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International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 15
11 Instructor’s Manual – Module 15| Geringer, McNett, Minor, Ball © 2016 by McGraw-Hill Education.
o income
o value-added (VAT)
o withholding
• Importance of how foreign operations are organized
to tax liability
o Branch—extension of parent company
o Subsidiary—separate legal entity –in U.S.,
active income taxed when remitted to parent
company
• Inversions—acquisition of foreign company to
reduce taxes
• withholding tax
• branch
• subsidiary
Map-Bridge-Integrate model can help manage across cultures and develop a global mindset in
that it helps synthesize across cultures
A. Mapping is identifying the cultural differences and understanding them.
B
I. Tax affects revenues and is an external force around which managers need to navigate
II. There are three major types of taxes
A. There are three major types of taxes
1. Income tax --direct tax on earnings
2. Value-added tax—indirect tax collected from parties as they add value to the product, on
the value-added. The consumer pays tax on full value of product.
3. Withholding tax—indirect tax levied on passive income (royalties, dividends, interest
payment)
III. Tax liability of foreign operations depends on their organization
A. Branch—extension of parent company—U.S. taxes due on earnings/losses deductible
B. Subsidiary—separate legal entity—in most cases, active income taxable only when remitted
to parent company; passive income may be taxable as it occurs (when U.S. parent has more
than 50% ownership--Controlld Foreign Corporation)
IV. Inversion—acquisition of foreign company in order to move legal HQ to reduce taxes
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 15
12 Instructor’s Manual – Module 15| Geringer, McNett, Minor, Ball © 2016 by McGraw-Hill Education.
CONNECT TOOLS FOR CLASS PREPARATION
SmartBook
What is SmartBook?
SmartBook is a digital version of your course textbook. It contains the same content within the
textbook, but unlike a typical eBook, SmartBook actively tailors that content to your individual
needs as a student. SmartBook can be accessed online through your laptop, tablet or
smartphone and is also accessible when you’re offline!
How Does SmartBook Help You/Students?
• Assignable – assigning students their reading and studying their textbook content
ensures they are coming to class prepared.
• Proven to help students get a better grade. Studies show SmartBook technology can help
increase grades by a full letter.
• Save time. Study smarter. SmartBook makes sure students focus on the things you don’t
know so they can prioritize your study time wisely.
• No more cramming. SmartBook helps learners retain key concepts so you can learn—not
memorize.
• Accessible on the go. Use SmartBook on your laptop, tablet or smartphone–online or
offline–via your browser or mobile app.
• Results in real time. Track student progress–and prevents them from wait for midterms
or finals. Know how well you understand the material now.
How to assign SmartBook to ensure students come to class prepared?
• On the Connect course homepage click “add assignment” > LearnSmart > Select the
chapter
• Decide what content you’d like your students to study, and how much time you’d like
students to spend on their work. Start by narrowing down the content prior adjusting the
slider bar. – Many instructors find it useful to limit the assignment to a maximum of 45
minutes.
• Assign points to the assignment. Instructors have found that if they give the
LearnSmart/SmartBook assignment a minimum of 10% of the course grade that students
are more likely to complete the assignment.
• The entire LearnSmart/SmartBook module is available to your student at all times,
however, assigning it will prompt students to try it. You are required to select a due date
for this assignment, however, this will not prevent the student from access to the tool; it
is designed to show you that the student has taken the LearnSmart/SmartBook
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 15
13 Instructor’s Manual – Module 15| Geringer, McNett, Minor, Ball © 2016 by McGraw-Hill Education.
assignment. LearnSmart/ SmartBook is an adaptive study tool designed for students. It
can also show you where students are struggling to understand specific concepts.
• The student’s LearnSmart/SmartBook score in the Connect reports is based on their
mastery of the material at the time the assignment is due. Mastery is an evaluation of
the number of learning objectives they completed via performance on answering
questions.
• Students may, and are encouraged, to continue to use LearnSmart/SmartBook
throughout the semester. After the assignment due date, they can continue to access
this tool. Continued use of LearnSmart will not affect their LearnSmart/SmartBook
assignment results in the Connect reports, but has shown to improve test scores by as
much as a full letter grade.
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 15
ENGAGEMENT & APPLICATION (FACE TO FACE & ONLINE & HYBRID)
BOXED TEXT DISCUSSION QUESTIONS WITH SUGGESTED ANSWERS
IB IN PRACTICE: Hedging on Sanctions: Challenges for Russian Businesses and
Individuals
The March, 2015 sanctions imposed on Russia for its annexation of Crimea were meant to send a
non-military response to what many Western governments see as a territory grab. These
sanctions, initially imposed on individuals in Putin’s inner circle and some defense companies,
later were expanded. This feature explores the effects of the sanctions on Russians and how
they might hedge their effects.
Online and Hybrid: Assign questions to be prepared in virtual teams and submitted as a
team assignment
Face-to-Face: Students develop responses to the questions in class in teams/groups
1. How is Prokhorov’s transfer of the basketball team the Brooklyn Nets an example of
hedging the risk of increased sanctions?
2. Are there costs associated with the Russian response to the U.S. and EU sanctions? If
so, who pays them?
3. How would you advise a Russian who has considerable assets in the EU and United
States to protect his or her assets?
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 15
GLOBAL DEBATE: Lending to the Poor: Charitable activity or For-profit Business?
The growing trend of microloans is changing access to capital for extremely small business start-
ups by individuals traditional bankers would view as “high risk” borrowers. What initially started
as a small loan initiative with social implications is now becoming a for-profit niche market
world-wide. The global debate issue here is whether lending to the poor via microfinance should
be done with a not-for-profit model or a for-profit business model. Is lending to the poor
inherently a charity operation? The recent trend following for-profit models has been a
successful approach.
Face-to-Face: Students develop responses to the questions in class in teams/groups.
1. Is profiting from lending to the poor an ethical business model?
2. Is for-profit microlending a way to reach more of the poor more effectively, or a
mistaken development?
GET THAT JOB! FROM BACKPACK TO BRIEFCASE Brian Goldfinger: Microfinance in
Latin America with Kiva
Brian Goldfinger describes his change of major into accounting and international business, and
then his work in Latin America with Kiva. Most interesting is his initial job with KPMG, which he
left because it did not offer him a way to fulfill his desire to help others.
Online and Hybrid: Virtual teams evaluate Goldfinger’s advice for their own career
development. Share conclusions with class, either online or in face-to-face setting.
Face-to-Face: Students evaluate their own career strategy in light of Goldfinger’s advice.
1. What advice does Goldfinger offer?
2. Do you admire his leaving his KPMG position to take up a Kiva fellowship or does this
seem foolhardy to you?
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 15
16 Instructor’s Manual – Module 15| Geringer, McNett, Minor, Ball © 2016 by McGraw-Hill Education.
This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This
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International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 15
END OF MODULE EXERCISES
CRITICAL THINKING QUESTIONS
1. The only difference between accounting in the domestic arena and accounting in the
international one is that international transactions may be in foreign currencies that have to
be translated into dollars. Comment on this observation.
2. How might you expect the practice of accounting to be different in another country?
3. Does the process of convergence of accounting standards present any benefits to U.S.
4. How might adopting triple-bottom-line accounting influence the competitiveness of
U.S. firms in foreign markets?
5. You are a CFO establishing your firm’s first overseas subsidiary. As you consider how
to capitalize your business, what are your concerns about using the local and home-country
6. A local business new to exporting has signed a sales contract with a buyer in Riyadh
that specifies payment of $3 million in Saudi riyals in six months Discuss the hedge options
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 15
7. One of the characteristics of centralized structures is that they are slow and reduce
innovation. Given that a globalized business needs increasingly quick responses, why would
8. U.S. corporations use three major tactics to keep their tax bills low: they avoid
repatriating their foreign earnings; they are careful about how they organize their foreign
operations; and they have explored inversions. Which of these tactics would you choose to be
9. Could transaction exposure be avoided if the revenues generated by foreign sales
were transferred to the home company’s currency at the end of every business day?
10. When accounting systems are fully harmonized and convergence is achieved, will the
company’s functional currency matter?
MINICASE: Dealing With Transaction Risk in a Renminbi Contract
This minicase explores a contract made in renminbi and how to hedge it.
1. How could you cover this risk?
