrinsic: personal growth, autonomy and interest; (2) extrinsic: security and salary; (3) social: relationships and contribution to society; (4) power: authority and stimulus (Schwartz, 1999). When discussing the topic of work values it is essential that one must highlight the role in which culture has to play in differentiating these values. HOFSTEDE, TROMPENAARS (Schwartz, 1999) suggests that the differences in various cultural values can be used to determine links relating to work values. Several studies examining Maslowà ¢Ã¢â€š ¬Ã¢â€ž ¢s (1943) hierachy of needs also show similar but not identical rank ordering of needs across cultures. As it has been proven that there are several differences across different cultures , it must be noted what actually determines these dif ferences. Previous research suggests that these determinants lie in the employees ethnic origin, cultural exposure and parent companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s nationality (Verburg Drenthe, 1999) (Yang Bond, 1990). In an article by (Wang, Ling, Jaw, 2006), two specific instruments were addressed in order to determine the differences in cultural values and work values bewtween Asian and western employees. In order to measure culture, Hofstedeà ¢Ã¢â€š ¬Ã¢â€ž ¢s (1980) four dimensions: (1) power distance; (2) masculinity; (3) individualism; (4) uncertainty avoidance were used. Power distance relates to the degree of inequality acceptable in a society (Hofstede, 1980). Masculinity refers to the degree in which values like assertiveness, performance, success and competitiveness associated with the role of men, prevail over values associated with femininity such as service, care for the weak and solidarity (Hofstede, 1980). With regards to results, it was found that Chinese employees tend ed to be more uncertainty avoiding than their counterparts (Wang, Ling, Jaw, 2006). With regards to their work values Asian employees were found to score much higher than their western counterparts in terms of contribution to society, stability and security. When it comes to conducting the study, Chinese researchers have used western questionaires to further study employees work values and have found valuable information (WeiWei, 1991). However, some issues need to addressed in this situation. It would be foolish to ignore the everchanging Chinese social environment. Since, the 1980à ¢Ã¢â€š ¬Ã¢â€ž ¢s China has been changing from a centrally planned economy (Jiang Yang, 2011) to a global market economy. As a result of these changes, Chinaà ¢Ã¢â€š ¬Ã¢â€ž ¢s population has been opened up to more western influences. It must also be noted that over the past few years China as a region has been at the helm of many natural disasters and epidemics such as SARS, earthquakes and floodi ng (Wenquan Ligang, 1999). On one side of the scale the Chinese population has suffered greatly but in turn they have grown to embrace some values more than others. Examples of these values include health, security and solidarity. (Huang, 1995) suggests that the emphasis of social norms between Chinese and western work values may be so significant that researchers should invent new Chinese work dimensions. As a result of Huangà ¢Ã¢â€š ¬Ã¢â€ž ¢s advice, (Neitai, 2010) came up with the à ¢Ã¢â€š ¬Ã‹Å"à ¢Ã¢â€š ¬Ã¢â€ž ¢four dimensions of Chinese work valuesà ¢Ã¢â€š ¬Ã¢â€ž ¢Ãƒ ¢Ã¢â€š ¬Ã¢â€ž ¢. These four dimensions include: (1) social harmony; (2) self realization; (3) material conditions; and (4) prosperous development. Social harmony refers to relationship bewtween family and the organization, self realization refers to the inner experience gained from work, material conditions relate to salary, working hours and welfare and finally prosperous development relates to improving compa ny performance, serving people and advancing China as a whole. In terms of work values relating to employees within the United States, Jurgensenà ¢Ã¢â€š ¬Ã¢â€ž ¢s (1978) study of over 57,000 job applicants at the Minesota Gas Company is crucial. Applicants were made complete a questionaire in which they ranked the importance of ten job characteriscs in relation to their wellbeing. What Jurgensen found was that surprisingly pay was the fifth most ranked job characteristic while job security topped the list. Several other researchers such as (Lindahl, 1949) and (Kovach, 1995) have used similar questionnaires in which U.S employees were asked to rank ten job attributes. Unlike Jurgensen, Kovach found that the age difference in employees led to differences in the ranking system. He found that senior employeeà ¢Ã¢â€š ¬Ã¢â€ž ¢s were more self concious on à ¢Ã¢â€š ¬Ã‹Å"à ¢Ã¢â€š ¬Ã¢â€ž ¢being kept in the loopà ¢Ã¢â€š ¬Ã¢â€ž ¢Ãƒ ¢Ã¢â€š ¬Ã¢â€ž ¢ rather than attributes such as pay and job security which which were found to motivate younger employees. An interesting element when comparing both the U.S and China is the importance of wages. Since the 1980à ¢Ã¢â€š ¬Ã¢â€ž ¢s, bonuses based on performanc ealone have become much more accepted in Chinese society (Easterby-Smith, 1995) with the Chinese government promoting the idea that it is glorious to be rich (Zhao, 1994). It has been suggested that this mentality installed in Chinese employees working overseas is quite evident as they have been known to talk openly about money whereas most U.S employees are hesitant (Redding, 1993). In relation to job security as a work value, Jurgensenà ¢Ã¢â€š ¬Ã¢â€ž ¢s model ranked job security as a number attribute between 1949 and 1975. However, when compared to the other models from the 1990à ¢Ã¢â€š ¬Ã¢â€ž ¢s, it can be found in 4th place. According to (Fisher Yuan, 1998) job security in China is less important due to the fact that until the mid 1990à ¢Ã¢â€š ¬Ã¢â€ž ¢s many employees in China were working for state owned organizations and it was and still is very difficult to fire an employee until the end of their contract. We must also consider the fact that Chinaà ¢Ã¢â€š ¬Ã¢â€ž ¢s workforce is becoming younger and more skilled which leaves them with better prospects of employment or remployment (Zhao, 1994). A final contrasting work value is that of interesting work, promotion and growth which are reasonably important to US employees at present, while the idea of partaking in interesting work seems to be very important. The importance of these values have come to light due to the significant amount of research conducted within the United States of personal work values (Fisher Yuan, 1998). With regards to these issues in China, there seems to be very few, signifying that possibly the majority of non-managerial employees are not familiar with meeting à ¢Ã¢â€š ¬Ã‹Å"higher levelà ¢Ã¢â€š ¬Ã¢â€ž ¢ needs in the work place (Lu Kao, 2011). It co uld be said that the à ¢Ã¢â€š ¬Ã‹Å"luxuryà ¢Ã¢â€š ¬Ã¢â€ž ¢ of interesting work is more of a privilege or expectation of employees in more developed nations. In studying the history of American work psychology, salary was seen as the principle motivator at the beginning of the century, while social factors and job satisfaction came to the forefront in the 1940s, and interesting work was not revealed as an important variable by employees until the 1950à ¢Ã¢â€š ¬Ã¢â€ž ¢s (Schwartz, 1999). Conclusion It may be interesting to study whether such a progression occurs over time in other countries as economic growth and living standards increase. Most managerial researchers in China validate their work by highlighting the fact that changes are happening very rapidly, and that work values may not be constant when the economic system is in the process of change (Chen, 1995). Forecasts such as those above, which are built on current literature, will probably not be significant in the future. It is also probable that value changes would be encouraged most willingly by younger employees as they may have been brought up with more western influences when compared to their seniors. Therefore, we might assume that preferences would vary between older and younger employees, with the older generation of employees having more traditional social and economic preferences while the younger generation adopting intrinsic and success oriented matters to a larger extent. Bibliography Chen, C. (1995). New Trends in Reward Allocation Preferences: A Sino-US Comparison. Academy of Management Journal, 408-28. Easterby-Smith, M. (1995). How Culture Sensitive is HRM: A Comparative Analysis of Practice in Chinese UK Companies. International Journal of Human Resource Management, 31-59. Fisher, C., Yuan, A. (1998). What motivates employees? A comparison of US and Chinese. The International Journal of Human Resource Management, 517-28. Hofstede, G. (1980). Motivation, leadership and organisation: Do American theories apply abroad? Organizational Dynamics, 42-63. Huang, G. (1995). Comparing the work values of Taiwan and mainland. Study of local pschology, 92-147. Jiang, X., Yang, J. (2011). Understanding the Work Values of Chinese Employees. Journal of Pschology, 579-83. Jurgensen, C. (1978). Job preferences (What makes a good job bad?). Journal of Applied Psychology, 267-76. Kovach, K. (1995). Employee Motivation: Addressing a Crucial Factor in you r Organisations Performance. George Mason University, 49-60. Lindahl, L. (1949). What Makes a Good Job. Lu, L., Kao, S. S. (2011). Work Stress, Chinese Work Values, and Work Well-Being in the Greater China. The Journal of Social Psychology, 767-83. Maslow, A. (1943). A Theory of Human Motivation. Psychological Review, 370-96. Neitai, C. (2010). A study of relationships among work values, leadership styles and organizational citizenship behaviour. Beijing: Chung Yang Christian University. Redding, G. (1993). The Spirit of Chinese Capitalism. New York: Walter de Grutyer. Schwartz, S. (1999). A theory of cultural values and some implications for work. Applied Psychology: An Introduction Review, 23-47. Verburg, R., Drenthe, P. (1999). Managing human resources across cultures: A comparative analysis of practices in industrial enterprises in China and the Netherlands. The International Journal of Human Resource Management, 391-410. Wang, C., Ling, Y., Jaw, B. (2 006). Cross-Cultural Determinants of Chinese Employee. Asia Pacific Management Review , 73-81. WeiWei, N. (1991). A Review on Occupation Values. Studies on Social Psychology, 34-40. Wenquan, L., Ligang, B. (1999). Study on the vocational value of Chinese undergraduates. Acta of Psychology, 839-52. Yang, K., Bond, S. (1990). Exploring implicit personality theories with indigenous or imported constructs: The Chinese case. Journal of Personality and Social Psychology, 1087-95. Zhao, S. (1994). Human Resource Management in China. Asia Pacific Journal of Human Resources, 3-12.

Environmental Problems Caused By Deforestation - 1055 Words

he world that individuals know today, is not how it used to be before. Before the modern industrial period, living beings were not having problems such as losing their habitats or worrying about the water and the oil spilled in the ocean. People at this time live in different types of environment that are constantly changing because humans are overusing the natural resources that the Earth provides to them. The planet is going through a lot of environmental problems. These problems affect all the living beings on Earth. Some of the examples are global warming, pollution of air, water, land, overpopulation, climate change, deforestation, etc. Our planet is facing severe environmental crises with all these examples. The Earth is getting†¦show more content†¦One of the causes of water scarcity according to J, Rinkesh, a writer in conserve-energy-future.com, â€Å"Water overuse is a huge issue that a lot of people are dealing with. 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Ancient China Free Essays

Ancient China Free Essays In Ancient China, many people were poor. There were mostly farmer and peasants. Most of the Chinese were very religious. We will write a custom essay sample on Ancient China or any similar topic only for you Order Now They often had ceremonies and practiced several traditions. Artisans and peasants were the lowest of the social pyramid. In ancient China, many people were treated poorly. Especially girls were treated very badly. Girls had to have their feet bound very tightly with bandages. By the age of 6, it was the law for girls to have their feet tied up. The girls of the family were to work in the house and had few privileges. Farmers and artisans were not treated well because of the amount of money they had; which was not much. The kids in ancient China were very much like the kids in our time; in some ways. They definitely worked a lot harder than we did. They also loved toys and games just like all kids do. Their feet were wrapped up because they believed that it would impress their god and they thought it was beautiful. When girls had their feet wrapped up, it caused broken bones and sometime infections. The ancient Chinese also lived in villages. The villages were all very different but mostly religious in similar ways. The majority of the Chinese practiced Buddhism. Kings and queens ruled over China at this time. They ruled over all villages. Also, the families of ancient China really enjoyed playing games and singing. Some of the main activities in ancient China were making pottery, art, hunting and fishing. The grandparents of the family were highly respected even though they did not do much to help the family. They usually lived in their children’s house. Most of all, elders were highly thought of. The kids went to school just like kids do now. That is another similarity to today. School was very different there though. The mom of the family usually stayed home and worked. The daughters of the family helped their mom too sometimes. She also made the food, cleaned the house. The moms took care of the children when they were young. The dads hunted and provided the food for the family. The boys of the family often helped the dads provide the food. In conclusion, people then were very similar to us today and very not alike in many ways too. The social structure was extremely different than now. The family life was very different because when we want food, we go to the store and buy our food. Not in ancient China! Same with toys, kids had to make their own! Fathers had to find, kill or make their food. Now we know how much we should appreciate our life! How to cite Ancient China, Essay examples

Structure and Functions of Commercial Bank free essay sample

Chapter 15 Accounting in a Global Market QUESTIONS 1. Foreign currency exchange rates are used to express transactions in local currency in terms of U. S. dollars and vice versa. For example, if the exchange rate is $1 = 1. 65 DM (Deutsche mark), and if one wishes to change 100 U. S. dollars into Deutsche marks, one will receive $100 ( 1. 65 = 165 DM, and if one wishes to change 100 DM to U. S. dollars, one will receive 100 DM/1. 65 = $60. 61. 2. A foreign currency transaction occurs when a transaction is denominated in a currency other than that of the firm. For example, a foreign currency transaction occurs when a U. S. firm purchases electronics components from a Japanese firm and must make payment in yen. 3. This easiest way for a U. S. company to avoid foreign exchange risk is to denominate all transactions in U. S. dollars. Alternatively, there are a variety of methods for hedging foreign currency risk. One method is to enter into a foreign exchange forward or futures contract. See Chapter 12 for more details about hedging. 4. If the purchase is denominated in British pounds, the purchase of the oil is recorded at $144,900, or 5,000 barrels at ? 18 per barrel equals ? 90,000 at $1. 61 equals $144,900. . In this situation the British pound increased in value from $1. 50 to $1. 53. This means the currency received in payment of the account will amount to more money in U. S. dollars. The exchange gain is $1,500 (? 50,000 ( [$1. 53–$1. 50]). 6. According to U. S. accounting standards, foreign currency transaction gains and losses are included in income in the period in which the exchange rate changes. Any gains or losses that result from these changing exchange rates are measured and recognized separately from the underlying sale or purchase and are recorded as separate income statement items. . U. S. firms must consolidate all their majority-owned subsidiaries when preparing financial statements. Foreign currency statements can be consolidated only aft er they have been translated into U. S. dollars. 8. The two methods available for converting foreign currency financial statements into U. S. dollar financial statements are (a) translation and (b) remeasurement. a. For foreign subsidiaries whose operations are well contained in the host country and that conduct most of their operations in the foreign currency, translation is used to convert the statements into U. S. dollars. Translation requires that all assets and liabilities be converted at the current exchange rate at the date of the financial statements. Income statement items are converted at the average exchange rate for the period. b. Some foreign subsidiaries are simply an extension of the parent company’s operations. Most of their operations are conducted in U. S. dollars. For these companies, remeasurement is used to convert the statements into U. S. dollars. Remeasurement requires that monetary assets and liabilities be converted at current rates and nonmonetary assets and liabilities be translated at the rates prevailing when the particular item was acquired. Income statement items are converted at the average exchange rate for the period. 9. In most instances, the functional currency is the currency in which most of the subsidiary’s transactions are denominated. 10. With translation, all balance sheet items other than stockholders’ equity are converted at the current exchange rate at the date of the financial statements. Income statement items are converted at the average rate during the period. Dividends are converted using the exchange rate prevailing on the date the dividends were declared. Paid-in capital is converted at the historical rate, that is, the rate prevailing on the date the subsidiary was acquired or the stock was issued. Retained earnings is translated in the first year using historical rates, but in subsequent years, it is computed by taking the balance in retained earnings from the prior period’s translated financial statements, adding translated net income, and subtracting translated dividends. Any resulting translation gains and losses are accumulated in a special stockholders’ equity account. 11. When translating foreign currency financial statements, the exchange rate as of the balance sheet date is used to convert assets and liabilities and the average rate for the year is used to convert revenues and expenses. The historical rate prevailing on the day the subsidiary was purchased or the stock was issued is always used in converting common stock from the foreign currency to the parent company’s currency. 12. When the foreign currency financial statements are translated, the debits of the trial balance will, in most instances, not equal the credits. This difference results from the effects of the differing exchange rates. This difference between debits and credits is called a translation adjustment and is included in the stockholders’ equity section of the balance sheet. 13. No, these firms are under no U. S. obligation to prepare special reports for their non-U. S. stockholders. Non-U. S. stockholders have special needs with regard to the financial information provided by these multinational companies. These needs may include: (a) reports prepared in the language of the user, (b) figures given in the denominated currency of the particular user, (c) accounting policies and principles reflecting the country of the user. Many companies do nothing special to respond to the needs of international users. That is, international users are forced to use the financial statements prepared for the domestic audience. However, a growing number of multinational firms are responding to the needs of the international investment community by preparing specialized financial statements and annual reports designed for nondomestic stockholders. 14. If a firm decides to prepare special reports for its nondomestic stockholders, the reports might have the following characteristics: a. Statements translated into the local language b. Statements denominated in the local currency c. Statements partially or fully restated to reflect the accounting principles of the users’ country d. Statements prepared according to international standards 15. Some of the advantages and disadvantages of each type of special-purpose report are listed below: a. The reports may have been translated into the local language without any other changes having been made in the financial statements. Thus, the user might be able to read the financial statements, but to fully understand their significance, the user would have to be familiar with the accounting principles used in preparing the statements. b. Reports denominated in the currency of the local user may be somewhat better than those discussed in part (a) above, but the problem of unfamiliarity with the underlying accounting standards persists. c. Reports restated to reflect the accounting principles of the user’s country would be an improvement; however, the degree of restatement will determine the degree of usefulness of the restated statement. Not many companies provide a full restatement. d. International accounting standards (IAS) are gaining increasing acceptance among the international community, especially outside the United States. The problem with one global standard is that local economies, cultures, and business practices differ, and accounting standards should be flexible enough to reflect those differences. 16. Mutual recognition involves country A accepting the financial statements of country B and country B accepting the financial statements of country A for all regulatory purposes. Although mutual recognition may be an inexpensive solution, the users of the financial statements bear the cost required to understand GAAP in various countries. 17. The International Accounting Standards Board (IASB) was created in 2001 to succeed the IASC (established in 1973). Like the FASB, the IASB develops proposals, circulates these among interested organizations, receives feedback, and then issues a final pronouncement. By working closely with national standard setting bodies, the IASB hopes to accelerate the convergence of high-quality accounting standards around the world. 8. The IASC was a creation of the national accountants’ associations around the world. For example, in the United States it was the American Institute of Certified Public Accountants (AICPA) that was involved in the formation of the IASC. This is an important point to recognize because it means that the IASC was operated by accountants, not by the worldwide business community. The IASB has broader business support; its members represent a broader cross-section of financial statement preparers, users, auditors, and analysts. In addition, most of the IASB members are independent full-time individuals who have severed their relationships with their previous employers. Finally, the IASB includes formal representatives from seven different national standard setting groups. 19. The U. S. capital market is the largest in the world. IAS will never gain wide acceptance in the United States until the SEC allows the use of the international standards in financial statements filed with the Commission. If and when the SEC allows the use of IAS, the credibility of the standards will increase dramatically worldwide. 20. If the SEC allows foreign companies to use IAS in their financial reports to U. S. investors, U. S. companies are sure to cry foul over a two-tiered system in which foreign companies are permitted to list their securities by following IAS and yet domestic U. S. companies must continue to follow the more extensive accounting requirements under U. S. GAAP. EXERCISES E 15-1 Foreign Currency Transactions 1. The equipment would be recorded in the books of Saginaw Power Company at $240,000 (750,000 ( $0. 32). This is the amount of U. S. dollars that could have been used to make the purchase on the purchase date. . On April 15 when payment is made, $262,500 (750,000 ( $0. 35) would be paid. 3. On April 15, Saginaw would record an exchange loss of $22,500, equal to the difference between the original obligation of $240,000 and the amount actually paid of $262,500. 4. The exchange loss of $22,500 due to the increase in value of the Swiss franc is recorded as another expense item in current pe riod’s income. E 15-2 Foreign Currency Transactions 1. The inventory would be recorded in the books of the GAAT Company at $36,800 (4,600,000 ( $0. 008). This is the amount of U. S. ollars that could have been used to make the purchase on the purchase date. 2. An exchange loss would be recorded as of June 30 to reflect the increased U. S. dollar obligation as a result of the increased value of the yen. The amount of the loss is $4,600 (4,600,000 ( [$0. 009 – $0. 008]). 3. When payment is made on July 6, GAAT would record an additional exchange loss to reflect the fact the U. S. dollar obligation has again increased as a result of the increased value of the yen. The amount of the loss is $4,600 (4,600,000 ( [$0. 010 – $0. 009]). E 15-3 Foreign Currency Purchase 1. On the day of the purchase, an obligation of $20,000 (10,000 units ( $2 per unit) would be recorded. This is also the amount of cash that would be required to be paid in 30 days because the transaction is denominated in U. S. dollars. 2. On the day of the purchase, an obligation of $20,000 (10,000 units ( DM 4 per unit ( $0. 50) would be recorded. The amount of cash that would be required to be paid in 30 days is $24,000 (10,000 units ( DM 4 per unit ( $0. 60) because the transaction is denominated in Deutsche marks. An exchange loss of $4,000 would be recognized to reflect the increased U. S. ollar obligation stemming from the increase in the value of the mark. E 15-4 Foreign Currency Purchase 1. The value at which the obligation would be recorded on December 15, 2002 is $3,846 (5,000,000 won/1,300). 2. The value to which the obligation should be adjusted on December 31, 2002 is $4,545 (5,000,000 won/1,100). An exchange loss of $699 ($4,545 – $3,846) has occurred reflecting t he increased U. S. dollar obligation stemming from the increase in the value of the won. 3. The number of U. S dollars that will be required to pay the obligation on January 30, 2003 is $5,000 (5,000,000 won/1,000). An additional exchange loss of $455 ($5,000 – $4,545) has occurred since the start of the year reflecting the increased U. S. dollar obligation stemming from the continuing increase in the value of the won. E 15-5 Translation or Remeasurement? 1. In determining the functional currency, one attempts to determine the primary economic environment in which the subsidiary operates. If the subsidiary generates and expends most of its cash in its local currency, then translation is appropriate as the functional currency would be considered the subsidiary’s local currency. Other factors to consider in determining the subsidiary’s functional currency include the forces that determine the firm’s sales price, the location of the subsidiary’s sales market, and the country in which financing is obtained and where production costs are incurred. If it is determined, after the above factors are considered, that the parent company’s currency is the subsidiary’s primary currency, then remeasurement is appropriate. 2. Management makes the final determination in selecting the firm’s functional currency. 3. A major difference between translation and remeasurement lies in the use of different exchange rates—for example, assets are translated at the exchange rate in effect on the balance sheet date whereas they are remeasured at the historical rate in effect when they were acquired. Another difference relates to the disclosure of the effect of changing exchange rates. With translation, the difference is reported as an equity adjustment on the balance sheet. With remeasurement, the difference is recognized as a gain or loss and recorded on the income statement. E 15-6 Translating Financial Statements AccountTranslation Amount Cash$100,000current rate Inventory700,000current rate Plant and equipment900,000current rate Sales3,500,000average rate Common stock450,000historical rate E 15-7 Foreign Currency Transactions and Translation 1. If, at the balance sheet date, a foreign currency transaction has not been completed and there has been a change in the exchange rate since the origination of the transaction, an exchange gain or loss is recorded. Then, upon settlement of the sales or purchase contract, any remaining exchange gain or loss is recognized. Thus, foreign currency transaction gains or losses are recorded in the period in which the exchange rate changes. Because UAL is an international carrier, it has transactions in foreign currencies. Due to changes in the exchange rates, there will be gains and losses on foreign currencies. 2. An account for a cumulative foreign currency translation adjustment would exist only if UAL had subsidiary companies located outside of the United States and then translated the financial statements of the companies into U. S. dollars. We can assume that UAL does not have such subsidiaries located outside of the United States. E 15-8 Translating Foreign Currency Financial Statements International Metals Translated Balance Sheet January 3, 2003 (in CanadianExchange(in U. S. dollars) Ratedollars) Assets Cash$58,000$0. 79$45,820 Accounts receivable112,5000. 7988,875 Inventory91,8000. 7972,522 Plant assets135,4000. 79106,966 Total assets$397,700$314,183 Liabilities and Equity Accounts payable$165,600$0. 79$130,824 Long-term debt88,0000. 7969,520 Paid-in capital65,1000. 7951,429 Retained earnings79,0000. 7962,410 Total liabilities and equity$397,700$314,183 Note that there is no translation adjustment. This is because the translated balance sheet is prepared on the acquisition date. A translation adjustment arises from exchange rate changes after the acquisition date. E 15-9 Translating Foreign Currency Financial Statements 1. International Data Products Trial Balance Trial BalanceExchangeTrial Balance (in Japanese yen)Rate(in American dollars) Cash6,000,000$0. 007$42,000 Accounts receivable18,500,0000. 007129,500 Inventory21,250,0000. 007148,750 Equipment27,700,0000. 007193,900 Cost of goods sold36,000,0000. 0065234,000 Expenses15,500,0000. 0065100,750 Dividends5,000,0000. 006733,500 Total debits129,950,000$882,400 Accounts payable24,000,000$0. 007$168,000 Long-term debt12,000,0000. 00784,000 Capital stock20,000,0000. 0055110,000 Retained earnings15,950,000computed105,000 Sales58,000,0000. 0065377,000 Translation adjustment38,400 Total credits129,950,000$882,400 2. International Data Products Income Statement Sales$377,000 Cost of goods sold234,000 Gross margin$143,000 Other expenses100,750 Net income$42,250 International Data Products Balance Sheet Assets Cash$42,000 Accounts receivable129,500 lnventory148,750 Equipment193,900 Total assets$514,150 Liabilities and Equity Accounts payable$168,000 Long-term debt84,000 Capital stock110,000 Retained earnings113,750 Translation adjustment38,400 Total liabilities and equity$514,150 Computation of Retained Earnings: Beginning retained earnings$105,000 Net income42,250 $147,250 Less: Dividends33,500 Ending retained earnings$113,750 E 15-10 Meeting the Needs of Foreign Investors For such a special report to be useful for non-U. S. stockholders, Lyle should do the following things: a. Prepare the report in the language of the non-U. S. stockholders. b. Prepare the report in the local currency of the non-U. S. stockholders. . Restate the financial statements using the accounting standards of the users’ country, or at least restate those parts of the statements that are relevant for a decision maker. E 15-11 Understanding Special-Purpose Annual Reports 1. Since Eurotech is a multinational company, it is trying to provide its nondomestic investors (such as U. S. stockholders) with information they can unde rstand. This includes translating statements into the language and currency of the users. By providing such a report, Eurotech is responding to the needs of its nondomestic users. 2. Such a report is quite useful. To assist my decision making as much as possible, I would want Eurotech to provide me with a report that is restated according to U. S. GAAP or makes use of some of the international accounting standards set forth by the IASB. If such restated statements are not prepared, it would be useful to have a schedule reconciling Belgian GAAP with U. S. GAAP. E 15-12 Differing Accounting Standards The probable cause of this difference in rankings is differences in generally accepted accounting principles (GAAP). The accounting standards in some countries, such as Germany and Japan, are more conservative than are the standards in the United States. This means that these standards result in systematically lower reported earnings than would be computed using U. S. GAAP. For example, the chapter included a discussion of â€Å"hidden reserves† in Germany. By establishing hidden reserves, companies can reduce profits in a given year. In later years, when these reserves are released or reduced, profits increase. In a sense, reserves smooth earnings and allow buildup of unreported profits that can be used in down years. E 15-13 Are International Ratios Comparable? If the only difference between U. S. nd foreign firms was a difference in accounting methods, it would not be a major problem to perform the necessary adjustments to be able to make financial ratios internationally comparable. Financial analysts are experienced in doing this very thing to improve the comparability of the financial statements of U. S. companies. However, U. S. and foreign firms differ in more than just accounting method choice; they operate in differen t business environments. For example, financing for most German firms comes not from stockholders but from large banks. Japanese firms are legendary for emphasizing growth in market share over short-term profits. Because U. S. and foreign firms do business in different ways, their financial ratios are not directly comparable, just as the financial ratios of two firms operating in different industries are not comparable. A major challenge facing international financial analysts is how to make appropriate adjustments for differing operating environments in order to make proper international ratio comparisons. E 15-14 Composition of the IASB Board 1. Of the seven national standard setters formally represented on the initial IASB, four are from Anglo-Saxon countries: Australia, New Zealand, Canada, United Kingdom, and United States. . In its initial composition, the IASB included no representatives from national standard setters in South America or from Central or Northern Africa. In addition, there are no representatives from the Middle East. In large part this stems from the fact that many countries with developing economies have not been very active in the expensive luxury of developing accoun ting standards. E 15-15 Preparation of a Form 20F Reconciliation 1. MEBA Company Reconciliation of Stockholders’ Equity to U. S. GAAP Stockholders’ equity computed according to home country GAAP100,000 Adjustments required to conform with U. S. GAAP: Goodwill, adjusted for amortization (80,000 – [80,000 ( 5/40]) 70,000 Unrealized gain on available-for-sale securities (4,700 – 3,000)1,700 Stockholders’ equity in accordance with U. S. GAAP171,700 With the adoption of FASB Statement No. 142, goodwill is no longer amortized (beginning in 2002) in the United States. There would still be a necessary adjustment to equity because goodwill is recorded as an asset in the United States. However, the adjustment would be for the entire 80,000. 2. MEBA Company Reconciliation of Net Income to U. S. GAAP Net income computed according to home country GAAP12,000 Adjustments required to conform with U. S. GAAP: Goodwill amortization (80,000/40 years)(2,000) Net income in accordance with U. S. GAAP10,000 With the adoption of FASB Statement No. 142, goodwill is no longer amortized (beginning in 2002) in the United States. Thus, there would be no need for the 2,000 reconciling item to subtract goodwill amortization. Thus, in this exercise, home country GAAP net income and U. S. GAAP net income would be the same. E 15-16 Preparation of a Form 20F Reconciliation 1. Gwang Ju Company Reconciliation of Stockholders’ Equity to U. S. GAAP Stockholders’ equity computed according to home country GAAP4,700,000 Adjustments required to conform with U. S. GAAP: Brand names (2,000,000) Postretirement obligation(1,500,000) Development costs (400,000) Stockholders’ equity in accordance with U. S. GAAP 800,000 Note: The adjustments for the postretirement obligation and development costs both reflect the fact that these amounts would have been expensed (reducing the retained earnings portion of stockholders’ equity) under U. S. GAAP. 2. Gwang Ju Company Reconciliation of Net Income to U. S. GAAP Net income computed according to home country GAAP500,000 Adjustments required to conform with U. S. GAAP: Development costs(400,000) Postretirement medical care expense(230,000) Net income in accordance with U. S. GAAP(130,000) PROBLEMS P 15-17 Foreign Currency Transactions 1. A purchase/sale resulting in a payable/receivable is considered separately from the subsequent payment/collection. The purchase/sale transaction is assumed to correctly measure the operating cost/revenue. Any exchange gains or losses on the payment/collection are the result of a decision not to settle immediately and not to hedge the open payable/receivable, but to speculate in exchange rate fluctuations. Accordingly, any exchange gains or losses are disclosed separately on the income statement as a financial item. Furthermore, adjustments are required at financial statement dates to recognize exchange gains or losses on outstanding payables/receivables. 2. The process of translating a foreign subsidiary’s financial statements is as follows: †¢ Assets and liabilities are translated using the current exchange rate prevailing as of the balance sheet date. †¢ Income statement items are translated at the average exchange rate for the year. †¢ Dividends are translated using the exchange rate prevailing on the date the dividends were declared. Paid-in capital is translated at the historical rate, that is, the rate prevailing on the date the subsidiary was acquired or the stock was issued. †¢ Retained earnings is translated in the first year using historical rates, but in subsequent years, it is computed by taking the balance in retained earnings from the prior per iod’s translated financial statements, adding translated net income, and subtracting translated dividends. †¢ A translation adjustment, either increasing or decreasing equity, is then recorded in order to balance the translated accounts. 3. A translation adjustment is recognized as accumulated other comprehensive income in the U. S. parent company’s stockholders’ equity. 4. ANALYSIS: The translation adjustment is recognized as a deferred gain (or loss) rather than as an income statement gain or loss because the only way the foreign currency gain can be realized is through liquidation of all the assets and liabilities of the foreign subsidiary. If the foreign subsidiary is a self-contained going concern, as it is assumed to be when the functional currency is the local currency and translation is used, it makes ense to defer the translation gain (or loss) because actual liquidation and conversion of the foreign subsidiary’s net assets into U. S. dollars is not expected any time soon. P 15-18 Foreign Currency Transactions 1. U. S. dollar amounts of receivables and (payables): Date of SaleBalance SheetDate of Payment or PurchaseDateor Receipt Goldstar (Korea)($515,000)($560,000)($575,000) Lockner (Switz erland)270,000270,000270,000 Geopacific (Canada)323,232332,112321,456 Printco (Japan)(337,500)(310,500)(328,500) 2. Exchange gains and (losses). An increase in a payable results in a loss; a decrease in a payable results in a gain. An increase in a receivable results in a gain; a decrease in a receivable results in a loss. Balance SheetDate of Payment Dateor Receipt Goldstar (Korea) ($45,000)($15,000) Lockner (Switzerland)nonenone Geopacific (Canada)8,880(10,656) Printco (Japan)27,000(18,000) Total ($9,120) ($43,656) Total exchange loss in 2002 is $9,120. Total exchange loss in 2003 is $43,656. 3. ANALYSIS: A company can partially hedge its exposure to foreign currency exchange risk by denominating transactions in a variety of different currencies. This is analogous to controlling investment risk by buying a diversified portfolio of stocks. As seen in this problem, some currencies strengthen at the same time that others weaken, and there is some canceling out of exchange gains and losses. However, this strategy does not eliminate all foreign currency exchange risk—in any given period, there is still exposure to exchange gains and losses. P 15-19 Translating Foreign Currency Financial Statements 1. Jane Company Ltd. Balance Sheet CanadianExchangeU. S. AccountDollarsRate*Dollars Cash$160,0000. 75$120,000 Accounts receivable, net180,0000. 75135,000 Inventory250,0000. 75187,500 Building, net800,0000. 75600,000 Land510,0000. 75382,500 Total assets$1,900,000$1,425,000 Accounts payable$170,0000. 75$127,500 Notes payable365,0000. 75273,750 Common stock700,0000. 85595,000 Retained earnings665,000 691,0001 Cumulative translation Adjustment(262,250)2 Total equities$1,900,000$1,425,000 Income Statement Sales$1,400,0000. 70$980,000 Cost of goods sold800,0000. 70560,000 Selling expenses320,0000. 70224,000 General and administrative expenses150,0000. 70105,000 Total expenses$1,270,000$889,000 Net income$130,000$91,000 *For the balance sheet, in all cases but common stock and retained earnings, the current exchange rate is used to translate the items. For common stock, the historical rate is used. For the income statement, the average rate is used. 1$600,000 retained earnings at the beginning of the period plus net income of $91,000 2Needed to make liabilities and stockholders’ equity equal to assets 2. ANALYSIS: U. S. Oils can reduce its foreign currency exposure in a variety of ways. One way is to replace some of its equity investment in Jane Company with debt. In the extreme, if total assets and total liabilities are the same amount, foreign currency exposure is zero because gains and losses on the assets and liabilities will perfectly offset one another. U. S. Oils can also enter into a long-term derivative agreement, such as a forward contract, that will hedge its exposure to Canadian dollar risk. P 15-20 Translating Foreign Currency Financial Statements 1. Doghead Technology Trial Balance December 31, 2003 Trial BalanceTrial Balance Dec. 31, 2003ExchangeDec. 31, 2003 (in French francs)Rate (in U. S. dollars) Cash925,000$0. 228$210,900 Accounts receivable1,875,0000. 228427,500 Inventory2,115,0000. 228482,220 Equipment1,025,0000. 228233,700 Cost of goods sold7,985,0000. 2101,676,850 Expenses4,234,0000. 210889,140 Dividends900,0000. 205184,500 Total debits19,059,000$4,104,810 Accounts payable2,100,0000. 228$478,800 Long-term debt1,000,0000. 228228,000 Paid-in capital1,200,0000. 175210,000 Retained Earnings (balance at beginning of year)640,000computed108,017* Sales14,119,0000. 2102,964,990 Translation adjustment115,003 Total credits19,059,000$4,104,810 *Retained earnings, 1/1/02 (301,000 francs ($0. 175)$52,675 Plus net income for 2002 (839,000 francs ($0. 178)149,342 $202,017 Less dividends for 2002 (500,000 francs ($0. 188)94,000 Retained earnings, 12/31/02$108,017 Doghead Technology Income Statement For the Year Ended December 31, 2003 Sales$2,964,990 Cost of goods sold1,676,850 Gross profit$1,288,140 Less: Expenses889,140 Net income$399,000 Doghead Technology Balance Sheet December 31, 2003 Assets Cash$210,900 Accounts receivable427,500 Inventory482,220 Equipment233,700 Total assets$1,354,320 Liabilities and Equity Accounts payable$478,800 Long-term debt228,000 Paid-in capital210,000 Retained earnings322,517 Translation adjustment115,003 Total liabilities and equity$1,354,320 Computation of retained earnings, December 31, 2003: Beginning retained earnings$108,017 Net income399,000 $507,017 Less: Dividends184,500 Ending retained earnings$322,517 2. ANALYSIS: Crab Beach invested 1,501,000 francs (total equity on January 1, 2002; 1,200,000 + 301,000) in Doghead Technology when one franc was worth $0. 175. By the end of 2003, each franc was worth $0. 228, suggesting that Crab Beach had experienced a gain of approximately $79,553 [1,501,000 francs ? ($0. 228 – $0. 175)]. The reason the deferred gain is not equal to $79,553 is that the investment just didn’t sit there during the two-year period—transactions occurred (sales, expenses, and dividends) that impacted the amount of Crab Beach’s net franc investment. P 15-21 Translating Foreign Currency Financial Statements 1. In the examples given in the text, the objective was to translate the financial statement items and determine the amount of translation adjustment required to balance the trial balance. In this case, the translation adjustment is given and the amount of retained earnings must be solved. Renecko Corp. Trial Balance Trial BalanceExchangeTrial Balance (in British pounds)Rate(in U. S. dollars) Cash55,000$1. 94$106,700 Accounts receivable113,0001. 94219,220 Inventory89,0001. 94172,660 Plant and equipment121,0001. 94234,740 Cost of goods sold218,0001. 98431,640 Other expenses74,0001. 98146,520 Dividends40,0001. 9778,800 Translation adjustment55,000 Total debits710,000$1,445,280 Current liabilities167,0001. 94$323,980 Long-term debt48,0001. 9493,120 Common stock100,0002. 15215,000 Retained earnings45,000*computed120,180** Revenues350,0001. 98693,000 Total credits710,000$1,445,280 *Total debits of 710,000 less credits (excluding retained earnings) of 665,000 = retained earnings of 45,000 as of the beginning of the year **Total debits of $1,445,280 less credits (excluding retained earnings) of $1,325,100 = retained earnings of $120,180 as of the beginning of the year Although not asked for in the problem, the retained earnings balance at the end of the year: Beginning retained earnings$120,180 Plus net income114,840 $235,020 Less dividends78,800 Ending retained earnings$156,220 2. ANALYSIS: This simple conversion process is misleading because it does not reflect the impact of changing exchange rates on the U. S. dollar value of South Kaibab’s investment in Renecko. | | |(In U. S. Dollars; | | |(In Pounds) |? 1 = $1. 4) | |Revenues |350,000 |679,000 | |Cost of goods sold |218,000 |422,920 | |Gross margin |132,000 |256,080 | |Other expenses | 74,000 |143,560 | |Net income | 58,000 |112,520 | | | | | |Cash | 55,000 |106,700 | |Accounts receivable |113,000 |219,220 | |Inventory | 89,000 |172,660 | |Plant and equipment | 121,000 | 234,740 | |Total assets | 378,000 | 733,320 | | | | | |Current liabilities | 167,000 | 323,980 | |Long-term debt | 48,000 | 93,120 | |Common stock | 100,000 | 194,000 | |Retained earnings | 63,000 | 122,220 | |Total liabilities and equity | 378,000 | 733,320 | P 15-22 Mutual Recognition 1. Of course, individual responses will differ on this question. One common opinion is that it is difficult to agree with this statement. It may hold for some countries, but certainly not all. As seen in the text of the chapter, significant adjustments must sometimes be made to convert the reported numbers under one country’s GAAP into U. S. GAAP. 2. Mutual recognition means that the financial statements of one country are recognized for all regulatory purposes by another country. For example, the SEC would recognize financial statements prepared under German GAAP as sufficient for meeting its regulations. For mutual recognition to be feasible, it would require that regulatory bodies believe that accounting practices of different countries are indeed equivalent. 3. ANALYSIS: The SEC could require complete restatement of financial statements, or a reconciliation to U. S. GAAP at a minimum. P 15-23 Preparation of a Form 20F Reconciliation 1. HKUST Company Reconciliation of Stockholders’ Equity to U. S. GAAP Stockholders’ equity computed according to home country GAAP146,000 Adjustments required to conform with U. S. GAAP: Minority interest included in stockholders’ equity (25,000) Unrealized gain on trading securities (4,700 – 3,000)1,700 Interest on the financing of self-constructed assets5,000 Stockholders’ equity in accordance with U. S. GAAP127,700 Note: The adjustments for the interest on the financing of self-constructed assets reflects the fact that this amount would NOT have been expensed (NOT reducing the retained earnings portion of stockholders’ equity) under U. S. GAAP. Similarly, the unrealized gain on trading securities would have increased net income, also increasing retained earnings. 2. HKUST Company Reconciliation of Net Income to U. S. GAAP Net income computed according to home country GAAP33,000 Adjustments required to conform with U. S. GAAP: Minority interest income(4,100) Unrealized gain on trading securities (4,700 – 3,000)1,700 Interest on the financing of self-constructed assets5,000 Net income in accordance with U. S. GAAP35,600 3. ANALYSIS: Home Country GAAPU. S. GAAP Net income33,00035,600 Stockholders’ equity146,000127,700 Return on equity22. 6%27. 9% In this case, return on equity is higher for HKUST using U. S. GAAP. Similarly, in many cases the reconciliation to U. S. GAAP will result in lower reported return on equity. A company might not wish to reconcile its reported numbers to U. S. GAAP, even when doing so would result in higher return on equity, because the reconciliation might require disclosure of information that the company would rather not disclose. In addition, the reconciliation process requires some effort by the accounting staff and so is not costless. P 15-24 Preparation of a Form 20F Reconciliation 1. Delpie Company Reconciliation of Stockholders’ Equity to U. S. GAAP Stockholders’ equity computed according to home country GAAP4,000,000 Adjustments required to conform with U. S. GAAP: Goodwill, adjusted for amortization (1,600,000 – [1,600,000 ( 3/40])1,480,000 Possible obligation for severance benefits1,500,000 Stockholders’ equity in accordance with U. S. GAAP6,980,000 With the adoption of FASB Statement No. 142, goodwill is no longer amortized (beginning in 2002) in the United States. There would still be a necessary adjustment to equity because goodwill is recorded as an asset in the United States. However, the adjustment would be for the entire 1,600,000. Note: The adjustment for the possible obligation for severance benefits reflects the fact that this amount would not have been expensed under U. S. GAAP, resulting in higher net income and an increase to the retained earnings portion of stockholders’ equity. 2. Delpie Company Reconciliation of Net Income to U. S. GAAP Net income computed according to home country GAAP400,000 Adjustments required to conform with U. S. GAAP: Possible obligation for severance benefits1,500,000 Goodwill amortization (1,600,000/40 years)(40,000) Net income in accordance with U. S. GAAP1,860,000 With the adoption of FASB Statement No. 142, goodwill is no longer amortized (beginning in 2002) in the United States. Thus, there would be no need for the 40,000 reconciling item to subtract goodwill amortization. 3. ANALYSIS: It appears that Delpie chose to recognize the obligation for possible future severance benefits this year rather than waiting to recognize the obligation in a future year in order to smooth its reported income. If Delpie had waited until next year to recognize the obligation for severance benefits, a large increase in income this year (from the unusual gain) would have been followed by a large decrease next year. Investors prefer a steadily increasing earnings stream, not one that wildly fluctuates from one year to the next. APPLICATIONS AND EXTENSIONS Deciphering Actual Financial Statements Deciphering 15-1 McDonald’s 1. McDonald’s reports that the functional currency of its operations that are located outside the United States is the local currency, with the exception of hyperinflationary countries. For those countries, the U. S. dollar is the functional currency. 2. McDonald’s purchases foreign currency options to serve as hedges of anticipated foreign currency royalty and other payments received from affiliates and subsidiaries. Short-term forward foreign exchange contracts are also used to mitigate exposure on foreign currency royalty and other payments received from affiliates and subsidiaries. Non-U. S. dollar financing transactions are used as hedges of long-term investments in foreign subsidiaries. 3. McDonald’s enters into agreements to exchange various foreign currencies in order to hedge the royalty payments that it expects to receive that are denominated in foreign currencies. Deciphering 15-2 Microsoft 1. In U. S. Dollars In Australian (AUD) dollars; AUD$1 = US $0. 6250. Net Income – U. S. GAAP15,054$9,409 In Canadian (C) dollars; C$1 = US $0. 6786. Net Income – U. S. GAAP13,8839,421 In British (BP) pounds; BP1 = US $1. 5908. Net income per published U. S. financial statements5,9229,421 In terms of U. S. dollars, the U. S. GAAP net incomes are the same for each of the three countries illustrated, except for rounding differences. 2. In U. S. In MarksDollars Jahresuberschu? nach deutschen Rechnungslegungs- vorschriften (HGB), nach Vorzugsdividenden22,775$11,629 Abschreibung auf erworbene Software19399 Rechnungslegungsvorschriften11860 Steuerminderung aufgrund der Ausubung von Aktienkaufoptionen durch Mitarbeiter(4,636)(2,367) Jahresuberschu? nach U. S. GAAP18,452$9,421 A similar table can be constructed using the Canadian GAAP disclosures: In CanadianIn U. S. DollarsDollars Net income – Canadian GAAP17,136$11,628 Acquired in-process technology 14598 Visio Pooling8960 Tax benefit of stock options(3,487)(2,366) Net Income – U. S. GAAP13,883$9,420 It is easy to match up the two reconciling items. In addition, from this comparison we see that, according to Microsoft, German GAAP and Canadian GAAP are almost identical in this case. Deciphering 15-3 Reed Elsevier 1. 2000Netherlands GAAPU. S. GAAP Net income3360 Stockholders’ equity3,0413,707 Return on equity1. 1%1. 6% 1999Netherlands GAAPU. S. GAAP Net income(63)(73) Stockholders’ equity1,8552,423 Return on equity(3. 4)%(3. 0)% 2. For both years, return on equity for Reed Elsevier computed using U. S. GAAP is higher than return on equity computed using Netherlands GAAP. This suggests that if a financial analyst is comparing Reed Elsevier’s financial ratios to those of a U. S. company, it is very important that the analyst do everything possible to make adjustments for the differing accounting standards used. International Financial Statements: BMW 1. Balance Sheet of BMW AG At December 31, 2000 in millions of Euro Current assets: Liquid funds2,879 Marketable securities and notes751 Trade receivables1,449 Receivables from sales finanacing10,372 Leased products7,206 Other receivables and other assets2,804 Inventories2,809 Prepaid expenses842 Total current assets29,112 Financial assets950 Tangible assets5,710 Intangible assets103 Total Assets35,875 Current liabilities: Trade payables1,831 Liabilities to banks105 Total current liabilities1,936 Long-term liabilities: Liabilities from sales financing15,508 Deferred income61 Deferred income from leasing financing662 Bonds2,211 Other liabilities2,391 Pension provisions1,666 Other provisions6,507 Registered profit-sharing certificates37 Total Liabilities30,979 Shareholders’ equity: Subscribed capital672 Capital reserve1,914 Revenue reserves2,000 Unappropriated profit available for distribution310 Total shareholders’ equity4,896 Total Liabilities and Shareholders’ Equity35,875 The prepaid expenses have been included with current assets; BMW lists them in a separate category. The trade payables (accounts payable) are obviously current liabilities; the small amount of â€Å"liabilities to banks† has also been somewhat arbitrarily classified as current. The item â€Å"registered profit-share certificates† is somewhat of a mystery; however, it must be either a liability or an equity and BMW excludes it from shareholders’ equity so it is reported as a liability here. BMW’s equity section contains a number of unfamiliar labels. Subscribed capital and capital reserve correspond very roughly with common stock at par and paid-in capital in excess of par. Revenue reserves corresponds approximately with retained earnings. The unappropriated profit is the amount of retained earnings that has been authorized (in accordance with the law and by vote of the board of directors) to be paid as dividends in the future. 2. Income Statement of BMW AG for the financial year ended December 31, 2000 in millions of Euros Net sales35,356 Cost of sales28,974 Gross profit6,382 Selling and marketing costs4,194 General administration costs520 Other operating expenses2,0256,739 (357) Other operating income1,935 Total operating income1,578 Net income from investments148 Net interest income388 Interest expenses from leasing financing(45185 Income before income taxes1,663 Taxes on income637 Net income1,026 Note: The exact arrangement given above is just one of many possible groupings. The category â€Å"Other operating income† includes gains on the disposal of fixed assets, gains from currency transactions and income from the release of provisions and liabilities. It is interesting to note that whether BMW generates profit from its operations depends on how one classifies these â€Å"other operating income† items. Business Memo: Choosing the Functional Currency To:The Board of Directors of Jeff Pong Company From:Member of the Accounting Staff Subj:Conversion of Mak Hung financial statements into U. S. dollars Once the financial statements of Mak Hung Enterprises have been restated to be in conformity with U. S. GAAP, they will be converted into U. S. dollars using the following process: †¢ Assets and liabilities are translated using the current exchange rate prevailing as of the balance sheet date. †¢ Income statement items are translated at the average exchange rate for the year. †¢ Capital stock is translated at the historical rate, i. e. , the rate prevailing on the date Mak Hung was acquired. This process is called translation and is used for all foreign subsidiaries that are considered to be self-contained. A self-contained foreign subsidiary is one that denominates most of its transactions in the local currency (Chinese yuan in this case). The local currency is called the functional currency of the subsidiary. This case contrasts with a subsidiary that primarily serves as a cash conduit for the parent; with this type of subsidiary, many transactions are denominated in U. S. dollars and cash transactions between the parent and subsidiary are frequent. For this type of parent-dependent subsidiary, the functional currency is said to be the U. S. dollar and the exchange rate conversion process, called remeasurement, differs significantly from the translation process outlined above. The accounting implications of the translation process are that any gains or losses arising from changes in the U. S. dollar/Chinese yuan exchange rate are not recognized as part of income but are instead reported as a separate category under consolidated equity. Research: The Movement of Exchange Rate U. S. dollar value of one currency unit January 1, 1999June 27, 2001 U. S. dollar1. 00001. 0000 British pound1. 66271. 4151 Chinese yuan (renminbi)0. 12080. 1208 Russian ruble0. 04790. 0343 euro1. 18740. 8633 euro value of one currency unit January 1, 1999June 27, 2001 U. S. dollar0. 84221. 1584 British pound1. 40031. 6392 Chinese yuan (renminbi)0. 10170. 1400 Russian ruble0. 04030. 0397 euro1. 00001. 0000 1. Relative to the euro, the U. S. dollar, the British pound, and the Chinese yuan strengthened between January 1, 1999 and June 27, 2001. The Russian ruble weakened slightly relative to the euro during that period. 2. The predominant trend during the two-and-a-half-year period examined was a weakening of the euro as financial markets expressed concern about whether the member countries would have the financial discipline to maintain the value of the euro. The Russian ruble continued to slide during this period in response to continued uncertainty over the solvency of the Russian government. 3. At this point, it is hard to say whether the euro will continue to weaken. One sure-fire piece of investment advice is to never try to outguess the foreign currency exchange market. Ethics Dilemma: Fear of Reporting Under U. S. GAAP This scenario is very close to what actually happened inside Daimler-Benz in 1993. The chief financial officer, Gerhard Liener, pushed hard to get Daimler-Benz to list its shares in the United States. Mr. Liener’s motivation was not so much gaining access to the U. S. securities markets but instead was exposing Daimler-Benz to the regulatory and disclosure requirements in the United States. Mr. Liener believed that, without these requirements, Daimler-Benz would continue to hide operating losses through the reversal of â€Å"hidden reserves. In doing so, the management of the company would delay making the tough decisions needed to fix the company. Mr. Liener’s story is a sad one. He was later ousted from the management of Daimler-Benz after portions of his diary, critical of the former chairman of the company, we re printed. Mr. Liener committed suicide in 1995. Nathaniel C. Nath, â€Å"Ex-Executive of Daimler is Called Suicide,† The New York Times, December 15, 1995: p. D2. The Debate: The FASB or the IASB Supporters of the FASB †¢ The United States has the largest capital market in the world. †¢ The FASB has long experience working with businesspeople in a sophisticated capital market. †¢ The FASB is well funded and has an experienced technical staff. Most of the advances in accounting standards in the past 20 years have originated with the FASB. †¢ The FASB enjoys broad business support. Supporters of the IASB †¢ There are many people and companies around the world who would never follow FASB standards just for the fact that they originate in the United States. †¢ The IASB enjoys broad-based support from many different countries. †¢ The IASB has particularly strong support among developing countries. †¢ The IASB has a head start in gaining in ternational credibility for its body of standards. Cumulative Spreadsheet Project 1. NOTE: BECAUSE OF SPREADSHEET ROUNDING, NOT ALL OF THE DISPLAYED TOTALS RECONCILE EXACTLY. HandymanHistorical rate0. 40 Chapter 15, Part 1Ending rate0. 62 Average rate0. 51 | | Year | Translated | | | | | 2003 | 2003 | | | |Balance Sheet | | | | | |Assets | | | | | |Cash |10 |6. 0 | | | |Receivables |27 |16. 74 | | | |Inventory |153 | 94. 86 | | | |Total current assets |190 |117. 80 | | | | | | | | | |Property, plant, equipment |199 |123. 8 | | | |Accumulated depreciation | 9 | 5. 58 | | | |Total Assets |380 |235. 60 | | | | | | | | | |Liabilities | | | | | |Accounts payable |74 |45. 8 | | | |Short-term loans payable | 10 | 6. 20 | | | |Total current liabilities |84 |52. 08 | | | | | | | | | |Long-term debt |207 |128. 34 | | | |Total Liabilities |291 |180. 2 | | | | | | |Translation | | |Stockholders’ Equity | | |Adjustment |$18. 70 | |Paid-in capital |50 |20. 00 | | | |Retained Earnings (as of 12/31) | 39 | 16. 48 | | | |Total Liab. and Equities |380 |216. 0 | | | | | | | | | |Retained Earnings (as of 1/1) |31 |12. 40 | | | |+ Net income |8 |4. 08 | | | |– Dividends | 0 | 0. 0 0 | | | |Retained Earnings (as of 12/31) | 39 | 16. 8 | | | | | | | | | |Income Statement | | | | | |Sales |700 |357. 00 | | | |Cost of goods sold |519 |264. 69 | | | |Gross profit |181 |92. 31 | | | |Depreciation expense |5 |2. 55 | | | |Other operating expenses |155 | 79. 5 | | | |Operating income |21 |10. 71 | | | |Interest expense | 9 | 4. 59 | | | |Income before taxes |12 |6. 12 | | | |Income tax expense | 4 | 2. 04 | | | |Net Income | 8 | 4. 08 | | | 2. HandymanHistorical rate0. 40 Chapter 15, Part 2Ending rate0. 28 Average rate0. 34 | | Year | Translated | | | | | 2003 | 2003 | | | |Balance Sheet | | | | | |Assets | | | | | |Cash |10 |2. 0 | | | |Receivables |27 |7. 56 | | | |Inventory |153 |42. 84 | | | |Total current assets |190 |53. 20 | | | | | | | | | |Property, plant, equipment |199 |55. 2 | | | |Accumulated depreciation | 9 | 2. 52 | | | |Total Assets |380 |106. 40 | | | | | | | | | |Liabilities | | | | | |Accounts payable |74 |20. 2 | | | |Short-term loans payable | 10 | 2. 80 | | | |Total current liabilities |84 |23. 52 | | | | | | | | | |Long-term debt |207 | 57. 96 | | | |Total Liabilities |291 |81. 8 | | | | | | |Translation | | |Stockholders’ Equity | | |Adjustment |($10. 20) | |Paid-in capital |50 |20. 00 | | | |Retained Earnings (as of 12/31) | 39 | 15. 12 | | | |Total Liab. and Equities |380 |116. 0 | | | | | | | | | | | | | | | |Retained Earnings (as of 1/1) |31 |12. 40 | | | |+ Net income |8 |2. 72 | | | |– Dividends | 0 | 0. 00 | | | |Retained Earnings (as of 12/31) | 39 | 15. 12 | | | | | | | | | | | | | | |Income Statement | | | | | |Sales |700 |238. 00 | | | |Cost of goods sold |519 |176. 46 | | | |Gross profit |181 |61. 54 | | | |Depreciation expense |5 |1. 70 | | | |Other operating expenses |155 | 52. 0 | | | |Operating income |21 |7. 14 | | | |Interest expense | 9 | 3. 06 | | | |Income before taxes |12 |4. 08 | | | |Income tax expense | 4 | 1. 36 | | | |Net Income | 8 | 2. 72 | | | 3. The translation adjustment in (1) is an increase in equity, reflecting the fact that the foreign currency has increased in value since the U. S. parent invested in Handyman. In contrast, the translation adjustment in (2) is a decrease in equity, reflecting the decline in the value of the foreign currency. Internet Search: www. daimlerchrysler. com This solution was prepared using information available on DaimlerChrysler’s Web site on June 12, 2001. 1. DaimlerChrysler reports that it’s NECAR 4 (New Electric Car) is now in operation and testing in California with a top speed of 145 km/h and an operating range of 450 kilometers. After testing they plan to begin production in 2003. 2. The 2000 income statement reveals that the combined company of DaimlerChrysler had net income of $7,411 million on revenues of $152,446 million. 3. The DaimlerChrysler financial statements are presented in both U. S. dollars and in euros. The balance sheet format is different from the standard U. S. format, with long-term assets being shown first and stockholders’ equity being listed before liabilities. 4. In its annual report, the company notes that â€Å"assets and liabilities of foreign subsidiaries . . . are generally translated using period-end exchange rates while the statements of income are translated using average exchange rates during the period. † This statement indicates that the company translates rather than remeasures. As of 12/31/00, DaimlerChrysler reported a cumulative translation adjustment of 3. 285 billion euros. Test Your Intuition Can U. S. companies create â€Å"hidden reserves†? Explain. Yes, U. S. companies can create â€Å"hidden reserves. † Recall that hidden reserves are simply overstatements of expenses that can be reversed in future years to bolster income. A prime example of a â€Å"hidden reserve† used by U. S. companies is a restructuring charge. Assume that France Company is a French company that happens to use U. S. GAAP. Will France Company recognize a $638 exchange gain on June 1, 2003? Explain your answer. No, France Company will not necessarily recognize a $638 exchange gain on June 1, 2003. If France Company maintains its accounting records in francs, then it will report no exchange gains or losses in association with this franc-denominated contract. If France Company were to maintain its records in U. S. dollars, then it would recognize a $638 gain. However, it is highly unlikely that a French company would maintain its records in U. S. dollars. These days, it is more likely for the company to maintain its records in euros. Using the information in Exhibit 15-5, identify the German words for â€Å"receivables† and â€Å"liabilities. † The word â€Å"receivables† appears three times in the current asset section. The corresponding German word appears to be â€Å"Forderungen. † The German word for liabilities, found several times in the bottom section

Parents and children in Romeo and Juliet free essay sample

Wife Juliet is the daughter of Lord and Lady Capulet, a wealthy and well-respected family. Although young and members of opposing families in a long-standing feud, Juliet and Romeo fall instantly in love with each other, and marry in secret. Her parents remain unaware of their relationship, and are determined that she marries Paris; it is their hasty actions in bringing about the marriage to Paris against Juliet’s wishes that ultimately leads to the tragic death of the two young lovers. Lord Capulet and his wife are shown to care for Juliet, and at first it seems that Capulet is reluctant for her to leave the family home through marriage. He argues that Juliet â€Å"is yet a stranger in the world†; the word â€Å"stranger† shows that he feels she is too inexperienced to marry, and that she should perhaps be older and have had more life experience before marrying. This idea is continued when he encourages Paris to wait for â€Å"two more summers† to have passed â€Å"Ere we may think her ripe to be a bride†. We will write a custom essay sample on Parents and children in Romeo and Juliet or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page It might be that Capulet is not ready to let his only living child leave, and is trying to delay the inevitable. Also, the imagery that Shakespeare uses here could highlight the idea that Juliet would be expected to be pregnant very quickly once married, and that her body is only just biologically able to get pregnant. â€Å"Ripe† is usually used to refer to fruit, being ready to be eaten; in this case, Capulet is referring to her womb, perhaps, being able to bear children, which is reinforced when Paris tries to persuade Capulet by saying â€Å"Younger than she are happy mothers made†. Capulet shows, however, that Juliet is his priority as he is worried that she would be made miserable and spoiled by early motherhood: â€Å"too soon marred are those so early made†. This is different to Lady Capulet’s beliefs, as she encourages Juliet to marry as an indication of her social superiority: â€Å"Here in Verona, ladies of esteem,/Are made already mothers . † If Juliet delays getting married, in her mother’s eyes, it would be disapproved of, and maybe others would think there was perhaps something wrong with their daughter. She reminds Juliet that she â€Å"was your mother much upon these years†, so she feels that Juliet should follow in her footsteps, without thinking of Juliet’s best interest. Unlike Lord Capulet, she encourages Juliet to marry soon, but it could well be that based on his own experiences of marrying a woman who was very young, he recognises the damage it could do. I think that maybe Juliet’s mother changed once she was married, and Capulet perhaps regrets marrying her so young, which is why he doesn’t want Juliet to marry Paris.

Unilateraism essays

Unilateraism essays Advantages and Disadvantages of Unilateralism in Resolving Conflict There are many sources of unilateralism. Some people think that being unilateral is something good, a type of leadership. Others see it as a problem, as a country trying to implement his believes and wants to others without considering their needs or points of view just to obtain their own good. Therefore, I will be discussing, the advantages and disadvantages of taking decisions, implementing foreign policies, and taking actions toward other countries without any regard for the views of allies. When talking about unilateralism the first country that comes to my mind is the United States of America. It is very well known that other countries have also been utilitarian. But, the US is the country that has taken the most actions toward others without the support of its allies, especially after the terrorist attacks of September 11, 2001. When a country starts acting unilaterally, is because he wants to fix differences and problems of a specific situation. Or at least that is what the government says to people to keep them calm. However, the majority of people do not agree with this kind of impositions. The United States is the worlds only superpower, so powerful that no country dares to harm its interests in a direct confrontation. The U.S. can afford unilateralism because the costs of acting by itself are so small that it wouldnt damage its economy. This allows strong determinations from Bushs foreign team to please their desire to try to rule world politics. President George W. Bush says that leaders get very few positive responses to many consultations that he have maid. Therefore, he takes resolutions by his own. Consequently, foreign leaders feel left out without any influences and believe that Bush is not interested in common interests and working on common problems. ...

Harriette Walters - BACKGROUND Essay Example | Topics and Well Written Essays - 1250 words

Harriette Walters - BACKGROUND - Essay Example Year Money Position 1989 $31735 Accounting technician in the real property division of department of finance and revenue D.C. 1990 $ 47,017 Accounting technician 1991 $ 160,153 Accounting technician 1992 $ 4,711 Accounting technician 1993 $ 246,301 Accounting technician 1994 $ 1,237,425 Accounting technician 1995 $ 1,423,238 Accounting technician 1996 $ 243,425 Accounting technician 1997 $ 543,423 Accounting technician 1998 $275894 Accounting technician 1999 $ 1,244,52 Accounting technician 2000 $ 2,587,831 Accounting technician 2001 $ 3,970,987 Manager of the Adjustment Unit in the Assessment Services Division 2002 $ 3,661,748 Manager 2003 $ 4,771,787 Manager 2004 $ 8,641,720 Manager 2005 $ 6,727,130 Manager 2006 $ 7,697,097 Manager 2007 $ 5,744,497 Manager Timeline for Harriette Walters’ Fraudulent Schemes (Gray & Evans 2011) Working Background   Ms. Harriette Walters started her carrier in 1981 as an accounting technician in the real property department of the D.C office of Tax and revenue. At that time the office of tax and revenue was department of tax and revenue. In the beginning Walters noticed the system and made fake documents like checks and other such document in collaboration with a coworker. Shortly thereafter, she realized that, she can work in a much safer manner. She made the checks refund to her friends and family members. She made fake residential addresses of her friends and family member and made the property tax refund checks. All this work was done with great care, to ensure that the refund checks and fake residential addresses would look normal. These checks ranged from 800 to 3000 dollars but it is nearly impossible to determine the exact amount of checks by the investigators during 1980’s (Jacoby, Lorigo & McCallum 24). Why It Last That Long? The fraud cases were prepared with great care and Walters even checked minor errors and tried to make as less mistakes as possible. The document should look genuine. The fake copie s were made as real as possible. Sometimes the documents were copied many times to produce real looking document (Jacoby, Lorigo & McCallum 24). The official requirements like official letter heads and signatures from different officials were there to go with the refund check requests (Jacoby, Lorigo & McCallum 24). She then prepared the documents which had the fake name and address and rather than mailed, she checked the option of â€Å"held for pickup†. The refund checks were sent to the revenue department from where Walters picked the checks up and cashed them (Jacoby, Lorigo & McCallum 24). Starting the Scheme In 1989, Ms. Harriette Walters processed the first fake documented refund check. The checked is payable to Alethia Grooms having worth of $4060. The next three years, Harriette Walters processed 13 more such fraudulent checks which have the worth of over $65000 which were paid to Alethia Grooms and some other person (Jacoby, Lorigo & McCallum 24). Walter then increa sed the amount of fraudulent refund and focused her attention on the processing of fraudulent refund checks for commercial checks instead of residential property. To achieve her goals, she involved her family members and close friends in her scheme (Jacoby, Lorigo & McCallum 24). She made fraud companies with her family members and other accomplices that never existed and claimed the refund check for the fake companies. She developed a power strategy to

Terrorist Activities & Community Members Assignment

Terrorist Activities & Community Members - Assignment Example However, the first major step is getting information from the community as this is the largest information gathering sector for law enforcement. Introduction Terrorist activities are planned crimes against the people in the form of bombings, fires, disruptions of services through electronic hacking, and in shootings of innocent people which cause injuries and death (EMD 2013). Other crimes may also be attached to terrorist activities in the form of robberies when terrorists commit these in order to build up financial funding for their endeavors. It is essential when law enforcement departments are setting up programs on surveying potential terrorism activities, that community members are also included in the process of observing specific activities and people who act suspiciously and could indicate a potential for an upcoming terrorist act (EMD 2013; SARA 2013). Training may also be included so that people understand what it is they must look for so as to report it correctly to law e nforcement members. 1. Some of the types of businesses that would be a hunting ground for terrorists are pawn shops that carry firearms for sale, old cell phones, huge amounts of hardware tools, nails, nuts and bolts, knapsacks and other cheap items; home improvement centers which carry everything listed above, new, but can be bought in huge quantities; libraries that have Internet access for information searches as an anonymous users, plus literature that can be reviewed for free without checking them out of the library (Smith 2008). Terrorists may also visit their target areas, such as stadiums, airports, specific high-risk government buildings such as town halls, or capital buildings, large hotels with international clientele, and well-known businesses (EMD 2013). New York City and Washington, D.C. both have a large number of buildings that are high-risk for terrorist attacks, such as the Financial District in New York City, and the Capital Building in Washington (Smith 2008). De pending on the type of terrorist, national or international, other businesses at risk are newspapers, hospitals, colleges, utility and nuclear plants, abortion and Planned Parenthood clinics, train and railroad centers, and Internet provider businesses (EMD 2013). 2. Businesses can be monitored by agreement and in partnership with the owners, who agree to hand over information about people and events that occur that might preclude an eventual attack. A pawn shop, for example, can inform the police if someone comes in and wants to purchase a large amount of old cell phones in the shop case. While some non-profit businesses do purchase these as part of a program for the elderly, the poor or for women who have been in abusive relationships and are being relocated elsewhere, normally, large purchases of these types would signal a potential for a terrorist who will use the phones as bomb detonators (EMD 2013). Internet connections can also be monitored, so long as a proper warrant has be en approved through regular channels, not only for what businesses are doing but also to observe customers’ communications or even if there is tampering from the outside that indicates hacking from a terrorist organization (Menn 2013). 3. If business owners and community members become suspicious

Research Paper and Power Point on Artist Claude Monet

And Power Point on Artist Claude Monet - Research Paper Example Monet got born in 1840 in Paris but got raised in the Normandy region. He was the second born to his father Claude Adolphe Monet and mother Louise Justine Aubree Monet. His parents were second generation Parisians (Whiting 8). His father worked in the family’s shipping business while his mother was a housewife who took care of the family. His mother was also a trained singer who liked poetry and was also a very popular hostess. His family relocated to the Normandy region when he was aged 5 years. Monet developed his love for drawing at an early age through his interest for being outside than confined in a classroom. His mother greatly supported his artistic pursuit while his father wanted him to join the family business. Upon his mother’s death in 1857, Monet suffered greatly (Katilina & Brodskaya 50). Monet became well known in the community for drawing many of his town’s resident as well as for his caricatures. Monet started to develop a liking for the natural world in his works when he met a local landscape artist in Eugene Boudin. Boudin was influential in introducing Monet to outdoor painting also known as plein air painting, which eventually formed the basis of his works. Monet moved to Paris in 1859 to pursue his artistic dream where he enrolled at the Academic Suisse as a student(Katilina & Brodskaya 22) . His enrollment was also fuelled by the works of the Barbizon painters earlier in the century who showed close observation and great naturalistic representation in their works. His time as a student at the institution led him to meet Camille Pissarro, a fellow artist who became his close friend for years. The years 1861-1862 saw him serve in the military in Algiers, Algeria where he got discharged for poor health. His return to studies in Paris saw him meet other a rtists in Alfred Sisley, Frederic Bazille, and Auguste Renoir. The four developed an artistic friendship. Monet also worked

How to implement SWOT Analysis

How to implement SWOT Analysis INTRODUCTION Change is a very significant word in business. Modern business is defined as the most competitive and active. To survive in the modern competitive business environment, the organizations have to adopt their strategies to meet the changing demands and needs of the customers. SWOT analysis is one the most significant business strategies which helps the organizations to assess their current situation both internally and externally and to implement a new strategy where necessary. Moreover, modern high technology, communication system and online shopping are highly influencing the customers and thus their demands and needs are becoming volatile. They have more choices, alternative products and services to get. Also, the changing life style of human beings is also another important reason why the business organizations need to modify their strategies. To balance these changes, both technological and social, the managers should plan a SWOT analysis and implement a new business strategy. However, change in business enables an organization to compete with its rivals and win the business position. Business organizations, particularly fashion, clothing, perfumed, mobile companies, technological instruments consider change as the most vital part of business strategy. For manufacturing companies, change is important in the sense that it gives variety to the existing customers and satisfies their unexposed desires. However, to bring change in business environment, the first thing is to identify the need of change, which will be followed by a specific plan for these changes. Various business tools, process, technology and performance meters are used to incorporate these changes. There is no alternative for continuous improvement in business environment. To survive in a competitive business environment, continuous improvement is mandatory to meet the business objectives. So, SWOT analysis is very important for business organizations to implement a new business strategy in order to cope with the modern competitive business market and to meet business objectives. Modern Business Environment: Volatile Change is one of the most significant and vital elements in business market. There are lots of reasons whey business market is changing and getting affected by it. The word change has now become the part of corporate business. Change management is a modern business philosophy which is adopted almost by every renowned business organization to meet the challenges of volatile business environment. The reasons of rapid change in business can be economic instability, inflation, changing life style, extensive use of modern technology, etc. Rapid rise and death of new companies also affect business environment. What is SWOT Analysis? An internationally recognized and extensive used business tool, SWOT analysis is a powerful technique to assess the current situation of a business organization and to predict the future business life. It is the primary level for marketers to plan and focus on key issues. However, SWOT is an abbreviated term for Strengths, Weaknesses, Opportunities and Threats. Strengths and weaknesses are internal factors, while opportunities and threats are external. History of SWOT analysis: Albert Humphrey developed the SWOT analysis technique. Team Action Model was the research project that Humphrey led a Stanford University in the 1960s and 1970s from where the term was derived. He collected the data for this research from many top companies. However, SWOT analysis is an extended form of TAM, which helps to manage change in business organization. Moreover, since 1960s organizations have been using SWOT analysis as a business concept. It has been also used in management structure and corporate marketing. Indeed, with the passage of time the concepts of SWOT have been modified to suit the needs of business setting. Significance of SWOT analysis: SWOT analysis is one of the most significant business tools, which aims to assess the current situation of an organization in order to develop business strategies to encounter competition. It is a key element of strategic development. It helps a company to predict its future prospects and the financial environment. Again, it helps an organization to develop its critical and specific decisions to plan strategic objectives. It helps organizations to predict future difficulties or problems. Notably, SWOT analysis can also be used in human life. It helps individuals to get an instant view of personality or career. In fact, SWOT analysis is a magnificent tool for appraisal both in business and individual life. Apart from these, there are numbers of other reasons whey an organization uses SWOT analysis. It can be used as a tool of problem solving, decision making, planning, brainstorm meetings, workshop sessions, product evaluation and also personal development planning. Discussion and Analysis: SWOT A tool for auditing an organization and its environment, SWOT analysis is the primary stage of planning which helps marketers to focus on key issues of business strategies. However, SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal factors. Opportunities and threats are external factors. SWOT ANALYSIS: INTERNAL FACTORS Strengths Strengths are the first elements of SWOT analysis which assesses the positive tangible and intangible attributes of an organization internally. These attributes are controllable and within the organizations. These strengths of a person or a company help to achieve the objectives. Strengths can also be defined as the elements which enable an organization to do well, comparing to the competitors. It focuses on the advantages of the organization over the business. For example, the strengths of an organization can be good quality of the products, brand image, attention of electronic media, customer loyalty, best location, strong communication, etc. Weaknesses Weaknesses include the elements which are harmful and stand in the way of achieving the business objectives. These are the internal factors within an organizations control that prevent to gain the desired objectives. It helps the organizations to identify the specific areas where improvements are necessary. The weaknesses of an organization, for instance, can be poor quality standards, broken reputation, past loss project, rejected by customers, old fashioned products, poor communication system, negligence of media, etc. SWOT ANALYSIS: EXERNAL FACTORS Opportunities Opportunities are the external factors over which the organization does have control. But, these factors affect the companys profitability and business processes both directly and indirectly. These are the factors why an organization exists and develops. These factors help an organization to foresee the future possibilities and opportunities that the organization may encounter. They help the organization to plan and identify the time line to achieve the objectives. Indeed, opportunities are the objectives of organization in a broad sense. For example, the opportunities of an organization can be a new business market, extending business overseas or to other outlets, launching a new product, adding new value (such as, online marketing), moving to global market, etc. Threats Threats are the external factors which cause dangers and risks for an organization to achieve the goals and objectives. As external factors, organizations do not have control over them, but are highly affected by them. These factors help an organization to have safeguard from risks and dangers. These factors also guide the organization to drive on the right road. Threats of an organization, for example, can be: Rising popularity of the competitors in local or global market Changing habits of customers Pricing competition with competitors Arrival of new alternative product in the market New taxation policy Difference between external and internal factors of SWOT: The difference between external factors and internal factors of SWOT analysis is very obvious. The basic difference between the two is that internal factors are controllable, while external factors cannot be controlled by the organization. Usually, the external factors (strengths and weaknesses) of an organization are mainly based on organization itself, corporate market or customer needs and demands. The strength of an organization can be defined as the way of meeting customer needs and satisfaction, while weaknesses are the problems or shortcomings that the company faces to fulfill the market or customer demands. However, the internal factors of an organization usually affect the following factors, such as sale and profitability, product quality and brand image, product cost and customer needs, employee potentiality and the financial ability of management, etc. On the other hand, the external factors of an organization are the issues that affect not only organization but the total business system. The common issues that affect the company externally can be business segments, customer motivations and unmet needs, business strategies, overall business structures, environmental issues (such as governmental, technological, economic, cultural, demographic, etc.), etc. How to implement SWOT Analysis? Though appeared as a simple and easy business tool, SWOT analysis is very powerful and meaningful technique. To implement SWOT analysis, the first thing an organization needs to have is time and adequate information and resources. It is not possible to implement a SWOT analysis in an organization by one person, because it requires team work and efforts. The positive traits of this technique are that it is quick, flexible and comprehensive managing tool, which make the process easy to implement. However, the process of SWOT analysis follows a sequential order. Obviously, there are four steps to follow in this analysis. Whether analyzing a product or a service, the SWOT analysis is done in the same way. First Step: Collection of information In this stage, an organization collects all the information regarding the first two internal factors, strengths and weaknesses. However, this information collection can be done through a number of different ways. One-to-one interview or a group discussion can be carried to gather information. There will be number of different views, questions and issues that related to these elements. Second Step: Listing possible Opportunities and Threats Here, the organization can make a list of all the opportunities that it may encounter in the future. It can make another list of all the future possible threats within the organization. Third Step: Planning action In this stage, the plan of action will carried out to meet these opportunities and to secure the company from the threats. In this stage, the organization makes sure that they can maintain the strengths, change or stop the weaknesses, prioritize opportunies and minimize threats. Again, there are other ways to implement SWOT analysis. The following chart shows another different technique of SWOT analysis. SWOT Analysis Framework Environmental Scan   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  / Internal Analysis  Ã‚  Ã‚     Ã‚  Ã‚  External Analysis /   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚     Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  / Strengths  Ã‚  Ã‚  Weaknesses  Ã‚  Ã‚     Ã‚  Ã‚  Opportunities  Ã‚  Ã‚  Threats | SWOT Matrix According to the SWOT matrix formula, there must be a balance between these elements. The formula follows the following chart: SWOT / TOWS Matrix Strengths Weaknesses Opportunities S-O strategies W-O strategies Threats S-T strategies W-T strategies S-O strategies: strengthening positive traits or opportunities W-O strategies: stopping or conquering weaknesses to meet opportunities. S-T strategies: strengthening ways to win external threats W-T strategies: having a strong plan to avoid weaknesses and threats CASE STUDY: SWOT ANALYSIS OF TESCO There are numbers of organizations which are using SWOT analysis almost every day in this modern business environment. This analysis can be carried on a small area of the organization or on overall company. TESCO is one of the major global business installations which can be analyzed by applying SWOT analysis as a whole. Strengths in Tesco The first strength of Tesco can be found in their popularity and business achievement of World Retail Award. Again, the constant increase of overall sales is another significant strength of Tesco. Likewise, Tesco has another strength in their reserve funds for business expansion and meeting economic crisis. Weaknesses in Tesco The primary weakness of Tesco can be found in their bad debt, house insurance claims and credit card arrears. Being a price leader in the market, Tesco is losing profit. Again, Tesco business and its profitability is mainly based on the UK market. Opportunities in Tesco Being the 3rd largest global trader, Tesco has strong buying power. Tesco is a global business organization which has number of different products and services. It is still extending to the global market and gaiting global trust. Extensive use of modern technology is enabling Tesco to meet the modern challenge of marketing. Constant increase of Tesco mobile customers can also be considered as a business opportunity. Threats in Tesco Economic inflation is one of the major business threats that Tesco had encounter in the recent past. The rising cost of food and non-food raw materials is another threat for Tesco. Changing buying habits of customers also affect Tescos business strategies and thus it requires reassessment of the current market. Competition with rivals, particularly with Wal-Mart which can takeover Tesco business position anytime is another noteworthy threat that Tesco is encountering nowadays. CONCLUSION To sum up, SWOT analysis is one of the powerful business tools which can be used in almost every business situation and also in individual affairs. It helps organizations to assess their current position and to plan their future plans. It is decision making tool that provides the framework for an organization to generate business strategy, mark its position and direct its objectives. Though very simple, SWOT analysis requires close attention and experienced application. In the modern changing business market, SWOT analysis has been proved to be a very important tool to the marketers. SWOT analysis is often said to be paralleled and alternative to the PESTEL analysis. Often, organizations use both these business tools together to plan their strategies. Once again, the SWOT analysis helps organizations to get an overall picture of the company and the starting point of strategic planning. It is the primary tool of business analysis. To conclude, experienced marketers when utilizing SWOT analysis make sure that the company is based on its strengths and opportunities, able to stop and correct its weakness, and can protect itself from external threats. They consider the business environment extremely unpredictable and thus use this tool that may help organizations to predict their future through this process.