W6,7,8

Discussion

Define the term “emerging capital market.”

 

Discuss two possible approaches to increasing the availability of high-quality financial information in emerging capital markets.  

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This discussion this week is interesting as it deals with the emerging capital market. First of all I would like to mention what is the difference between emerging capital market and capital developing markets, since they can possibly be confused; Emerging capital markets are countries that have had rapid growth and development, but are below the capitals of developed countries such as the United States and western European countries, among others; Developing capital markets are those that are found with a minimal or nonexistent level of development, and with a high rate of poverty, these countries generally have a characteristic in common which is a high rate of corruption in political systems, which have led to a high external debt, resulting in an inflation of the economy. (Jackson, 2019)

According to the book International Accounting A User Perspective by Saudagaran, & Smith, (2013), there are two approaches to increase the availability of high quality financial information in emerging capital markets and they are the Free approach and the Regulatory approach, both are very different from each other despite the fact that the purpose of both is improve the quality of the information presented in financial reports. Both are presented below, pointing out the benefits and the disadvantages they represent. (Saudagaran, & Smith, 2013)

Free market Approach	Regulatory Approach
· This approach proposes that the disclosures be according to the needs of each enterprises or company, with an appropriate level of information to cover the needs that each case presents. · This approach is considered less expensive due to its nature, which is focused on each case, but some do not consider it feasible due to the possible little information presented to users.	· It proposes an adequate framework in the disclosure regulations, to minimize problems that affect the economic well-being of investors, that is, the information provided in the disclosures, is within the framework of the necessary requirements. · This approach is considered more expensive but more effective especially after the problems that the financial market suffered in the early 2000’s.

 

From my point of view, I believe that there should be a consequence in the disclosure of financial statements, especially in economies where there is a high level of corruption at the government level, that is, in financial markets in developing countries. In emerging capital markets it is necessary that disclosures are clear and with good quality information in order to continue attracting new investors, giving them confidence that the investment will be a success. The article “Effects of fed announcements on emerging markets: What determines financial market reactions?” by Mishra, Papa N’Diaye, & Lam, (2018), points out that due to the financial crisis faced a decade ago, developed capital markets were susceptible to the millionaire fraud that took place, which produced millionaire losses, and that was a point that emerging countries took advantage of, to highlight how productive and feasible the investment would be in those countries. (Mishra, Papa N’Diaye, & Lam, (2018

Discussion

Do you think U.S. companies will embrace IFRS for financial reporting purposes?  Why or Why not? Present original arguments (supported by authoritative reference sources) in support of your position. Include in your response, a list of 2-3 U.S. MNCs who are already using IFRS for financial reporting purposes.

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It is recommended that US companies with subsidiaries in other countries adopt IFRS in order to have a better comparison at the time of making and analyzing financial reports, since in that way they make the information more uniform, and this at the same time can be better taken advantage of.

The article “Financial reporting Goes Global” by Gannon, and Shwal (2004), points out that although IFRS is not a requirement for American companies, they may experience a different effect on financial reports regardless of the size of the company, that is, American companies with subsidiaries in other countries that have public shares will have to make an inclusion of consolidated reports under the parameters of IFRS. (Gannon, and Shwal, 2004).

According to White, J. (2008) in e; The article “Speech by SEC Staff: IFRS and US Companies: A look Ahead”, points out that during the meeting there were several discussions that favored the use of IFRS and others that were against, one of the comments against was that the US GAAP had served the US Market extremely well for many reasons, giving investors comparable transparency in financial reporting and therefore implementation of IFRS may not be as necessary. (White, J., 2008). In other words, there are strong detractors in the implementation of a global set of financial reports since the US market changes the accounting standards established for years for a new set used globally.

 

Students are to conduct research and write a 10 page (at least) paper, excluding the cover page, abstract and References pages, related to the topic below. 

· Minimum of 10 scholarly reference sources, of which only 1 can be limited use of your text.

· Must be prepared using APA format and include K.U. cover page (in START HERE)

Topic

Key differences between U.S. GAAP and IFRS. 

Your paper should address and include discussions/analysis of the following:

· Define the process of harmonization and the goals of harmonization.  What end user needs is harmonization trying to address and why;

· The International Accounting Standards Board’s (IASB) role in the harmonization process;

· The Financial Accounting Standards Board’s (FASB) role in the harmonization process;

· The Securities and Exchange Commission’s (S.E.C.) role in the harmonization process;

· What accounting differences are left to be resolved between the FASB and the IASB? Discuss any 1 of these differences. Include in your discussion any future plans these organizations have for addressing these differences (e.g. IFRS treatment of Goodwill vs. U.S. GAAP treatment of Goodwill)

Discussion

Why is global risk management such an important requirement for companies operating in foreign markets?  Select the most current financial statements of a U.S. multinational corporation (MNC), list the various methods of risk management included in their policy. Do you think these methods are effective in global risk management? Support your answer.

NOTE: Go to the MNC’s website, Search for “Investor Relations” and you will find financial statements there. Choose annual reports for the fiscal year end 2014, 2015 or 2016. You can also use the SEC’s Edgar database to conduct a public company search:  

https://www.sec.gov/cgi-bin/srch-edgar