Chapter 1 Questions 1. How important is international trade to the world economy? a. International sales and trade can be a source of higher profit margins through additional sales. Unique products or technological advantages can provide competitive advantage that a company wishes to exploit by expanding sales in a foreign market 2. What accounting issues arise for a company as a result of engaging in international trade? b. New accounts added to the chart of accounts, foreign currency and exchange rates and the risk of falling rates, hedging, whether or not it is profitable for a company to invest overseas, financial reporting for overseas operations, international taxes, tariffs, fees associated with intercompany …show more content…

3. How does the relationship between financial reporting and taxation affect the manner in which income is measured for financial reporting purposes? c. In some countries the published financial statements form the basis of taxation in other countries financial statements are adjusted for tax purposes. 4. Who are the major providers for capital financing for business enterprises and what influence does the relative importance of equity financing in a country have on financial statement disclosure? d. The major providers are family members, banks, governments, and shareholders. The importance of equity financing is in those countries where the financing is dominate by families, banks, or the state there will be less pressure for public accountability. As companies become more dependent on financing from the general populace through the public offering of shares of stock the demand for more information made available outside the company becomes greater. 5. What are the major problems caused by world wide accounting diversity for a multination corporation? e. Preparation of consolidated financial statements, the cost of preparing financial statements for foreign exchanges, lack of comparability between financial statements, lack of high quality accounting information. 6. What are the major problems caused by worldwide accounting diversity for internation portfolio investment? f. Lack of