Taxes and Currency

Quick reference

• 00:04 Hi, I'm Ray Sheen.
• 00:06 Let's now talk about the financial impact that government policies
• 00:11 can have on how a business should be managed.
• 00:14 Of course, any discussion of government and business will need to address taxes.
• 00:18 Let me just say that for the purpose of this discussion,
• 00:20 I'm going to ignore the ability of the government to print money.
• 00:23 That should not be affecting the management decision of a business, unless,
• 00:27 of course, you're providing paper and ink to the government.
• 00:30 Taxes, duties, fines and fees are how government makes money, which
• 00:34 means they get money by taking it from others, and that includes your business.
• 00:38 Businesses are often taxed based upon the processes they operate and
• 00:42 the value of things that the business owns or controls.
• 00:45 Every country has its own complex tax code.
• 00:48 But taxes and fees fall into one of these general categories, permits and
• 00:52 fees to operate the business or a business process such as business license or
• 00:56 wastewater permit income taxes based on that earnings, usually paid quarterly or
• 01:01 annually, property taxes based upon the value of assets like buildings equipment
• 01:06 inventory, and some financial assets.
• 01:09 These are normally paid annually.
• 01:11 Duties and tariffs are based upon the value of goods being shipped
• 01:14 to other locations.
• 01:16 As I mentioned, tax laws and regulations are often complex.
• 01:20 In addition,
• 01:20 every country, sometimes even every city, will have their own unique tax code.
• 01:25 This is full time work for finance to keep up with tax.
• 01:29 As operating managers, you'll not need to fill out the forms and
• 01:32 learn the regulations.
• 01:33 Make wise business decisions and let finance know what you did.
• 01:37 They may occasionally ask you to change the date on which transactions will occur,
• 01:41 to reduce the tax liability.
• 01:43 Currency is another aspect of government that we must deal with as business
• 01:47 managers.
• 01:48 Currency is just another name for money.
• 01:50 Some countries have their own unique currency, like the Japanese Yen.
• 01:54 Other currencies are shared by many countries, like the Euro.
• 01:57 The value of the currency is impacted by government policy at macroeconomic
• 02:01 factors.
• 02:01 Governments try to control the value of their currency, but there's only so
• 02:05 much they can do.
• 02:06 The currency exchange rates between some currencies change daily.
• 02:10 So why do we care?
• 02:12 Well, if you work for a multinational company doing business in many countries,
• 02:16 you will find that local business is done in the local currency.
• 02:20 Now, currency fluctuations should not impact your day-to-day decisions, but
• 02:23 sometimes it will constrain operations as currency stacks up in one country and
• 02:28 you have a shortage in another.
• 02:29 Finance will let you know when and where there may be constraints.
• 02:34 Most companies will eventually need to convert the currency of other countries
• 02:37 into the currency of the country in which they do their financial reports.
• 02:41 However, because of the fluctuations, there are people in finance who's job is
• 02:45 to track currency markets and make transactions when the timing is favorable.
• 02:50 Let's wrap up this module with a quick overview of financial standards.
• 02:53 There are two primary financial standards and systems.
• 02:56 One or the other is applied to most businesses.
• 02:59 These standards focus on how costs and sales are recorded and reported.
• 03:03 The emphasis is on the financial system.
• 03:05 By following one of these systems investors and customers
• 03:09 can have confidence in the financial reports and know how to interpret them.
• 03:13 As operating managers, we don't care which system is used.
• 03:16 We make wise business decisions and finance will take care
• 03:19 of insuring the transactions are placed in the correct column and
• 03:22 that reports are completed the correct way.
• 03:26 With that said, if finance tells us that we need to do something in a certain way
• 03:30 to be compliant and it achieves our business goal, don't argue, just do it.
• 03:35 If it does not achieve the goal, then push back and have finance help you to find
• 03:39 a way to do what needs to be done and to do it in accordance with the standards.
• 03:44 Although these standards are recognized around the world,
• 03:47 many countries will have their own addendums to these standards so
• 03:51 that they can have a special or unique report generated.
• 03:54 Once again, you don't need to know this,
• 03:56 the people in your finance Department should.
• 03:58 One system is FASB/GAAP, which stands for
• 04:01 the Financial Accounting Standards Board / Generally Accepted Accounting Principles.
• 04:06 FASB is a non profit, non governmental association in the USA.
• 04:10 That publishes and maintains the gap standard.
• 04:13 The other system is IAS IFRB.
• 04:16 International Accounting Standards.
• 04:18 International Financial Reporting Standards.
• 04:21 These are published and maintained by a department of the European Union.
• 04:25 From an operational manager standpoint,
• 04:27 the two systems are essentially equivalent.
• 04:29 We still need to make good business decisions and
• 04:31 record them correctly in the financial books.
• 04:33 Finance will take care of the rest.
• 04:35 Governments help to insure a business environment that is predictable and
• 04:40 that's a big help to companies.
• 04:42 Yes, we must pay taxes and deal with different currencies and
• 04:45 financial standards, but that's a lot better than chaos.

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