International Finance Report: Mergers, Acquisitions, and Policies

This report provides an overview of international finance, focusing on the application of International Accounting Standards (IAS) within a company context. It examines the impact of IAS on financial statements, the contribution of international financial markets, and the importance of exchange rate markets. The report analyzes capital requirements for multinational enterprises, financial theory's role in developing capital structures, and evaluates foreign exchange management strategies. It also includes an analysis of micro and macro-environmental factors, international acquisitions, mergers, and investment policies, and the influence of fiscal and monetary policies. The report uses Luxury Chocolates Ltd. as a case study to illustrate the practical application of these concepts, covering aspects of working capital management and short-term asset management.

International Finance

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1 ...........................................................................................................................................3
TASK 2............................................................................................................................................3
1.3 Impact of IAS on the financial statements............................................................................3
2.2 contribution of international financial market.......................................................................4
2.3 importance of exchange rate market.....................................................................................4
TASK 3............................................................................................................................................5
3.1 Requirement of capital by multinational enterprise..............................................................5
3.2 Financial theory contribution in developing capital structure...............................................5
Evaluation of foreign exchange management.............................................................................6
Planning, monitoring and management of short term assets.......................................................6
Working capital management strategies.....................................................................................6
TASK 4............................................................................................................................................6
4.1 Analysis of micro and macro environment factor.................................................................6
4.2 Analysis of international acquisition, mergers and investment policies...............................7
Fiscal and monetary policy.........................................................................................................8
Benefits and risk of cross-border mergers and acquisition.........................................................8
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
International accounting standard provides general guidelines to the institutions and
corporate body which help them to prepare and present the financial statements such as income
statements, balance sheet, cash flow etc. Luxury chocolates Ltd. Company is situated in England
which sale the highly expensive chocolates to the customer. The report highlights the role of
international accounting standard in the organisation and how they treat the financial transaction.
For the treatment of financial transaction separate accounting standard are prepared which
provide a set of guidelines to evaluate and measure the impact on the company. The report
explains the contribution of financial instruments and markets in collecting the finance for the
company and the requirements of capital for the multinational companies. It also focuses on the
micro and macro-environmental factor which influence the decision making process of
international financial management. The study highlights the international merger, acquisitions
and different investment policies for the financial management.
TASK 1
Covered in PPT
TASK 2
1.3 Impact of IAS on the financial statements
International accounting standard provide framework to treat the financial transaction and
use the appropriate methods to deal with the transaction. For example there are different methods
to calculate the inventory such as LIFO, FIFO, weighted average etc. different accounting
standard are used for the valuation of income statements, balance sheet and cash flow statement.
IAS 1 help the Luxury Chocolates Ltd. Company to prepare the financial statement to
present the financial position in the international market and increase the profit of company by
providing their luxuries chocolates (Newman and et.al., 2016). It helps to adapt the different
accounting concept such as going concern concept, accrual basis concept to record the
transaction. It discloses the accounting policies and help the company to work under the
government guidelines and minimize the political and economical risk. IAS 2 is refers to manage
the inventory in the company. It helps to set the price of product and services. It uses the FIFO
and weighted average method for they valuation of chocolates stock and provide the chocolates
according to the demand and available stock.
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IAS 7 is used for cash flow statement to present the total inflow and outflow of cash in the
company to meet the daily requirement. The objective of the standard is to present the
information about the changes in cash and cash equivalents. It helps to prepare the financial
statements with the accuracy and reliability of the data. IAS 16, 36,37 and 38 are used to
valuation of current assets and liability, non current assets, contingent assets and liability, asset
impairment and intangible assets (Abata, 2015.). These standard help the company to prepare the
balance sheet and record all the assets and liability of the company to present accurate financial
position to the different stakeholders. It supports Luxury Chocolates Ltd. company to gain the
market share and profit and expand the business by collecting finance from the various sources
and attract the investors by the financial position (Teece, 2017).
2.2 contribution of international financial market
International financial environment affect the decision making process. The changes in the
currencies values and taxation policy affect the business. For example decreasing the value of
currency highly affect the import of raw material and ingredients. It increases the price of the
product which ultimately reduces the profit. International financial market and instruments help
the company to collect the finance from the different sources and support the decision of
company (Ghosh, Ostry and Chamon, 2016). International financial market provide a place to the
Luxury chocolates Ltd. Company to trade in global market and attract the global investor to
invest in the company wealth. Financial instruments also provide the borrowing and loan facility
to the Luxury chocolates Ltd. Company to raise the capital and import the ingredients to improve
the quality and attract the global customer.
2.3 importance of exchange rate market
Exchange rate market refers to the place where the foreign currency are exchange. It helps to
regulate the foreign currency, rectify balance of payment and protect the domestic industries in
the global market.
Importance
 The foreign exchange market provide the foreign currency to regulate and operate the
business of Luxury chocolates Ltd. Company.
 It helps to balance the BOP of the company by increasing the foreign direct investment
and manage the economic growth.
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 It helps to protect the domestic industries from the foreign industry by providing foreign
currency to trade in international market (Levy-Yeyati and Sturzenegger, 2016).
 It makes the volatile movement of currencies and limit the exposure by managing the risk
associated with the foreign exchange market.
 Foreign exchange market provide support to Luxury chocolates Ltd. Company o trade din
different countries to increase the profitability and productivity.
TASK 3
3.1 Requirement of capital by multinational enterprise
Every multinational enterprise requires capital to run the business effectively by acquiring the
resources and equipments. The different financial institutions and private sector provide finance
to the company by assigning loan, borrowings etc. company can also raise the capital by issuing
the shares, bonds and debentures to the public (Durusu-Ciftci, Ispir and Yetkiner, 2017). Luxury
chocolates Ltd. Company can issue the share to the public to raise the capital and utilize the
capital in operational activities. Capital is required by the company for the various activity such
as paying debt and salaries, purchasing the material, ingredients and machinery, expanding
business in global market and open the new branch to different countries. Luxury chocolates
Ltd. Company wants to expand business in international market to increase the sales and get
higher profit.
3.2 Financial theory contribution in developing capital structure
Financial theory provide guidelines and help the company to run the business effectively. It helps
the company by providing systematic approach to balance the debt and equities of the company.
The different theory explains the relation between the equity finance, debt finance and market
value. The M&M approach theory suggest that the capital structure of the company does not
matter in the perfect market because the market value of the company is ascertained by it earning
and the risk associates with the company assets.
The pecking order theory aim is to focus on the asymmetrical information cost. The theory
suggests that the company has to prioritize the financial strategy on the basis of the least
resistance path (Zhang and et.al., 2015). Internal financing is the best method for developing the
capital structure by balancing the debt and equities.
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Evaluation of foreign exchange management
The foreign exchange management can be done by different methods like SWAP, hedging,
future and option market. It helps the company to raise the foreign exchange like by interest rate
swap company can take the advantage by swapping the interest rate to the other company and
pay the less interest on borrowing foreign exchange. In future market they can purchase the
foreign currency in current market rate with the expectation of increasing the value in future
which help they to get the profit.
Planning, monitoring and management of short term assets
The luxury chocolates Ltd. Company plan, monitor and manage the short term assets to
accomplish the requirement and achieve the goal of the company. They prepare proper plan to
purchase the short term assets and monitor and regulate them for the effective result. It will help
them to increase the profit and market share. The multinational enterpriser plan the activities to
fulfil the requirement of capital.
Working capital management strategies
Working capital is required by the company to fulfil the day to day requirement of finance to
accomplish the goal and objectives of the company. The aim of the strategy is to balance the
assets and liability of the Luxury chocolates Ltd. Company to meet the requirement of short term
obligations. The major components of the working capital are current assets and current liability
of the company. It refers to the difference between current assets and liability which help to meet
operational requirement.
The inadequate working capital in the company affects its functioning and unable to pay the debt
of the company. Luxury chocolates Ltd. Company are also unable to purchase the quantity in
bulk which affects its profitability and incur higher cost.
TASK 4
4.1 Analysis of micro and macro environment factor
Micro environment factor : Micro environment factor refers to the factors which affect
the individual, company and market. The factors are customer, suppliers, distribution channels
and competitors etc. It affects the business of the company by the external and internal changes.
For example the change in customer taste and preferences force the company to renovate the
product and services to retain the customer toward the organization (Munjal and Kundu, 2017.).
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Macro-environmental factor : It includes the political, environmental, legal, social and
economical factor which affect the business of the company. The macro-environmental factor
provide the different benefits to the Luxury chocolates Ltd. Company to gain the competitive
advantage. The political and legal factor provide support to the company in international market
with the exchange rate, trade policy and interest rate.
The micro and macro-environmental factor influence the decision making of international
financial management. The economic factor such as interest rate, exchange rate etc. affect the
policy of international financial management (Ardalan, 2016). The legal and technological
changes force t eh company to adopt the new technology to retain and compete in the market.
They also force financial management to change the policies and grant finance to expand the
business in global market. The competition in market also influence international finance
management to take effective decision regarding the improvement in pricing policy and
managing finance.
4.2 Analysis of international acquisition, mergers and investment policies
International merger and Acquisition : It refers to the cross-border acquisition and
mergers of the company. Company adopts the acquisition and mergers strategies to provide the
different benefits such as competitive advantages, diversification, differentiation and large
capital with the grater market share. International merger help the company to increase and
expand the business in global market and control the activities without incurring higher cost and
time (International Mergers and Acquisitions. 2010). It helps the company to attain the grater
market share with the popularity and gain the foreign direct investment. International merger and
acquisition support the company by providing the international finance via the various institutes
such as international monetary fund, world bank, foreign direct investment etc. It increases the
capital of the company and help them to invest in operational activity to fulfil the needs and
demand of customer (Collings, Mellahi and Cascio, 2019).
The different investment policies, trade policies, taxation and dividend policy etc.
Provide the effective way to expand the business and minimize the barriers in the market.
International liquidity and market integration also provide the various benefits to run the
business smoothly in the market without incurring higher cost and time.
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Fiscal and monetary policy
The aim of fiscal and monetary policy is to control and manage the requirement of finance in the
economy. They prepare the different strategies to regulate the finance and manage the interest
rate and supply of money. It refers to the usage of taxing and spending powers by the
government. It affects the capital expenditure, deficit, exchange rate and individual spending.
Raising the interest rate help the government to collect more fund and utilize for the growth of
the economy.
Benefits and risk of cross-border mergers and acquisition
Cross boarder merger and acquisition help the company to gain the competitive advantage,
decrease the competition in market and increases the market share. It also helps the company to
increase the production and profit and enter into the international market and exp-and the
business. But it also has some disadvantages, sometimes in cross-border mergers and
acquisitions, it is difficult to manage the business in different country because of the various
political factor and risk.
CONCLUSION
The report summarizes the international accounting standard to support the organisational
functioning like preparing the financial statements, inventory management, current and non
current assets' treatment etc. it can be concluded from the study that company require the capital
for improving organisation performance and production and the financial market and institution
help the organization to collect the finance from different sources. International merger and
acquisition also help the company to expand the business in global market and overcome the
financial issues.
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REFERENCES
Books and Journals
Abata, M.A., 2015. The impact of international financial reporting standards (IFRS) adoption on
financial reporting practice in the Nigerian banking sector. Journal of Policy and
Development Studies, 289(1850). pp.1-16.
Ardalan, K., 2016. On the role of paradigms in finance. Routledge.
Collings, D.G., Mellahi, K. and Cascio, W.F., 2019. Global talent management and performance
in multinational enterprises: A multilevel perspective. Journal of Management, 45(2).
pp.540-566.
Durusu-Ciftci, D., Ispir, M.S. and Yetkiner, H., 2017. Financial development and economic
growth: Some theory and more evidence. Journal of Policy Modeling, 39(2). pp.290-
306.
Ghosh, A.R., Ostry, J.D. and Chamon, M., 2016. Two targets, two instruments: Monetary and
exchange rate policies in emerging market economies. Journal of International Money
and Finance, 60. pp.172-196.
Levy-Yeyati, E.L. and Sturzenegger, F., 2016. Classifying exchange rate regimes: 15 years later.
Munjal, S. and Kundu, S., 2017. Exploring the connection between human capital and
innovation in the globalising world. In Human Capital and Innovation (pp. 1-11).
Palgrave Macmillan, London.
Newman, W., and et.al., 2016. A literature review on the impact of IAS/IFRS and regulations on
quality of financial reporting. Risk Governance & Control: Financial Markets &
Institutions, 6(4).
Teece, D.J., 2017. Dynamic capabilities and the multinational enterprise. In Globalization (pp.
105-129). Springer, Berlin, Heidelberg.
Zhang, J., and et.al., 2015. The effect of leadership style on talent retention during merger and
acquisition integration: Evidence from China. The International Journal of Human
Resource Management, 26(7). pp.1021-1050.
Online
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International Mergers and Acquisitions. 2010. [Online]. Available through :
<http://www.economywatch.com/mergers-acquisitions/international>
Accounting Concepts, Principles and Basic Terms. 2019. [Online]. Available through :
<https://www.mbacrystalball.com/blog/accounting/>
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