In the development of the article, topics will be emphasized that will emphasize the concept, application, importance and problems that Multinationals bring with them within the accounting, economic and social environment in which they operate.
Multinational corporations are those dedicated to the development of an activity (ies) in several countries, where they will seek greater growth in their operations, a greater expansion of their activities, having as an important result economic growth, given the low costs that low prices and an expansion of your market.
Definition
After the creation of the multinationals, there have been controversies due to the different definitions of it, some define it as any company that maintains economic operations in more than one country; Others affirm that this should not be limited only to having operations outside the borders, but must also have capital and personnel from different countries.
We find the different types of corporations that exist that are: ethnocentric company: it is oriented to its nation and the subsidiaries are controlled by the parent, the accounting system is according to the practices used in the country of origin, there is a permanent domain of the Matrix house; polycentric company: a decentralization is presented in which the development of the accounting practices of each of its subsidiaries is allowed, from which the parent company expects economic returns; geocentric company: accounting information systems are designed that are affordable to the systems of all the countries related to it and it is developed in search of the benefit of all, its design is carried out based on the systems of the most developed countries and the standards international.
Needs and financing
Already known a generalized concept of multinational corporations, it is necessary to know what are the needs that they develop and how they can be financed.
Among the needs we find the search for homogenization in the way of directing resources, personnel and financial information and in general the control of its subsidiaries, generating an organizational environment effectively, another need is to create good relations with the governments of the countries in which the subsidiaries of the multinational firm are located; demonstrating the benefits that this generates, allowing an environment of trust that will facilitate the easy access and distribution of its products.
Finally, the multinational firm must comply with different legal headings that allow the development of its activities and the creation of a degree of confidence in its products and in the financial information presented to its users, which will be characterized by its easy understanding as It will be developed based on the regulatory aspect of your country.
In order to develop these needs, multinationals must have a source of financing that can be:
- North American Fundraising Source International Funding Source Local Funding Sources Abroad Other Foreign Funding Sources
Accounting development of multinationals and their problems:
While the basic accounting techniques for business transactions are the same regardless of the country in which the business is conducted, the problems arise in applying those techniques to foreign operations, which do not exist in domestic operations..
These problems grow out of the following conditions, which characterize operations abroad. These are:
- Distance from parent company Different languages and the resulting barriers to facilitating communications Different laws and legal systems Different stages of progress in the art of applying accounting Different accounting practices Different types of currency.
1. Distance from the parent company: this difficulty arises due to the distance between the parent company and its subsidiaries at the time of collecting the information on the different movements and transactions that will be necessary for the preparation of the financial statements; These delays will be reflected when the consolidated reports are rendered (IAS 27 Consolidated and accounted financial statements of investments in subsidiaries).
In many cases, parent companies attribute the delay in obtaining the financial statements of foreign subsidiaries to the fact that accountants in some countries do not place as much emphasis on periodic reporting as accountants do in developed countries.
2. Different Languages: Local laws and the employment of local personnel make it necessary to keep accounting accounting records in the national language and in the national currency in most countries, without the need to save such information in another language (language of the parent or subsidiary), causing problems when analyzing and interpreting the information presented by the different companies.
3. Foreign Laws: Each country has its own laws and administrative agencies that regulate accounting in that country, due to the approach that is given to each law in its country of origin, leads accountants to give a different management to the profession whether thinking about the welfare of the company, the state or the partners.
On the other hand, at the time of preparing the financial statements, the requirements given in each country are not met and may cause problems for the company.
4. Differences in Accepted Accounting Practices: When a subsidiary makes its financial statements, these are made according to the laws of each country; When consolidating the information, certain difficulties may arise. When the differences are material, the subsidiaries adjust their statements to the accepted practices followed by the parent company.
As an example of these differences we can highlight the accelerated depreciation at higher rates practiced by some foreign countries, than those allowed for tax purposes in other countries; Another example we can cite is the income tax regulations in Brazil, where they limit the deduction for depreciation of personal property and do not allow any deduction for depreciation of buildings or other property improvements.
Some Companies require that all their subsidiaries follow the same accounting methods; This is why Multinational companies make an accounting manual that provides a catalog of accounts, standard depreciation rates and a series of reporting forms, allowing all this to compare Accounting and costs between countries; coming to exist any deviation that is necessary to abide by local laws.
5. How to ensure a competent accounting staff abroad: What is considered more appropriate is that the accounting aspect of each subsidiary is in charge of an accountant from the same country, but many multinational companies do not think so and have put themselves in the function of sending local personnel from the parent company to carry out these positions in the different subsidiaries they own.
In the search for greater trust and credibility of the transactions and movements made by each subsidiary, the parent company chooses to apply some of its practices in other countries, sometimes without being aware that this may have administrative and legal consequences for its subsidiaries.; For this reason, it is best to train foreign personnel to carry out their functions resembling what the main headquarters wants, but proportionally the development of these countries.
6. Accounting problems due to currency differences: given the devaluation of some currencies against others, in some cases when converting foreign currency to local currency, you can go from having a gain to having a loss.
What many multinationals sometimes do not understand is that the profit margins that are satisfactory when measured in local currency may not be the most adequate to compensate for the devaluation and thus maintain working capital and its productive capacity.
Conclusions
- Despite the importance acquired by multinational corporations in recent years, they feel a little vulnerable in terms of competitiveness, not because they lack good products, prices, statistics, but because of the difficulties presented in terms of regulations accounting, this having a very important influence on the quality or importance of the financial statements.
- In the implementation of multinational corporations, the accounting profession plays a fundamental role due to the need to have clear and useful financial reports for both local and foreign users.
- Presenting this economic opening, accountants must be more efficient and specialized every day, since competition increases more and more, this being a point in favor for multinational corporations.
Bibliography
Jarne Jarne, José Ignacio. Other international analyzes of the quality of business auditing. Magazine: Accounting and Auditing Legis No. 17 (January-March 2004). Pages 26-66.
Mejía Soto, Eutimio. Montes Salazar, Carlos Alberto. International accounting approach to international standards. 2005.
International trade, introduction to the world of multinational companies. Publisher: Prentice / International Hall. 1997
