Planning and management control is critical for the company, in this multinational company. However, the reduction in national trade barriers continuously, a floating currency, sovereign risk, restrictions on sending funds across national borders, differences in national tax systems, differences in the level of interest rates and commodity prices and the effect of changing equity to assets, earnings , and the cost of capital is a variable that complicates management decisions. And rapid global Persaingn penyebarn the limited information supports national differences in management accounting practices. Additional pressures include, among others, changes in markets and technologies, the growth of privatization, incentive costs, and performance as well as coordination of global operations through joint ventures and other strategic links.
Company in the conduct of management control requires a planning tool that can identify the relevant factors in the future, scanning the external and internal environment. The tool helps companies identify opportunities and challenges. One such tool is the WOTS-UP analysis regarding the strengths and weaknesses of the company relating to the company’s operating environment. Accountants can also help corporate planners to obtain useful data in strategic planning decisions.
Then, the decision to invest abroad is a very important element in the global strategy of a multinational company. Investment risk, followed by the foreign environment, complex and constantly changing. Formal planning is a must and is generally performed in a capital budgeting framework that compares the benefits and costs of the proposed investment yng. Differences in tax law, accounting system, the rate of inflation, the risk of nationalization, currency framework, market segmentation, restrictions on the transfer of retained earnings, and differences in language and culture adds to the complexity of elements that are rarely found in domestic environments.
Adaptation by multinational companies for investment planning models have traditionally been carried out in three areas of measurement:
1. relevant to determining the return on investment of multinational
A manager must determine the relevant rate of return on foreign investment opportunities mengalisis remedy. However, the relevant rate of return is a matter of point of view of the project or the parent company abroad. Returns from these two points of view can differ significantly. Financial managers need to meet multiple objectives by providing a response to investor groups and noninvestor in the organization and the environment. If siatu not promise the return of foreign investment that has risk-adjusted returns that value is obtained from local competitors, the parent company’s shareholders would be better to invest directly in local companies.
2. measure of cash flow expectations
For managers of multinational companies, measuring the expected cash flows of a foreign investment is quite a challenge. Revenue estimates are based on projected sales and billing experience antipasti. Operations and local tax burden equally predictable. This process should also consider the impact of changes and fluctuations of the currency on expectations of return on foreign currency.
3. calculate the capital costs of multinational companies
For a control system for a multinational company to function properly, the system typically used by many multinational companies to control its foreign operations in many respects much the same as those used domestically. Parts of the system are generally shipped out include financial control and budget as well as the tendency to apply the same standard that was developed to evaluate the domestic operations.
Once the strategic goals and capital budgets are created, the management focus on short-term planning. Short-term planning includes making the operating budget or profit plan when needed in the organization. Plan earnings are the basis for forecasting cash management, operating decisions, and management compensation schemes. Plan of the company income statements of foreign affiliates is first converted according to accounting principles adopted in the parent company’s country of origin and translated from local currencies into the currency of the parent.