You are providing advice to a large and successful Australian petrochemical company (Petrochem)
Australia Ltd). The company has succeeded in exporting their products to a number of overseas countries and has thus far avoided any problems with fluctuating exchange rates by stipulating that all transactions be recorded in Australian dollars. Because of increasing demand for its products and lower production costs overseas, the company is now considering establishing a manufacturing and distribution facility in Dubai, Thailand or Singapore. You are required to select one of these proposed destinations and prepare a report outlining to the board, the accounting and other key issues which will arise and which must be considered when developing an independent overseas subsidiary in your selected destination.
This assessment will enable students to discuss various business and accounting issues arising from Australian businesses operating internationally.
Must include these accounting issues
Accounting Issues:
• Hedging
• Foreign exchange risk
• Foreign currency translation
• AASB 121 & AASB 139 (Regarding AASB 139: I expect that you are able to explain the concept of a hedge and to identify key paragraphs from this standard which outline the accounting treatment. The textbook chapter will provide you guidance here).
You should address all of the accounting issues that I have outlined.
Other Important & Relevant issues:
• Cultural issues
• Legal issues
• Global business issues
• Global competition
• Tax issues
• Transfer pricing
• etc (ie there are other issues that you could discuss)
You will not be able to cover all of the other important & relevant issues that I have outlined. You should identify and address what you believe to be the most important and address your selected issues in sufficient detail
