Should the Multinational Firm Be Involved In International Business or Essay

Should the Multinational Firm Be Involved In International Business or Investment with a Developing Country - Essay Example In this study, Supermart is taken as a frictional multinational company which is based in the United Kingdom. It is a developed country. Supermart is a retail company doing its business for a long time in various countries of the world. It is one of the largest companies in the retail industry segment of UK. But for the large numbers of players the market of UK has become very much saturated which limits the growth of the company. Therefore expanding its business internationally will help this retail company to generate more revenue by acquiring the new customer base. For this reason, this UK based company has made a plan of expanding its business in the emerging market of China. Supermart can have many benefits and advantages of this decision. China is experiencing a huge growth in its retail market. A significant rise in the income of household people influences the retail industry of China to grow. China is a developing country having an emerging market. The improvement of the Chi nese economy Influences its people to spend more which becomes an advantage in its retail industry. The purchasing power of the people is increasing in this country which leads to the rise in demand. A positive marketing environment is created for this reason. The government of China is providing business licenses to many new companies for the development of the country. But in some cases, its government policies create many difficulties in case of foreign companies for establishing its business. Some of the reforms of China opens the country’s market and attracts many big companies. The political factor of China influences a lot in its national institutional system. Previously there were many trade regulations in the retail industry sector of this country. This industry was not considered as a prestigious industry by its government and it was not sanctioned. But modernization of China facilitates the growth of its retail industry. The open market system of the country influe nces its institutional system. The economic system of China has become market-oriented economy. The country has become a significant player in a global economy. It supports the growth of its private sector industry. For business operations, the country maintains strict regulations and laws. There is a specific framework under which the companies have to operate its business.

Evaluating the revenue recognition practices undertaken by the Assignment

Evaluating the revenue recognition practices undertaken by the software company - Assignment Example For this case, they need to bring this revenue down so that they can show the stakeholders the true financial statements according to the laid down rules in the International Accounting Standards. There are various accounting concepts and principles that were not adhered to by Isoft company thus why they showed higher revenue than they had actually realised. This paper will critically evaluate the revenue recognition practices which had been used by Isoft and it will also include an analysis of the potential economic and social consequences of these practices. For once, revenue should be earned. This means that anticipated incomes also referred to as receivables should not be recognized until such a time when they have been realized. According to the American accounting association, the term income includes realized net income add and not income only. Isoft Ltd might have overlooked this prudence concept regarding income. (Lynn, 2004) Even if the income elements are expected in the normal course of operations of the firm, a degree of judgement and probability need be attached in making the final conclusion on whether or not to include that income or else the turnover shall be overstated if that income does not materialize. Such items may include doubtful debts, exaggerations of the useful lives of some plant and equipment, etc. Apart from the probability of earning the income so anticipated, recognition as to whether that income should be able to be measured reliably should also be taken into account. Income recognition practices require that income should be measured reliably and with certainty. And if Isoft did not make reasonable estimate, then the whole items of income should have been excluded from the financial statements all together. However they should have included/shown the existence of the income items as a footnote to the accounts. (Wood and Sangster, 1999) Also related to the measurements is the cost at which a firm records its expenses which will have a direct influence to the recognized income. Isoft might have understated their reliability and expenses which is not prudent Another principle of income recognition is that of distinguishing revenue incomes from capital gains. Revenue incomes are those incomes generated from the principle income generating operations of the firm whereas capital gains are those gains made as a result of investments and or even disinvestments. Isoft might have included such capital gains as: Proceeds from sale of assets and Gains on disposals of plant and equipments in its income statements thus overstating revenue. This is a fundamental error that normally arises as a result of poor accounting knowledge on the side of accountants. The income recognition practices stipulate that only revenue incomes should be recognized in the income statements, capitalizing the capital items. 1 It should also not be forgotten that revenues should be matched with cost/ expenses incurred in realizing that income. Isoft did not employ clear cut-offs in apportioning of income and expenses to various financial problems. For instance, they might have wholesomely recognized a given income say rental income, some of which might have been rent in arrears for prior periods for previous debtors for earlier years making good their payments this year. For this case, Isoft should have only recognised rental income that pertain the current