Thursday, January 16, 2020
The importance of the meaning and measurement of “affordable†in the Affordable Care Act Essay
Affordable Care Act Introduction            The purpose of this paper is to research about the general health care condition of the United States citizens. The paper also argues about the advantages of individual payment of health insurance as opposed to compulsory insurance. Financial benefits of obamacare affordable care Act are also illustrated throughout the paper. The paper also illustrates about the rising costs of health care in United States where the US has the highest healthcare expenditure globally. The U.S healthcare system is also compared with other systems adopted by other developed countries to show the pros and cons of the United States system. The paper describes also about PPACA and how it solves many serious challenges which are faced by the small business owners such as lack of affordable coverage, rising health insurance costs, limited choice of health plans and escalating costs of health care.            Affordable care Act refers to the healthcare reform law in the United States. It is aimed at making health insurance and healthcare to be more available and more affordable to more American citizens. The act does this by new regulations, new rules and consumer protections the industry of healthcare, through establishing a marketplace purposed for insurance which is subsidized and also by expanding and reforming public programs on healthcare programs such as Medicaid and Medicare. Affordable care Act also incorporates measures which are aimed at reducing healthcare spending in United States. Many American citizens are unaware that since 2010 when the Affordable care Act became into law after being signed they have been enjoying from the protections, rights and benefits of obamacare (Faria, 2012). Before this Affordable care Act many small businesses and low and middle income earning American citizens found it challenging to afford healthcar e for their families and also for themselves (Burkhauser & Lyons, 2011). In the past the many sick people were denied health treatment or coverage with diminutive right for appealing. Insurance companies charged individuals more on basis of their health status where women were required to pay higher rates. Affordable care Act entails provisions which are aimed at solving all these challenges. Obamacare gives rise to clear financial benefits for all stakeholders: the government, the individual and the insurance companies. BODY Macroeconomic angle Non –return on high healthcare expenditure America’s high healthcare expenditure            United States expenditure on health care is very high becoming a great concern however it is the medical expenditure growth rate and not its level which determines the financial security of United States. United States expenditure exceeds one -sixth of the economy of the country and the percentage keep rising every year. Unfortunately, this system does not deliver value to match the annual health care expenditure totaling to approximately 2.7 trillion dollars. Experts claims that approximately 20% to 30% of that spending which totals to about 800 billion dollars annually is spent on care that is inefficient, redundant and wasteful (Miller, 2001). This rise in healthcare expenditure harms the country in many ways. For seniors and families, the increasing medical care cost means increased expenses making them to make hard choices regarding to rent, needed care and balanced food. For the local, state and federal governments, increasing health costs result to higher Medicaid and Medicare costs, and decreased funding on key priorities like education, public safety and infrastructure (Oberlander, 2012). For the fortune 500 employers and small businesses these costs makes it challenging for them to add new workers, maintain retiree coverage becomes a great challenge for them and they are unable to compete in world economy. The net outcomes of increasing health care costs are ominous and far –reaching: increased costs for health insurance, erosion of global competitiveness, fraying of nation’s safety net and fiscal insolvency which is long-standing. Although health reform law has made important steps in spreading out coverage, more efforts should also be directed to reducing the increasing healthcare cost (Sade, 2012). Comparison with other developed nations            U.S health care expenditure is the highest compared to other nations yet the American citizens experiences more illnesses and die sooner compared to citizens from other developed countries. United States is ranked 37th position out of 191 nations according to the world health organization (WHO) health care systems rankings. This means that despite the fact that the united states citizens spends a lot of money on healthcare and the cost is still increasing however they are offered product which is ranked 37th position in quality. When comparing United States with other nations which are developed, it is evident that America performs poorly on infant mortality and life expectancy. Also United States tops list of deaths which are perceived to be preventable when diagnosed early and adequate early care is administered. Typical American citizen has very few doctor appointments annually compared to citizens from other nations but yet spends more for this privilege. When U.S citizen is admitted one day in a hospital, it would 5.6 times more when compared to what it would cost a Japan citizen. Also United States top all other developed nations in healthcare cost where it spends 8,233 dollars more per individual annually than other developed nations, although 47 million of those U.S citizens are still uninsured ( Hodge, Arias and Ordell, 2011).            The figure $8,233 per citizen annually spent by united states is over two and a half times more compared to what other developed countries spend per citizen annually globally including Europeans nations which are relatively rich such as united kingdom, Sweden and France. On an advanced global scale, it is clear that health care costs of United States represents 17.6% of the nation’s GDP.            According to reports from OECD (organization for Economic Co-operation and Development) which is an international economic group which consists of 34 member countries, American citizens are not getting what they expect.            United States has fewer physicians per individual compared to most other OECD nations. For example United States had 2.4 physicians per 1000 citizens in 2010 which is below 3.1 which is OECD average. In 2009, the hospital beds number in United States was 2.6 per 1,000 individuals which is lower than 3.4 beds which is OECD average.            Between 1960 and 2010, Life expectancy in the U.S increased by approximately nine years however those years were few compared to Japan where there was an increase of 15 years and also it was below 11 years which the average in OECD nations. Also, in 2010 the average U.S citizen lived 78.7 years which is below 79.8 years which is the average.            However, United States tops globally in the cancer treatment and health care research, for example. The breast cancer survival rate is very high in United States compared to other OECD nations and also U.S is among the best in survival from colorectal cancer. The poor general health condition of American citizens            United States citizens spend a lot of money on healthcare and the cost is still increasing however they are offered product which is ranked 37th position in quality. This means that Americans are offered poor general health care. U.S healthcare system does not deliver value to match the annual health care expenditure totaling to approximately 2.7 trillion dollars. Experts claims that approximately 20% to 30% of that spending which totals to about 800 billion dollars annually is spent on care that is inefficient, redundant and wasteful. Also United States tops list of deaths which are perceived to be preventable when diagnosed early and adequate early care is properly administered.            The leading cause of disability and death in United States is the chronic diseases. They lead to 7 out of 10 deaths annually. Stroke, cancer and heart disease leads to more than 50% of all deaths annually.            Out of 107 million American citizens approximately 1 out of every 2 adults aged 18 or much older had at least 1 of 6 reported chronic ailments which includes asthma, arthritis, diabetes, cancer, cardiovascular disease and chronic obstructive pulmonary disease. Typical American citizen has very few doctor appointments annually compared to citizens from other nations but yet spends more for this privilege. When U.S citizen is admitted one day in a hospital, it would 5.6 times more when compared to what it would cost a citizen from other nations. When comparing United States with other nations which are developed, it is evident that America performs poorly on infant mortality and life expectancy. United States has fewer physicians per individual compared to most other OECD nations. In 2009, the hospital beds number in United States was 2.6 per 1,000 individuals which is lower than 3.4 beds which is OECD average. These facts from various resea rches shows that American citizens experiences poor general health condition despite the fact that they spend the highest amount on healthcare but they end up getting poor quality compared to other developed countries. Therefore, it is evident that despite the fact that although America is among wealthiest countries globally however, it is far from becoming the healthiest nation (Sage, 2011). The nine health domains studied by Committee on Population, and Board on Population Health and Public Health Practice. When United States is compare with peer nations which are average America is ranked poorly in the following nine health domains. Adverse birth results: For many years America has experience huge infant mortality rate of high income nations and also ranked poorly on other birth results, like low birth weight. Kids in America are unlikely to live to age 5 compared to kids in other nations with high incomes. Injuries and homicides: Violence, deaths emanating from motor vehicle accidents and injuries which are not related to transportation occur at much more commonly in U.S than in other nations and are a primary cause of deaths in kids, young adults and adolescents. Since 1950s, Young adults and adolescents in United States have died at an alarming rate from homicide and traffic accidents than in other nations. Sexually transmitted infections and Adolescent pregnancy: since 1990’s , among all the developed nations the united states adolescents have had high chances of acquiring infections which are sexually transmitted and also have the highest number of pregnancies. HIV and AIDS: America is the second leading nation among 17 peer nations with high pervasiveness of HIV infection. Drug-related mortality: united states lose more life years to alcohol and also other drugs compared to individuals from peer nations, even after excluding deaths emanating from drunk driving. Diabetes and Obesity: For many years America has experienced the highest rates of obesity among the developed nations. High occurrence rates for obesity are experienced in United States kids and also in every age group subsequently. From 20 years onward the adults in America have among the highest occurrence rates of diabetes among peer nations. Heart disease: Death rate in America emanating from ischemic heart disease is second leading among the 17 peer nations. Citizens from united states attain age 50 with less favorable cardiovascular risk profile compared with their peers in Europe and also adults aged over 50 years have higher chances of developing and dying from cardiovascular disease compared to older adults in developed nations. Chronic lung disease: Lung disease are more common and linked with high mortality rates in America compared to UK and other European nations. Disability: older adults in United States depicts higher occurrence of activity limitations and arthritis compared to their counterparts in Japan, UK and other European nations (Sade, 2012). Comparison with other developed nations            For many years, Violence, deaths emanating from motor vehicle accidents and injuries which are not related to transportation occur at much more commonly in U.S than in other nations and are a primary cause of deaths in kids, young adults and adolescents. Since 1950s, Young adults and adolescents in United States have died at an alarming rate from homicide and traffic accidents than in other nations.            America has experience huge infant mortality rate of high income nations and also ranked poorly on other birth results, like low birth weight. Kids in America are unlikely to live to age 5 compared to kids in other nations with high incomes (Majette, 2011).            since 1990’s , among all the developed nations the united states adolescents have had high chances of acquiring infections which are sexually transmitted and also have the highest number of pregnancies.            America is the second leading nation among 17 peer nations with high pervasiveness of HIV infection. united states lose more life years to alcohol and also other drugs compared to individuals from peer nations, even after excluding deaths emanating from drunk driving.            For many years America has experienced the highest rates of obesity among the developed nations. High occurrence rates for obesity are experienced in United States kids and also in every age group subsequently. From 20 years onward the adults in America have among the highest occurrence rates of diabetes among peer nations.            Death rate in America emanating from ischemic heart disease is second leading among the 17 peer nations. Citizens from united states attain age 50 with less favorable cardiovascular risk profile compared with their peers in Europe and also adults aged over 50 years have higher chances of developing and dying from cardiovascular disease compared to older adults in developed nations.            Lung disease is more common and linked with high mortality rates in America compared to UK and other European nations.            Older adults in United States depicts higher occurrence of activity limitations and arthritis compared to their counterparts in Japan, UK and other European nations (Sade, 2012). Financial justification for system overhaul            United States healthcare system in not universal, where some people benefits more from the system compared to others. This system does not deliver value to match the annual health care expenditure totaling to approximately 2.7 trillion dollars. The Experts claims that approximately 20% to 30% of that spending which totals to about 800 billion dollars annually is spent on care that is inefficient, redundant and wasteful. United States top all other developed nations in healthcare cost where it spends 8,233 dollars more per individual annually than other developed nations, although 47 million of those U.S citizens are still uninsured. This necessitates an overhaul of the entire healthcare system which is both complex and gigantic. When comparing America healthcare system to Dutch system there are many improvements that are required in order for the US system to be successful. Some of these improvements should be trying to make it transparent and simpler for consumers to purchase health insurance easily through aggressive regulation of the insurance marketplace in such a manner that the products are universal.            Obamacare has four types of fundamental insurance packages which includes platinum, gold, silver and bronze. Dutch system has just one type of package for fundamental insurance. The system should not discriminate some applicants by charging them higher premiums depending on their age, health status, gender and just like Dutch system they should charge all the applicants the same price. Under the obamacare system the older applicants are supposed to pay three times as much in terms of premiums than the young ones. This means in obamacare system an applicant is supposed to input and then verify their age in order for their charge to be determined.            The system in US should be modified to be transparent where consumers should be allowed to compare prices and buy insurance through private sector portal websites instead of government run website. This will led to an aggressive way of restructuring and regulating the private sector industry as consumers will be able to compare the prices and decide which insurance to buy thus reducing consumer exploitation and increasing transparency. In this way the government will be able to reduce the rising healthcare costs and the number of the insured citizens will increase (Pipe, 2013). Microeconomic angle: Opposing views and rebuttals The individual’s point of view The individual mandate: compulsory insurance Opposing view: compulsory insurance places financial burden on citizens            Universal healthcare system where compulsory insurance is introduced to everyone would do more harm to the citizens due to the financial burden it would implicate to the citizens. This would give the insurance companies a chance to increase the premiums since government will not be able to cover everyone where some people will be coerced to purchase insurance from the private sector insurance companies since it is a compulsory insurance. The poor and low income earners would be required to dig deep into their pockets and purchase the insurance despite the fact that insurance premiums are rising. During presidential campaign in 2008, president Barrack obama who was then a Democrat senator assured American citizens to improve the health care where he claimed that 47 million American citizens were not in a financial position to afford health insurance. He instead advocated for creation of government run, federally administered health care sys tem where people would pay individually for their health care and insurance instead of compulsory insurance which overburdened the poor. He also explained that people could be offered subsidized government coverage making insurance affordable to many. Requiring for citizens to buy mandatory health care insurance from private companies at any price they decide to charge will be directly overburdening the citizens while promoting the insurance industry. This is because insurance premiums rise faster than income thus reducing the disposable income of the citizens.            For the poor and those who earn low incomes they will be forced to choose low premium plans which have high deductibles and co-payments. This is because they cannot afford the best plans due to high premiums. Therefore many poor citizens will be left with healthcare insurance which is unaffordable to use but they are mandated to purchase such insurance anyway    Compulsory insurance is extremely regressive and in some cases the mandated insurance plus the co-payments can add up to almost a third of the income which is a great financial burden to the citizensRebuttal 1: The ‘health promotion’ theory of insurance            Health promotion refers to the approach of allowing people to increase power over the health determinants thus improving their health. It is the most sustainable, efficient, effective and ethical approach to attaining good health.            PPACA invests in research to identify relative value of healthcare procedures.            PPACA solves many serious challenges which are faced by the small business owners such as lack of affordable coverage, rising health insurance costs, limited choice of health plans and escalating costs of health care. PPACA is highly popular as the most fundamental health care legislation since establishment of Medicaid and Medicare about 10 years ago. The act was enacted in 2010 and it was aimed at taking effect in phases in a period of 8 years and incorporates reforms like expansion of Medicaid eligibility, subsidizing of insurance premiums, providing businesses with incentives to offer health care benefits and prohibiting the insurers from denying some applicants coverage for the pre-existing conditions. It persuades states to introduce exchanges of health care where small businesses and adults who are uninsured can purchase insurance from a variety of the private insurers. One element of PPACA is promoting comparative effectiveness res earch. This is aimed at comparing treatment options which are available. The core benefit of PPACA is to reduce the number of the uninsured individuals and providing them with high value healthcare (Gray & Sullivan, 2011). It uses a mixture of subsidies, tax credits and mandates in encouraging people and corporations on buying coverage and also it protects applicants who are hard to insure including those who possess conditions which are pre-existing. Other elements of legislation will be aimed at encouraging evidence based decision making and improving healthcare practices. United States tops globally in the cancer treatment and health care research by PPACA, for example. The breast cancer survival rate is very high in United States compared to other OECD nations and also U.S is among the best in survival from colorectal cancer thus ensuring high value healthcare. The comparative effectiveness research (CER) involves a board which lowers overall expenditure through determining whic h procedures, treatments and medicines which are most perfect, their price tags and identifying those who ignore justifying identifying the evidence based health benefits. Through PPACA as the acknowledgement Medicare has been successful in rewarding certain health coverage providers and punishes some providers on basis of value of care. Through PPACA Medicare is required to measure performance and change payments of providers on basis of scoring system in its current value based purchasing program (Skocpol, & Williamson, 2011). PPACA promotes consumption of ‘high value’ healthcare.            The core benefit of PPACA is to reduce the number of the uninsured individuals and providing them with high value healthcare. It uses a mixture of subsidies, tax credits and mandates in encouraging people and corporations on buying coverage and also it protects applicants who are hard to insure including those who possess conditions which are pre-existing. Other elements of legislation will be aimed at encouraging evidence based decision making and improving healthcare practices. Through PPACA as the acknowledgement Medicare has been successful in rewarding certain healthcare providers and punishes some providers on basis of value of care. PPACA solves many serious challenges which are faced by the small business owners such as lack of affordable coverage, rising health insurance costs, limited choice of health plans and escalating costs of health care. Through PPACA Medicare is required to measure performance and change payments of provid ers on basis of scoring system in its current value based purchasing program. PPACA is highly popular as the most fundamental health care legislation since establishment of Medicaid and Medicare about 10 years ago. The act was enacted in 2010 and it was aimed at taking effect in phases in a period of 8 years and incorporates reforms like expansion of Medicaid eligibility, subsidizing of insurance premiums, providing businesses with incentives to offer health care benefits and prohibiting the insurers from denying some applicants coverage for the pre-existing conditions. It persuades states to introduce exchanges of health care where small businesses and adults who are uninsured can purchase insurance from a variety of the private insurers. One element of PPACA is promoting comparative effectiveness research. This is aimed at comparing treatment options which are available. The comparative effectiveness research (CER) involves a board which lowers overall expenditure through determin ing which procedures, treatments and medicines which are most ideal, their price tags and identifying those who ignore justifying identifying the evidence based health benefits. United States tops globally in the cancer treatment and health care research by PPACA, for example. The breast cancer survival rate is very high in United States compared to other OECD nations and also U.S is among the best in survival from colorectal cancer thus ensuring high value healthcare (Kotlikoff, 2007). Rebuttal 2: The ‘financial security’ model of health insurance            Individual’s financial risk due to unforeseen illness            Insurance companies play a great role in managing the risk of individuals. These companies enable individuals to share their liability through pooling the personal risk and assist them through reducing chances of facing financial desolation. Due to many risks that individuals faces on a daily basis, these insurance companies have advanced over the years to meet the needs of the average human beings and have come up with different products and policies which covers almost entire risks. These companies normally provide financial coverage of loss that a certain person is expected to suffer as a result of unforeseen events thus reducing the effects of a certain event. They compensate the financial damage and people whose peril can be pooled. An individual who want to be insured is expected to pay a premium which is dependent on the probability of the event occurring where high probabilities will lead to high premiums. In a case of health insur ance the insurance is able to insure individuals through pooling the risk of illness. The health care cost is easily balanced in the pool since some individuals go through life devoid of catching a cold whereas others have to spend many dollars for treatment. The act of pooling the peril with other individuals is a prudent decision since no individual is able to predict what their health will be, and also how much they will have to pay in order to be treated. It is therefore advisable for individuals to pay for their individual health insurance to avoid financial challenges that may face them in case of unforeseen illness (Woolf & Aron, 2013)            The escalating costs of health insurance prior to PPACA.            PPACA solves many serious challenges which are faced by the small business owners such as lack of affordable coverage, rising health insurance costs, limited choice of health plans and escalating costs of health care. The core benefit of PPACA is to reduce the number of the uninsured individuals and providing them with high value healthcare. It uses a mixture of subsidies, tax credits and mandates in encouraging people and corporations on buying coverage and also it protects applicants who are hard to insure including those who possess conditions which are pre-existing. Other elements of legislation will be aimed at encouraging evidence based decision making and improving healthcare practices. Before PPACA the health insurance costs were very high and still escalating year after year. This was as a result of requiring citizens to buy mandatory health care insurance from private companies at any price they decide to charge which directly ov erburdening the citizens while promoting the insurance industry. This made insurance premiums to rise faster than income thus reducing the disposable income of the citizens. The number of uninsured Americans was very high where 47 million American citizens were not in a financial position to afford health insurance. President obama was against this and he launched PPACA aimed at reducing the escalating health insurance costs. He also advocated for creation of government run, federally administered health care system where people would pay individually for their health care and insurance instead of compulsory insurance which overburdened the poor. He offered subsidized government coverage making insurance affordable to many. PPACA reduced the rising costs of health insurance which resulted to increased number of people who were insured (Hofer, Abraham, & Moscovice, 2011). Cost-sharing requirements under older health insurance regime.            There was a universal insurance regime where every person was supposed to be responsible for his or her health insurance. This regime required citizens to buy mandatory health care insurance from private companies at any price they decide to charge which directly overburdening the citizens while promoting the insurance industry. This made insurance premiums to rise faster than income thus reducing the disposable income of the citizens. The number of uninsured Americans was very high where 47 million American citizens were not in a financial position to afford health insurance. The insurance market place was not controlled by government which gave the insurance companies a chance to raise the premiums. Every individual was required to be covered where those who did not have a cover were faced by financial fines. Non-insurance or under-insurance as result of the above            This healthcare coverage approach made many people who were unable to pay the good plans to opt for the buying covers that were not helpful to them just because they wanted to fulfill the requirement. Many other people were unable to purchase any cover as a result of increased premiums as a result of uncontrolled insurance marketplaces. Also, most of the people were under insured due to financial constraints. This made many people in reality to be non -insured since the covers they purchased could not be used to compensate them during an event of illness. Also those who were under insured were not able to get fully compensation in an event of illness. Therefore, this led to poor general healthcare situation for many citizens (Hoffman, 2011).            PPACA places reasonable limits on financial insecurity due to health hazards            PPACA is aimed at reducing the number of the uninsured individuals and providing them with high value healthcare. It uses a mixture of subsidies, tax credits and mandates in encouraging people and corporations on buying coverage and also it protects applicants who are hard to insure including those who possess conditions which are pre-existing. Other elements of legislation will be aimed at encouraging evidence based decision making and improving healthcare practices. Through PPACA as the acknowledgement Medicare has been successful in rewarding certain healthcare providers and punishes some providers on basis of value of care. PPACA solves many serious challenges which are faced by the small business owners such as lack of affordable coverage, rising health insurance costs, limited choice of health plans and escalating costs of health care. Through PPACA Medicare is required to measure performance and change payments of providers on basis of scoring system in its current value based purchasing program. PPACA is highly popular as the most fundamental health care legislation since establishment of Medicaid and Medicare about 10 years ago. The act was enacted in 2010 and it was aimed at taking effect in phases in a period of 8 years and incorporates reforms like expansion of Medicaid eligibility, subsidizing of insurance premiums, providing businesses with incentives to offer health care benefits and prohibiting the insurers from denying some applicants coverage for the pre-existing conditions. It persuades states to introduce exchanges of health care where small businesses and adults who are uninsured can purchase insurance from a variety of the private insurers (Hoffman, 2011).            The comparative effectiveness research (CER) involves a board which lowers overall expenditure through determining which procedures, treatments and medicines which are most ideal, their price tags and identifying those who ignore justifying identifying the evidence based health benefits. United States tops globally in the cancer treatment and health care research by PPACA, for example. The breast cancer survival rate is very high in United States compared to other OECD nations and also U.S is among the best in survival from colorectal cancer thus ensuring high value healthcare. One element of PPACA is promoting comparative effectiveness research. This is aimed at comparing treatment options which are available (Sade, 2012). Financial relief to the individual            Insurance companies enable individuals to share their liability through pooling the personal risk and assist them through reducing chances of facing financial desolation. They play a great role in managing the risk of individuals and providing financial relief to individuals who are faced by a calamity which they had insured. These Due to many risks that individuals faces on a daily basis, these insurance companies have advanced over the years to meet the needs of the average human beings and have come up with different products and policies which covers almost entire risks. These companies normally provide financial coverage of loss that a certain person is expected to suffer as a result of unforeseen events thus reducing the effects of a certain event. They compensate the financial damage and people whose peril can be pooled. An individual who want to be insured is expected to pay a premium which is dependent on the probability of the ev ent occurring where high probabilities will lead to high premiums. In a case of health insurance the insurance is able to insure individuals through pooling the risk of illness. The health care cost is easily balanced in the pool since some individuals go through life devoid of catching a cold whereas others have to spend many dollars for treatment. The act of pooling the peril with other individuals is a prudent decision since no individual is able to predict what their health will be, and also how much they will have to pay in order to be treated. It is therefore advisable for individuals to pay for their individual coverage to avoid financial challenges that may face them in case of unforeseen event. Rebuttal 3: The ‘brute luck’ theory of health insurance            Underwriting; Insurers’ discrimination on the basis of unavoidable risk factors, resulting in high insurance costs            The insurance companies look at many determinants when determining the premiums to be paid by the applicant for them to be covered for a certain risk. Some applicants are supposed to pay higher premiums due to their health status, gender, race, religion, national origin, age among other factor. For instance, older adults are asked to pay higher premiums by health insurance providers than the premiums expected for young adults and kids. In this regard the insurers charge different premiums depending with groups on basis of their risk. These health coverage providers categorize their insureds into different risk pools on basis of their differences in their risk probabilities (Hoffman, 2011). PPACA prohibits above-mentioned discrimination            PPACA is against these discriminatory laws and requires the coverage providers to stop this discrimination and charge the applicants fairly without considering their pre-conditions. It protects applicants who are hard to insure including those who possess conditions which are pre-existing from this discrimination. This is aimed at ensuring that no one is penalized for their propensities and genetics or for factors and events which are beyond their control (Hoffman, 2011). Financial relief to the ‘unlucky’ individual            Insurance companies play a great role in managing the risk of individuals and providing financial relief to unlucky individuals who are faced by a calamity which they had insured. This is because they enable individuals to share their liability through pooling the personal risk and assist them through reducing chances of facing financial desolation. As a result of many risks that individuals faces on a daily basis, these insurance companies have advanced over the years to meet the needs of the average human beings and have come up with different products and policies which covers almost entire risks. These companies normally provide financial coverage of loss that a certain person is expected to suffer as a result of unforeseen events thus reducing the effects of a certain event. They compensate the financial damage and people whose peril can be pooled. An individual who want to be insured is expected to pay a premium which is dependent on the probability of the event occurring where high probabilities will lead to high premiums. In a case of health insurance the insurance is able to insure individuals through pooling the risk of illness. The health care cost is easily balanced in the pool since some individuals go through life devoid of catching a cold whereas others have to spend many dollars for treatment. The act of pooling the peril with other individuals is a prudent decision since no individual is able to predict what their health will be, and also how much they will have to pay in order to be treated. It is therefore advisable for individuals to pay for their individual coverage to avoid financial challenges that may face them in case of unforeseen event. This is because if they are unlucky they will be provided with financial relief by their health insurance providers (Hoffman, 2011).. The insurers’ point of view Opposing views & rebuttals Objection 1 & rebuttal Objection: Insurance companies’ bottom lines hurt through limitations on deductibles, co-insurance and co-payments, and prohibition on underwriting.            Employee expenses on cost sharing include coinsurance, deductibles and co-payments. Insurers companies are experiencing unfavorable impact due to the limitations on co-payments, coinsurance, deductable and prohibition on underwriting as they increases the risks therefore increasing the amounts paid as compensation thus reducing their returns. Rebuttal 1: Insurers’ losses from reduced profit margins mitigated through broadened customer base            Insurers’ losses from reduced margins can be reduced by increasing their customer base. This is because insurance use the pooling of risks approach where broadened customer base will result to high returns. This is because more customers will lead to more funds in funding pool of risks while the amount paid out to the unlucky individuals as compensation will be low than the premiums paid therefore leading to increased profit margins. Also, increased broadened customer base also serves as a way of diversifying the risks. Rebuttal 2: View disproved by financial statements and stock market movements            Such a view which is refuted by stock market movement and financial statements should not be used and should be regarded as void. Stock movements are un predictable and an insurance company should not be forced to compensate an unlucky individual who loses unless such a claim is validated. Objection 2 & rebuttal Objection: Compulsory acceptance of foreseeable risks unfair burden on insurers            PPAC protects the applicants from the insurer’s discrimination where the insurance companies are forced to accept foreseeable risks thus reducing the profit margins. This mandatory acceptance of these foreseeable risks will lead to increased expenses which are paid to the unlucky individuals as compensation which eventually leads to reduced returns. This act is unfair to the insurers since they should be given an opportunity to consider whether to accept or reject insuring individuals with foreseeable risks. This is because increase in amounts paid for these foreseeable risks as compensations will reduce the profits margins to an extent of making losses which may lead to such companies deciding to exit the industry due to constant loss making.            Rebuttal: Insurers allowed to underwrite avoidable risks and discriminate on the basis of lifestyle choices            Insurers should be allowed to discriminate based on lifestyle choices and underwrite avoidable risks. This is because the individual to be covered should be responsible. The fear that individuals may have that they may not be compensated if the risk was avoidable would prevent them from making choices which are reckless thus protecting the insurance companies from paying unfair amounts as compensation. Also individuals should be responsible and they should put necessary measures or efforts to ensure that the risk doesn’t occur, so as not to overburden the insurance provider with expenses which are avoidable. In this regard individuals should be ready to bear the responsibilities for the consequences of their freely made decisions. Summing up & Conclusion            Affordable care Act also incorporates measures which are aimed at reducing healthcare spending in United States. Many American citizens are unaware that since 2010 when the Affordable care Act became into law after being signed they have been enjoying from the protections, rights and benefits of obamacare. Before this Affordable care Act many small businesses and low and middle income earning American citizens found it challenging to afford healthcare for their families and also for themselves. In the past the many sick people were denied health treatment or coverage with diminutive right for appealing. Insurance companies charged individuals more on basis of their health status where women were required to pay higher rates. Affordable care Act entails provisions which are aimed at solving all these challenges.            The cost of health care in United States keeps rising year after year at an alarming rate. This rise in healthcare expenditure harms the country in many ways. For seniors and families, the increasing medical care cost means increased expenses making them to make hard choices regarding to rent, needed care and balanced food. For the local, state and federal governments, increasing health costs result to higher Medicaid and Medicare costs, and decreased funding on key priorities like education, public safety and infrastructure.            For many years America has experienced the highest rates of obesity among the developed nations. High occurrence rates for obesity are experienced in United States kids and also in every age group subsequently. From 20 years onward the adults in America have among the highest occurrence rates of diabetes among peer nations. However, United States tops globally in the cancer treatment and health care research, for example. The breast cancer survival rate is very high in United States compared to other OECD nations and also U.S is among the best in survival from colorectal cancer thus ensuring high value healthcare.            In conclusion, although obama care has been faced by many challenges however it has resulted to many benefits than costs. Before this Affordable care Act many small businesses and low and middle income earning American citizens found it challenging to afford healthcare for their families and also for themselves. In the past the many sick people were denied health treatment or coverage with diminutive right for appealing. Insurance companies charged individuals more on basis of their health status where women were required to pay higher rates. Affordable care Act entails provisions which are aimed at solving all these challenges. Although it have been faced by many challenges obamacare remains a good system which should not be done away with since it gives rise to clear financial benefits for all stakeholders: the government, the individual and the insurance companies. References Burkhauser, R. V., & Lyons, S. (2011). The importance of the meaning and measurement of â€Å"affordable†in the Affordable Care Act. Cambridge, Mass.: National Bureau of Economic Research. Faria, M.A. (2012). ObamaCare: Another step toward corporate socialized medicine in the US. Surgical Neurology International, Jan. 2012, 386+. Gray, B. J., & Sullivan, K. C. (2011). Provisions in the Patient Protection and Affordable Care Act (PPACA). New York: Nova Science Publisher’s, Inc. Hodge JG., Arias J., and Ordell, R. (2011). Nationalizing Health Care Reform in a Federalist System. Arizona State Law Journal, 42(4), 1245-1275. Hofer, A.N., Abraham, J.M & Moscovice, I. (2011). Expansion of Coverage under the Patient Protection and Affordable Care Act and Primary Care Utilization. The Milbank Quarterly, 89(1), 69–89. Hoffman, A.K. (2011). Three models of health insurance: The conceptual pluralism of the Patient Protection and Affordable Care Act. University of Pennsylvania Law Review, 159(6), 1873-1954. Kotlikoff, L. J. (2007). The healthcare fix: universal insurance for all Americans. Cambridge, Mass.: MIT Press. Majette, G.R. (2011). PPACA and public health: Creating a framework to focus on prevention and wellness and improve the public’s health. Journal of Law, Medicine & Ethics, 39(3), 366-379. Miller, E. A. (2001). The Affordable Care Act: advancing long-term care policy in the United States. Norwood, NJ: New Age International. Oberlander, J. (2012). The future of obamacare. The New England Journal of Medicine, 367(23), 2165-7. Pipes, S. (2013). The cure for Obamacare. New York: Encounter Books. Sade, R.M. (2012). Introduction: The health care reform law (PPACA): Controversies in ethics and policy. Journal of Law, Medicine & Ethics, 40(3), 523-525. Sage, W.M. (2011). Brand new law! The need to market health care reform. University of Pennsylvania Law Review, 159(6), 2121-2146. Skocpol, T. & Williamson, V. (2011). Obama and the transformation of U.S. public policy: The struggle to reform health care. Arizona State Law Journal, 42(4), 1203-1232. Woolf, S.H., & Aron, L.Y. (Eds.) (2013). U.S. health in international perspective: shorter lives, poorer health. Retrieved from http://www.nap.edu/catalog.php?record_id=13497. Source document
Wednesday, January 8, 2020
The Legacy Of The Reconstruction Era - 1473 Words
The reconstruction era was a time that then affected America in positive facets and negative aspects as well, and still affects America today. Thanks to the reconstruction era, there are several implementations that geared the world on the path in which it is today. Had it not been for some of the laws that were set in place African Americans may have not had many of the opportunities that were presented during the reconstruction period, therefore the years of oppression and cruelty might still be present. Arguably one of the greatest contributions during the reconstruction era was the thirteenth amendment. This is the amendment that formally abolished the cruel and unjust acts of slavery in 1865. The thirteenth amendment states â€Å"Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction (Primary documents in American History). â€Å"The ratification came eight months after the end of the war, but it represented the culmination of the struggle against slavery. When the war began, some in the North were against fighting what they saw as a crusade to end slavery. Although many northern Democrats and conservative Republicans were opposed to slavery s expansion, they were ambivalent about outlawing the institution entirely†(13th amendment ratified). This statement is proof that although the North was opposed to slavery they were n otShow MoreRelatedThe Legacy Of The Reconstruction Era1920 Words  | 8 PagesIn the years prior to the Reconstruction era, the nation was involved in a brutal civil warâ€â€one of the most destructive to ever take place. The North and the South were fighting against each other, with the Confederate States fighting for secession and slavery, and the Union fighting for an in tact country. Abraham Lincoln, the newly elected president, was against secession and blatantly stated so in his inaugural address, â€Å"A husband and wife may be divorced, but the different parts of our nationRead MoreThe Legacy Of The Reconstruction Era1303 Words  | 6 PagesThe Reconstruction Era America was in disarray following the events of the Civil War. Southern economy was in shambles while congress was struggling to find a middle ground between the radical republicans and Lincoln’s lenient policies. Many Southerners faced the aftermath of uprooting their society and their way of life while thousands of newly freed slaves struggled to find a way to support themselves. The country needed a strong leader, however on the 14th of April, 1865 President Lincoln wasRead MoreEssay about The Reconstruction Era: The Planted Seeds1231 Words  | 5 Pageswalked through compared to other American Wars (â€Å"Civil War Facts†). After the Civil War the Reconstruction Era rose up and flourished into a luminous path of freedom for slaves in America. The president’s impact on the Reconstruction Era lit a path to the rights of African Americans. Abraham Lincoln, Andrew Johnson, and Ulysses S. Grant each had their own participation in the movement of the Reconstruc tion Era, for they planted a seed of faith believing that a beautiful rose would rise and become oneRead MoreThe Reconstruction Era Was A Success1490 Words  | 6 PagesThe Reconstruction Era was a Success Shortly after the Civil War ended in 1867, President Abraham Lincoln’s new objective was to unify the union and the confederate states into what was formerly known as the United States of America. This time period is known as the Reconstruction Era, starting with the surrender of Robert E. Lee at Appomattox Court House in 1865 and ending with the implementation of the Compromise of 1877. The Reconstruction Era was a time period full of political, economicRead MoreThe Reconstruction of America after the Civil War1078 Words  | 4 PagesCivil War would become known as the â€Å"Reconstruction Era.†An era that raised just as many questions as it did answers. A reconstruction of America that seems to carry on many decades later. The reconstruction of America would decide how the south would rejoin the Union, what was to become of the nearly 3 million black slaves freed, how America was going to recover from such a devastating internal war. There appears to be phases that the Reconstruction Era went through, roughly three of them. TheRead MoreTime Line 21050 Words  | 5 Pageseconomic disruption caused by the anti-slave Northern States that caused it. The civil war was a war where the most American troops were killed. It also ended slavery. | 5) The phases of the Reconstruction Era and its legacy to U.S. history. | 1863 – 1877 | There are 2 stages of the Reconstruction Era. The first is the post-Civil War U.S. and the second focuses on the Southern United States (Wikipedia, n.d.). | 6) The post-Civil War conquest of the West, including the â€Å"displacement†of theRead MoreAbraham Lincoln And Its Impact On The United States1470 Words  | 6 Pagesthe United States because he abolished slavery. Also, his Reconstruction plan showed the South that they would have a say in the government, despite their size. This was significant because slavery was tearing the country apart. When the South threatened to leave the Union they complained about slavery and about not having a say in the government. Lincoln realized why they would feel that way and helped them out. By the time reconstruction was over, the Southerners had a more stable lifestyle andRead MoreEssay about Jim Crows Legacy 616 Words  | 3 Pagespre-Civil War/Reconstruction era. The insidious nature of Jim Crow easily converted bigotry and intolerance from vile vices to prized virtues. Although Jim Crow laws were settled by the 1954 court case, Brown v. Board of Education of Topeka, where all laws and public policy based on the theory of separate but equal were deemed unconstitutional; they were not fully eliminated until the mid 1960s, almost one hundred years after the end of U.S. Civil War and the beginning of Radical Reconstruction. Read MoreRace And Reunion : The Civil War1581 Words  | 7 Pagesthe war. The two major themes race and reunion, demonstrate how white Americans adjusted and altered the causes and outcomes of the Civil War to reflect their particular ideas regarding this catastrophic conflict between Northerners and Southerners era. Blight, addresses how these differences in cultures collided in the visions that they saw America becoming when reunited as a union after the Civil War, reconciliationists, White supremacy and emancipationist. Blight does an excellent job of showingRead MorePolicy Containment in the Northwest Ordinance and Missouri Compromise576 Words  | 3 Pageswas the end of the Reconstruction Era and allowed the South to â€Å"turn the tables†on the North. Democrats were able to regain control of the Legislative and Judicial branches of government. (http://history.ncsu.edu/projects/cwnc/exhibits/show/second-redemption/redemption-1877) In conclusion, containment was accomplished through stages that included the Establishment of the Northwest Ordinance and the Missouri Compromise that later led to the failure of the Reconstruction Era and allowed the Southern
Tuesday, December 31, 2019
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.
Monday, December 23, 2019
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. It may be overused on people, animals, land, o r any other number of things. It may also be used for recreational activities without any care about the effects that it may have on the world around them.†. Also, the same writer talked about the effects. Rinkesh states, â€Å"Without access to clean water, there is no way to clean food, dishes, or people. When people are not given access to proper sanitation, disease ends up becoming much more of an issue than it would have been otherwise.†Meanwhile, Rinkesh pointed one solution that might help people. He says, â€Å"There are organizations located all over the world that are looking to bring clean water to areas that don’t have it.†Furthermore, water scarcity affects many places around the world. For example, United States is one of the countries that is facing problems with water. A report written by Lubber Mindy, called â€Å"The Ripple Effect†explains that the most water-stressed regions are Los Angeles, Phoenix, Dallas and Atlanta. Deepen ing the report, Los Angeles and Atlanta are the states with the highest risk of water scarcity because their water utility system bonds present problems. According to Lubber, â€Å"some of the nation s largest public utilities may face moderate to severe water supply shortfalls in theShow MoreRelatedThe Environmental Issues Of South Africa1726 Words  | 7 Pagesof input in order to yield higher output and evidently, much of the input required can be extracted from forests. However, the environmental issues lie in the fact that much of the forests are being cleared for commercial and industrial purposes to accommodate the desired improvements. Consequently, along with the attempt to improve standards of living, various environmental issues present in Southern Africa today have been a result of the high levels of input essential for the desired and projectedRead MoreThe Environmental Problems Of Global Warming1486 Words  | 6 Pagesâ€Å"Human population rise, industrilisati on and the increased requirement for natural resources has led to many environmental problems, beside global warming. With reference to specific examples, discuss those environmental problems and their possible solutions.†â€Å"Modern humans deeply influence the form and function of the ecosphere†(Hugget et al: 2004). During the twentieth century alone the world’s population increased from 1.65 billion to 6 billion and just now the worlds population stands atRead MoreThe Increase Of Gross Domestic Product899 Words  | 4 Pagesresidential properties but also schools, hospitals and hazardous material sites. Research says that by 2060, the ocean will rise 27 inches on sea-level compromising entire cities and neighborhoods. Another fact is hurricane problems, which in the past cost $422 billion in economic losses caused by the increasing intensity of Atlantic and Gulf Coast storms. Global warming will influence energy costs because higher temperature leads to higher demand for air conditioning and refrigeration. Also, due to weatherRead MoreThe Environmental Change and the Collapse of Easter Island1208 Words  | 5 PagesThe environmental change and the collapse of Easter Island Ruud Coumans In this paper, we will search for an explanation of the mystical collapse of society on Easter Island, during the 18th century. We’ll use the second chapter for the book â€Å"Collapse. How Society Choose to Fail or Succeed†by Jared Diamond. First we will summarize some of the evidence supporting the explanatory framework of the author to give an outline of the situation. Then we will state the research question. After that weRead MoreEnvironmental Challenges Ghana Faces and Suggested Solutions1404 Words  | 6 PagesEnvironmental management can be described as the process by which the collection of policies, structures, resources, systems and processes are brought to mutual interplay for the achievement of clearly defined environmental policy directives (EPA). Ghana, a developing country, is facing so many environmental challenges despite the policies put in place by the various institutions to help curb this problem. Some of these challenges are lack of proper was te management, deforestation, pollution, landRead MoreDeforestation Is A Big Environmental Issue1092 Words  | 5 PagesNowadays, deforestation becomes a big environmental issue around the world since forests play critical roles in many aspects for the life of all the living things. (World Wildlife Fund) There are many factors that will result in deforestation such as â€Å"fires, clear-cutting for agriculture, ranching and development, unsustainable logging for timber, and degradation due to climate change†(World Wildlife Fund). Human activities would be the main cause of deforestation. (Ronca, 2008, p.1) World WildlifeRead MoreThe Most Crucial Problem of Philippine: Deforestation1153 Words  | 5 PagesPhilippine Deforestation: Final Paper Deforestation is one of the most crucial problem of the Philippines today, because of poor economic performance, weak polices, legal institutions and government laws, increasing population, poverty, corruption , agricultural expansion and lastly, extensive commercial logging activities. Philippines is a beautiful country rich in its biodiversity and natural resources, the country has 7,107 islands with a land area of 300,000 square kilometers. UnfortunatelyRead MoreEffects Of Deforestation On A Whole World Essay822 Words  | 4 Pagesnumber of negative effects, and the diminishing amount of the forestry or greenery is one of the most significant problems. This issue has been a major topic of research and discussion for ages. But different researchers have tried to find out the vitality of this problem from varied dimensions. This paper attempts to submit my proposal for the research essay on the issue of deforestation on a whole, but the specific focus would be on how the natura l resource of the forestry dwindle when the peopleRead MoreMan s Quest Always Conquers, Outdoes And Destroys What Nature Has Created By Emily Dickinson903 Words  | 4 PagesAs the result of rapid industrialization and other human activities like chemical testing and deforestation, the Earth became loaded with pollutants. Pollution is a serious problem because it causes global warming, acid rain, famine, water shortage, disease, genetic mutation, and many different types of problems. Most environmental pollution is the result of human activities such as deforestation, automobile emissions, radioactive waste, fuel combustion, etc. in my essay, I will prove that man’sRead MoreEnvironmental Pollution And Its Effects On The Country Of Indonesia1694 Words  | 7 Pagesmass deforestation, smog, water pollution, and various other forms of environmental destruction. As a poverty ridden nation lead by a government with too few resources at its disposal the issues of extreme poll ution are often put on hold to other societal issues. In Indonesia, many forms of environmental pollution / destruction are not only affecting their population of well over a hundred million people, but also the surrounding areas, these forms of pollution include: water, deforestation, and
Sunday, December 15, 2019
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
Friday, December 6, 2019
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 ratesâ€â€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 riskâ€â€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 periodâ€â€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
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