International Accounting Foreign Direct Investment

Question: Discuss about theInternational Accountingfor Foreign Direct Investment. Answer: Accounting Issues Confronted by Besserbrau AG The variety of international accounting issues confronted by Besserbrau AG is as follows; Foreign direct investment: With rapid growth and expansion in China, Besserbrau AG should account for FDI. They are under the obligation to adopt to accounting standard so that they can convene the requirements in China. The company should exchange the profits derived from their subsidiary, BB Pijio from GAAP of China to GAAP of Germany. Having FDI in China Besserbrau AG would be under double taxation together by Chinese government and by German government upon the profits derived by them (Hoskin, et al., 2014). The ultimate objective is to lower the sum of taxes occurred in order to maximise its after tax cash flows. Hedges of Foreign Exchange Risk: Besserbrau AG can lower their contact to overseas exchange risk by setting up the requirement that of enabling the foreign customers to pay for products in Euros. Alternatively it can purchase the foreign currency provides them with the option of selling in the predetermined exchange rate. Financial reporting of foreign operations: Besserbrau AG has its head quarter in Bavaria and conducts its trading activities on London Stock Exchange; the company is under the obligation of preparing the financial statements in compliance with the states accounting standard (Oliver, 2014). Sales made to foreign customers:Besserbrau AG ships its products to China and this lead to the problem of currencies since both the nations have different set of currencies. In order to account for its shipment, it is necessary for Besserbrau AG to convert the Chinese Yuan sale and receivables into the German Euros. Reference List: Hoskin, R.E., Fizzell, M.R. Cherry, D.C., (2014).Financial accounting: a user perspective. Wiley Global Education. Oliver, K., (2014). Balance Sheet Presentation under IAS 1 and US GAAP.