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OVERVIEW OF BRIEF EXERCISES, EXERCISES, PROBLEMS, AND CRITICAL
THINKING CASES
Brief
Exercises Topic Skills
B. Ex. 15.1 Foreign currency translations Analysis
B. Ex. 15.2 Purchases in a foreign currency Analysis, communication
B. Ex. 15.3 Currency strength Analysis
B. Ex. 15.4 Exchange rate fluctuations Analysis, communication
B. Ex. 15.5 Currency choice Analysis, communication
B. Ex. 15.6 Currency strength and gains and losses Analysis, communication
B. Ex. 15.7 Culture effects on business Analysis, judgment
B. Ex. 15.8 Currency fluctuation effects Analysis
B. Ex. 15.9 Foreign Corrupt Practices Act Analysis, judgment
B. Ex. 15.10 Exchange rate computation Analysis
Exercises Topic Skills
15.1 Global business terminology 15-1–15-8 Analysis
15.2 External financial reports and globalization Analysis, research,
technology
15.3 Understanding exchange rate conversion Analysis
15.4 Locating international business
information Analysis, research,
judgment
15.5 Real World: Boeing, Nikon, Peugot,
Caterpillar 15-2, 15-5 Analysis, communication
Currency fluctuations: who wins and who
loses?
15.6 Foreign currency transaction Analysis
15.7 Harmonization around the world Analysis, research,
technology
15.8 Foreign currency sale journal entries Analysis
15.9 Real World: Home Depot’s International
expansion Analysis, judgment
15.10 Matching foreign exchange gains and
losses Analysis
15.11 Real World: Home Depot, Inc. Analysis, judgment
Foreign currency translation effects
15.12 Real World: Global sourcing costs for
Mattel, Inc. Analysis
15-1, 15-2
15-4, 15-5
15-4
15-4, 15-7
15-3
15-5
15-6
15-4, 15-5
15-1, 15-2
15-4
15-2, 15-7,
15-8
15-4, 15-5
15-4
15-4
15-2
Objectives
Learning
15-5
15-5, 15-6
15-5, 15-6
15-8
Objectives
15-4
CHAPTER 15
GLOBAL BUSINESS AND ACCOUNTING
Learning
Exercises Topic Skills
15.13 Financial statement harmonization 15-2, 15-3 Analysis
15.14 Real World: Honda Motor Company 15-3 Analysis, judgment
Use of U.S. GAAP or IFRS
15.15 Analysis, research,
judgment
Sets A, B Skills
15.1 A,B Exchange rates and export decisions 15-4, 15-5,
15-7 Analysis
15.2 A,B Journalizing exchange rate gains and
losses 15-1, 15-
4–15-6 Analysis, communication
15.3 A,B Exchange rates and performance
evaluation 15-4 Analysis, communication
15.4 A,B Exchange rates and production decisions 15-4, 15-7 Analysis
15.5 A,B Understanding trade agreements 15-2, 15-7 Analysis, research,
technology
15.6 A,B Comprehensive problem journalizing
exchange rate effects 15-4–15-6 Analysis
15.7 A,B FCPA violations 15-8 Analysis, judgment
15.8 A Real World: Home Depot’s
globalization 15-1, 15-2,
15-6, 15-7 Analysis, judgment,
research
15.1 Globalization decisions are complex 15-1, 15-2 Analysis, judgment
15.2 Disclosure requirements
1
5-2, 15-3, 15-
5
Analysis, communication,
judgment
15.3 U.S. Foreign Trade Zones Analysis, research,
(Internet) technology
15.4 International demand for corporate
governance 15-2, 15-3 Analysis, research,
communication
(Ethics, fraud and corporate governance)
15-1, 15-2,
15-7
Learning
Objectives
Critical Thinking Cases
Comparing environmental factors 15-2
Problems Topic
DESCRIPTIONS OF PROBLEMS AND CRITICAL THINKING CASES
Problems (Sets A and B)
15.1 A,B Crackle Cookie Com
p
an
y
/Monster Cookie Com
p
an
y
30 Medium
Demonstrate how differences in costs and exchange rates between
countries can impact the profits earned from exportation. The student
must calculate the forecasted amount of profits to be earned from two
alternative export locations and consider how exchange rate volatility
may impact the decision of which export location to choose.
15.2 A,B Global Motors/Euroam 25 Eas
y
Prepare journal entries to record payment of liabilities stated in
krona/Swiss franc. Involves recognition of both gains and losses from
fluctuations in exchange rates. Student is asked to explain a hedging
technique that would protect the company from losses from exchange
rate fluctuations.
15.3 A,B Global Products Inc./IBC 30 Stron
g
Students investigate the impact of exchange rates on the income
statement. Provides insights into how foreign currency impacts
performance evaluation.
15.4 A,B Ulsa Com
p
an
y
/Halida
y
Com
p
an
y
40 Medium
Students calculate profits to be earned in two different production and
selling locations. In addition to differences in production costs, the
student must consider the costs of foreign import duties and income
taxes.
15.5 A,B NAFTA vs. ASEAN-AFTA Initiative /NAFTA vs. CAFTA DR 90 Strong
This is an unstructured problem that asks students to research an
international trade agreement and compare and contrast its
requirements/restrictions with those of NAFTA. Designed to be a group
writing assignment or presentation exercise.
15.6 A,B Wolfe Com
p
uter/Fox Games 40 Stron
g
A more comprehensive problem involving gains and losses on both
receivables and payables stated in foreign currencies. Student is also
asked to explain techniques for hedging against losses on foreign
payments and foreign receivables.
Below are brief descriptions of each problem and case. These descriptions are accompanied by the
estimated time (in minutes) required for completion and by a difficulty rating. The time estimates
assume use of the partially filled-in working papers.
15.7 A,B FCPA Violations 30 Medium
Students are asked to assess four business activities for violation of the
FCPA. They also consider whether the activities are good business
practices and if alternative activities should be considered.
15.8 A Home Depot's Globalization 40 Medium
This problem demonstrates how the financial statements of a company
can be used to assess its level of globalization. By evaluating the
number of countries with operations; the percentage of sales and assets
from foreign sources; and the foreign taxes paid, an investor can form
an opinion about a firm’s level of globalization.
Critical Thinking Cases
Bristow, Inc. 40 Medium
Presents several options a firm has for increasing its presence in a
foreign location. The student considers what factors are useful in
deciding the option most beneficial to the firm. Also demonstrates that
different options result in different informational needs.
International Financial Reporting Standards 50 Medium
Given a set of arguments for and against harmonization of international
accounting practices, the student is asked to write a one-page summary
of his/her opinions regarding the issue.
U.S. Foreign Trade Zones 40 Medium
Internet
Using the Web site, the student is asked to find information concerning
foreign trade zones located in their home state. The student is also
asked to read one of the several case studies included in the site and
answer follow-up questions.
International Demand for Cor
p
orate Governance 30 Medium
Ethics, Fraud & Cor
p
orate Governance
Using the OECD Web site, students are asked to write a short paper
about global efforts to create corporate governance.
15.4
15.1
15.2
15.3
SUGGESTED ANSWERS TO DISCUSSION QUESTIONS
1.
2.
Different accounting standards have been developed in various countries because of differences
in:
The International Accounting Standards Board (IASB) was formed by the major accounting
6. a.
• Political risk is related to unstable governments
• Changes in securities regulation or law is related to financial disclosures
• Changes in taxes, tariffs and fees
7.
8.
(1)
Political and legal systems can affect accounting practices because:
Two ways that a company making purchases on account from foreign companies can protect
itself against the risk of losses from increases in the exchange rate are:
The Foreign Corrupt Practices Act required U.S. companies to maintain record keeping in all
international locations. That record keeping must identify all payments, including improper
Specify the purchase prices in U.S. dollars.
10.
11.
13.
The strengthening of the U.S. dollar relative to the euro means that $1 can purchase (or be
exchanged for) relatively more euros. Likewise, to obtain a given amount of euros will require
In an international licensing agreement, a domestic firm contractually agrees to allow a foreign
Societies described as individualistic tend to place relatively more importance on individual
achievement, accountability, and welfare. Collectivist societies tend to focus on group outcomes
SOLUTIONS TO BRIEF EXERCISES
B. Ex.15.1 a.
B. Ex.15.2 a.
B. Ex.15.3
$1,218,400 = (£800,000 × $1.5231 per British pound)
The U.S. company will determine the dollar cost of this purchase by
translating 2 million pounds into the equivalent value in U.S. dollars. This is
No. Although the exchange rate for the British pound is much higher than for the
yen, this fact does not necessarily mean that the pound is the stronger currency.
B. Ex.15.5
B. Ex.15.7
B. Ex.15.8
The purchasing agent should prefer to buy at prices stated in Mexican pesos. If
One example of cultural differences provided on the website is between the
Middle Eastern countries and the Western countries, especially the United
States. When negotiating in Western countries, the objective is to work toward
The Brazilian real increased in dollar value, so that Borso corporation had to
