Factors Affecting Effective Globalization Discussion

Factors Affecting Effective Globalization Discussion

I’m working on a business discussion question and need a sample draft to help me learn.

Part 1 a. Please use at least two in references with in text citations that are based in the United States and are websites. Should be between 300-500 words. Please add on to what was said. These is a discussion response.

In order to keep up with globalization, organizations and businesspeople now must consider cultural differences when operating with international companies. Although close in proximity, the United States and Canada have cultural and accounting differences that can impact the way companies do business.

Culturally according to Hofstede’s cultural dimensions, the U.S. and Canada are extremely similar, revealing societies that are individualistic, moderately ‘masculine’, and accepting of new ideas (Hofstede Insights, 2022).

The U.S. is known for challenging authorities and supporting future-oriented thinking. Canada, however, recognizes the need for collaboration more than the U.S. and tends to put more importance on barriers and authority. In turn, organizations and their representatives must be aware of the slight cultural differences that can affect business including etiquette, politeness, and directness.

Other business differences include the amount of time off, in Canada paid time off and maternity leave is regulated by law, whereas in the U.S. is designated by the employer and set contracts. While stigmas around PTO and working hours are slowly changing in the U.S. the consensus is to work longer hours and not use PTO.

In regard to accounting principles, the U.S. follows GAAP while Canada uses International Financial Reporting Standards (IFRS). Adopted in early 2006 and implemented in 2011, the Canadian Accounting Standards Board (AcSB) requires public organizations to use IFRS in financial reporting (Government of Canada, 2022). The main difference between IFRS and GAAP reporting is that GAAP is a rules-based system that requires more particularized financial reporting, while IFRS is a principles-based system that requires more estimating and judgment in financial reporting (Popatia, 2017).

Major differences between US GAAP and IFRS are the way revenue, inventory, development costs, write-downs, and fixed assets are recorded which can impact the way profits are presented to stakeholders. Under US GAAP, revenue is generally recorded when it is realized/reliable and earned, in accordance with ASA 606 which outlines industry-specific contingencies (PwC, 2014).

IFRS uses general revenue principles that account for all transactions, with minimal industry-specific rules.

Differences in the timing of revenue recognition can be a result of US GAAP versus IFRS reporting, leading to differences in revenue on financial statements.

For inventory reporting, IFRS disallows the use of last in, first out (LIFO) methods, which is acceptable under US GAAP, allowing for differences in operating expenses including income tax payable (PwC, 2014). Fixed assets, including property and equipment, in US GAAP, are valued at the historical cost while under IFRS fixed assets can be revalued to the fair market value. The U.S. market currently accepts non-US companies to prepare financial statements using IFRS.

When conducting international business, it is important to understand not only the accounting differences between countries, but also the cultural differences that impact business decisions and deals. Although similar, differences between the U.S. and Canada can impact the understanding of financial statements by investors and creditors.

References:

Government of Canada. (2022). International Financial Reporting Standards (IFRS). Government of Canada. Retrieved from https://www.canada.ca/en.html.

IFRS. (2021). Canada, Who uses IFRS Standards? IFRS Foundation. https://www.ifrs.org/use-around-the-world/use-of-ifrs-standards-by-jurisdiction/view-jurisdiction/canada/

Hofstede Insights. (2022). Country Comparisons: Canada and the U.S. Hofstede Insights. https://www.hofstede-insights.com/country-comparison/canada,the-usa/

Popatia, K. (2017). IFRS & GAAP: Reconciling Differences Between Accounting Systems and Assessing the Proposed Changes to the IFRS Constitution. Northwestern Journal of International Law & Business, Vol. 38, Issue 1 Fall.

PwC. (2014). IFRS and US GAAP: similarities and differences. PricewaterhouseCoopers, LLP, October 2014.

Part 1 b. Please use at least two in references with in text citations that are based in the United States and are websites. Should be between 300-500 words. Please add on to what was said. These is a discussion response.

Dr. Martin, J. R. published an article comparing Japanese and American management methods regarding the need for various management accounting and control systems. The article is divided into four sections:

-Worker Characteristics and Attitudes

-Management attitudes and policies toward workers

-Competitive focus of management and management policies

-Management accounting and control

For this discussion, I will only focus on the last two sections.

While American managers are focused on short-term financial results, Japanese managers appear to be more concerned with a long-term strategy. The variations in reporting standards between the two countries could partially explain this discrepancy. When it comes to reporting quarterly to investors, Japanese companies are not required to do so. However, there are several fundamental differences in the Japanese management style.

In reality, Japanese management is based on a very different set of principles than the typical management paradigm in the US. Japanese management practices and procedures (kaizen) are based on continuous improvement. A significant part of American management is built around the idea of optimization.

Every management policy, practice, measurement system, and the decision will be affected by these two concepts if they are not understood. Dynamic management aims for perfection by removing restrictions, whereas optimization seeks the best response given a set of constraints. This is the primary difference between the two approaches.

Furthermore, accounting and control systems are commonly used to influence behavior in Japan, and they are second in importance to a company’s overall strategy. On the other hand, accounting and control systems have primarily been used to inform management of the company’s performance in the United States.

In Japan, planning and control are built from the ground up. This means that employees and lower-level managers help set goals and have a big say in how plans are carried out. However, in the United States, planning and control are done top-down, with the budget flowing down through the organization.

The plan-do-check-act cycle is almost sacred in Japan. This demonstrates the Japanese dedication to planning and receiving feedback (PDCA). The planning stage of this approach involves identifying the problem and its root cause and devising a solution. In the Do stage, the plan is tested to see if it works. The trial run is analyzed during the Check step, and any necessary adjustments are made, and the final step is to implement the strategy. Nevertheless, the PDCA method is a never-ending activity for the Japanese, who meticulously document almost everything they do.

Actual expenses in Japan are compared to market-determined targets. They are deducting the target profit margin from the target price yields the target costs. The target costs should fall somewhere between the standard and allowable expenses. At the target price, the company will have a competitive advantage.

The goal costs are constantly reduced during and after the design stage to encourage continuous development, making this strategy dynamic. The standard American method compares actual expenses to flexible budgets based on engineer-determined standard charges.

On the other hand, everyday costs are based on a static optimization paradigm in which standards are set based on the plant’s and resources’ current constraints. The primary goal is to meet the internal standard rather than continue cutting costs to complete the external target. (Martin, 1992)

Lastly, the four sets of accounting standards used in Japan are: the International Financial Reporting Standards (IFRS), Japanese Generally Accepted Accounting Principles (J-GAAP), Japan’s Modified International Standards (JMIS), and United States Generally Accepted Accounting Principles (US GAAP).

However, the most widely used accounting standards are IFRS and J-GAAP.

IFRS is an accounting standard based on principles, emphasizes balance sheets, has global accounting rules, and is easy to use. GAAP is used in both the US and Japan, but IFRS is now required by law in both countries. This is a full set of rules about accounting standards, how to interpret them, and other things. The rules are not as complicated as J-GAAP.

For a proper interpretation of details by company and country, you need a lot of notes with convincing evidence. In contrast to J-GAAP, IFRS calls for non-operating income and expenses, other operating income, and other operating expenses. (Global Connect Admin b. V. The Future of Accounting Standards in Japan, 2021)

References:

Global connect admin b. V. The future of accounting standards in Japan: IFRS or Japanese GAAP – global connect admin b. V. (2021, March 5). https://globalconnectadmin.com/the-future-of-accounting-standards-in-japan-ifrs-or-japanese-gaap/

Martin, J. R. (1992). Comparing the practices of U. S. and Japanese companies. Management and Accounting Web. https://maaw.info/ArticleSummaries/ArtSumMartin92.htm

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