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What is …

Multinational Company?

Multinational Company (MNC)
At least 2 countries delivers services facilities

controls production

*Originated in 20th century and expanded after World War II.

Also can be named as…

     

Multinational enterprise (MNE), Transnational corporation (TNC), Multinational organization (MNO) , Super National Enterprises, Global companies, Cosmocorps, International corporation.

.Examples…..

Machinery • Sales turnover 100 mil Profit oriented • Generate profits • No social welfare activities Unified control of the parent company • New investment & local objectives • Members of BOD .Characteristics: Gigantic size company • Capitals. size plant.

Advantages & Disadvantages of Multinational Companies (MNC) .

S.do global.Advantages  Acquire larger pool of customer  Borderless World. get more customers  96% Consumers/ 67% World Purchasing Power=> Outside U. .A.

com/mosongo/0906CWIndiancompaniesvsMNCsTheRaceIsStillOn.Advantages  Create rivalry and increase competitiveness Source : http://www.goldensegroupinc.pdf .

Advantages  Gain cost advantage  Increase efficiency.S. and Western Europe have hired 170.000 Indians . cut costs  India receives most of all offshore revenue  Companies from U.

Advantages  Avoid trade barriers  Inward investment. .UK can access to high-quality cars at lower prices.build own facilities  Japanese car manufacturers invest into UK - avoid EU Common External Tariff.

obtain raw materials or lower-cost components to the international markets (Ozoigbo & Chukuezi.Disadvantages  Exploitation on natural resources by MNCs  Japanese MNCs . 2011) .

Disadvantages  A threat to economic and political sovereignty of host countries. perhaps  Protectionism  Keep new entrants away from market.reap profits .

Disadvantages  Destroy local companies  Destroy competition in local market  Acquire monopoly through acquisition of domestic firms .

Disadvantages  MNCs may ignore home countries’ industrial and economic development  More investments to foreign countries  Less availability of domestic capital .

Harmonization of accounting standards BENEFIT MULTINATIONAL COMPANIES .

Systematic review and evaluation of the company performance  Communication within the groups become easier  Monitoring business operation and take corrective action .

 Increases comparability of company performance against domestic and international peers  Financial statements presented on same basis  Analysis of competitive and operational can be conducted easier .

 Attract capital from a larger pool of investors  Differences in financial reports reduced  Better quality and credibility of financial report  Investors understand and confidence .

 Reduce reporting costs  Simplified consolidation of financial statements of foreign subsidiaries  Accountants only require knowledge for common accounting practices .

Easier to move accounting staff between foreign subsidiaries  Increase mobility of accountants  Not need outsource accounting tasks  Better respond and manage human capital needs of subsidiaries .

Align two sets of standards .What MASB Do??? .

 Renamed as Financial Reporting Standards (FRS) & Renumbering the standards  Correspond to international standards  Example: >> IFRS 1 to 5 are FRS 1 to 5 in Malaysia .

 Introduced a two-tier reporting framework  For non-private entities: >> Financial Reporting Standards (FRS)  For private entities: >> Private Entity Reporting Standards (PERS) .

 FRS made identical to IFRS and 10 revised accounting standards issued  Removed all remaining differences >> Local guidance and editorial matters .

 Issued statement about the fully convergence plans with IFRS  Ensure companies have sufficient time to prepare  Ample time frame was necessary to adopt remaining standards .

 Issued Malaysian Financial Reporting Standards (MFRS)  Fully IFRS-compliant framework  Equivalent to IFRS .

What is the impact?? .Arising from new Financial Reporting Standard .

 Increase the transparency of financial reporting  Provide more disclosures More flexibility in financial reports  Principle-based standard  To determine stock option value: >> Not only use option pricing model >> Allow for use of valuation techniques .

 Increase the credibility and reliability  High quality and consistency reports  Increases the ability of foreign investors and analysts to understand .

 Greater comparability  Sets limits on the alternatives allowed for similar transactions  Facilitates comparison between Malaysian companies with foreign companies .

 Small companies bear a higher cost  Lesser resources to handle the implementation and training .