One of the major risk in the International Business is the payment of taxes in both the countries i.e. the country in which the business is actually effected and in the country where the MNC is having its head office. This type of double taxation will definitely impede the growth and development of the MNCs in multiple ways. So the provisions are made to avoid the double taxation (Double Taxation Relief) between the two countries through two types of relief namely Bilateral Relief and Unilateral Relief. Bilateral Relief Under this scheme, relief against the burden of double taxation is worked out on the basis of mutual agreement between two countries. There are two types of agreements. In one type, the two concerned countries agree that certain incomes which are likely to be taxed in both countries shall be taxed only in of them or that each of the two countries Continue reading
International Business Finance
Key Differences Between GAAP and IFRS
The differences between International Financial Reporting Standards (IFRS) and GAAP are numerous. International Financial Reporting Standards (IFRS) are principles-based accounting Standards, Interpretations and Framework adopted by the International Accounting Standard Board (IASB). Many of the standards forming part of IFRS are known by the older name of International Accounting Standards (IAS). Generally Accepted Accounting Principles (GAAP) is a term used to refer to the standard framework of guidelines for financial accounting used in any given jurisdiction which are generally known as Accounting Standards. GAAP includes the standards, conventions, and rules accountants follow in recording and summarizing transactions, and in the preparation of financial statement. GAAP and IFRS differ in key ways, including their fundamental premise. At the highest level, GAAP is more of a rules-based system, whereas IFRS is more principles-based. Under GAAP, voluminous guidance attempts to address nearly every conceivable accounting problem that might arise. And if that guidance Continue reading
Major Participants in Securitization Process
Securitization is the process whereby relatively illiquid financial assets such as mortgages are packaged together and sold off to individual investors. Securitization turns relatively illiquid instruments into quite liquid investments called asset-backed securities. A market maker agrees to create a secondary market by buying and selling the securities. Securitization originated in the mortgage market in the early 1980s, when mortgage loans began to be packaged together and sold off as securities in the secondary market often with government insurance guaranteeing that the principal and interest would be repaid. Securitization became popular because it provides a way of protecting against interest rate risk in an environment of increased interest rate volatility. Securitization offers reduced credit risk because of the pooling of assets. Read More: The Concept of Securitization Process of Securitization Benefits of Securitization The securitization process involves a number of participants. The role of major participants in securitization process are Continue reading
Factoring Concept in Export Finance
What is Factoring? Factoring is a financial transaction whereby a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount in exchange for immediate money with which to finance continued business. Factoring differs from a bank loan in three main ways. First, the emphasis is on the value of the receivables (essentially a financial asset), not the firm’s credit worthiness. Secondly, factoring is not a loan – it is the purchase of a financial asset (the receivable). Finally, a bank loan involves two parties whereas factoring involves three. The three parties directly involved are: the one who sells the receivable, the debtor, and the factor. The receivable is essentially a financial asset associated with the debtor’s Liability to pay money owed to the seller (usually for work performed or goods sold). The seller then sells one or more of its invoices (the receivables) Continue reading
Spot and Forward Foreign Exchange Rates
There are two types of foreign exchange rates, namely the spot rate and forward rates ruling in the foreign exchange market. The spot rate of exchange refers to the rate or price in terms of home currency payable for spot delivery of a specified type of foreign exchange. The forward rate of exchange refers to the price at which a transaction will be consummated at some specified time in future. In modern times the system of forward rate of foreign exchange has assumed great importance in affecting the international capital movements and foreign exchange banks play an important role in this respect by matching the purchases and sales of forward exchange on the part of would be importers and would be exporters respectively. The system of forward foreign exchange rate has actually been developed to minimize risks resulting from the possibility of fluctuations over time in the spot exchange rate Continue reading
Modes of Transferring Capital or Funds from Savers to Borrowers
In economics, a financial market refers to a media that allows people to buy, sell, create and exchange financial securities such as share and bonds, commodities such as basic agricultural goods and precious metals, and other fungible items of value at low transaction costs and at prices that reflect the efficient-market. Both general markets where many commodities are traded and specialized markets where only one commodity is traded exist in financial market. Markets work by placing many interested buyers and sellers in one media, thus making it easier for them to find each other. The financial markets can be divided into different types such as capital markets, commodity markets, money markets, insurance market and foreign exchange market. A saver refers to the one who deposit their money in bank, invest in company share and pays premium to an insurance company with objective to earn interest, dividend and profit. They aim Continue reading