tailieunhanh - Ebook International accounting (7th edition): Part 2

(BQ) Part 2 book "International accounting" has contents: Financial reporting and changing prices, global accounting and auditing standards, international financial statement analysis, managerial planning and control, financial risk management, international taxation and transfer pricing. | CHAPTER 7 Financial Reporting and Changing Prices Fluctuating currencies and changes in money prices of goods and services are integral features of international business. Chapter 6 focused on the former. This chapter dwells on the financial statement effects of changing prices. The global economy is presently experiencing one of its most serious economic downturns since the 1930s. During times such as these, national governments are often tempted to adopt expansive fiscal stimulus and monetary measures designed to lift their economies out of recession. Disproportionate stimulus measures, however, are sure to stoke the flames of inflation as too much stimulus money chases the same goods and labor. It is too early to tell what path governments, affected by the current recession, will follow or how soon economic recovery will manifest itself. Recent reports, however, suggest that inflation worries are heating Developing economies, some of which fought serious battles to tame inflation in the 1980s and 1990s, are especially worrisome. In several large emerging markets, such as India, Indonesia, the Philippines, Russia, Turkey, and South Africa, double digit inflation has already arrived. Given the distortive effects of changing prices on financial statements and their interpretation, it is important that financial statement readers understand what these effects are and how to cope with this reporting conundrum. Grupo Modello ., the largest manufacturer of Corona beer in Mexico, operates in an environment where changing prices have been nontrivial in the recent past. To see how price changes have been reflected in the company’s published accounts, examine Exhibit 7-1, which contains selected excerpts from Grupo Modello .’s financial statements and related 1 2 Mark Whitehouse, “Inflation is Tempting to Indebted Nations,” Wall Street Journal, March 30, 2009. As the cumulative rate of inflation in Mexico no longer exceeds 28 .