1. OHT 11.1 Wall and Rees: International Business, 2nd edition © Pearson Education Limited 2004 International Accounting and Finance

2. OHT 11.2 Wall and Rees: International Business, 2nd edition © Pearson Education Limited 2004 Reasons for different accounting standards The legal system Types of ownership patterns The accounting profession Conservatism

3. OHT 11.3 Wall and Rees: International Business, 2nd edition © Pearson Education Limited 2004 Higgs Committee Report (2002) Sought to improve corporate governance in the UK by recommending that: At least 50% of a company’s board should consist of independent non-executive directors Rigorous, formal and transparent procedures should be adopted when recruiting new directors to a board Roles of Chairman and Chief Executive of a company should be separate No individual should be appointed to a second chairmanship of a FTSE 100 company

4. OHT 11.4 Wall and Rees: International Business, 2nd edition © Pearson Education Limited 2004 Financial Instruments and Trade Bills of Exchange ‘Avalised’ Bills of Exchange Forfaiting Letters of Credit Factoring Invoice Discounting Securitisation Options, Futures and Swaps

5. OHT 11.5 Wall and Rees: International Business, 2nd edition © Pearson Education Limited 2004 Centralised Financial Management Reasons in favour: –Minimising cost/maximising return –Flexibility –Scale economies –Professional expertise –Synchronisation

6. OHT 11.6 Wall and Rees: International Business, 2nd edition © Pearson Education Limited 2004 Decentralised Financial Management Reasons in favour: –Generality –Motivation and morale –Conflicts –Inflexibility

7. OHT 11.7 Wall and Rees: International Business, 2nd edition © Pearson Education Limited 2004 Transfer pricing Scenario 1Scenario 2 $mCountry A Country B Country A Country B Costs Sales Profit Tax liability 40 50 10 2.5 90 100 10 5 40 60 20 5 100 0 Total tax7.55

8. OHT 11.8 Wall and Rees: International Business, 2nd edition © Pearson Education Limited 2004 Strategic Risk Management Methods of implementing such a policy include: –Modifying the company’s operations –Adjusting the company’s capital structure –Employing targeted financial instruments –Combining the above 3 methods to minimise the aggregate net exposure to risk from all sources

9. OHT 11.9 Wall and Rees: International Business, 2nd edition © Pearson Education Limited 2004 Integration of ways to manage risk Source: Lisa Meulbrook, Financial Times, 9 May 2000.