Pricing Transfer and International Taxation

Transfer prices may be based on the cost of the difference of the increase or a price. Environmental influences over prices caused to transfer some questions about the methodology of the determination of the price. The principle or price antarperusahaan beseem transfer transactions with supposes that happen antarpihak unrelated instimewa in a competitive market.

Early concept
Complexity legal and rules specifying taxes to foreign companies and profit generated abroad in fact taken from some basic concepts. This concept includes instilah neutrality tax and equity tax. Neutrality tax means that have no influence ( neuter ) of the decision allocation of resources. In other words decision business propelled by fundamental economic seoperti level of rewards and not tax consideration. Equity tax mean wajub tax face a situation similar should pay taxes the same , but there are disapproval antarbagaimana interpret this concept. 

Transfer pricing in the practice of taxation of international

In principle practice transfer pricing ( with prices not equal to the market price ) can be driven by tax motive or instead of taxation ( non-tax motive ). Various studies beyond indonesia show it ( carson 1979 , ; vaitson ; 1974 in caves ; 1996 ). Motivation taxes on practices transfer pricing executed with wherever possible move income to a country for to the tax lowest or minimum. One form transferee income e.g. in shape payment royalty because with great scarcity of standard price ( of tariff ) market over royalty very hard for administration tax about it. Kopits ( in caves ; 1996 ) declaring that least 13 % payment royalty from state bcrkcmhang ( to the developed world ) a transformation royalty be dividends. Next , with respect to goods price ( of ) the input of production lecras ( in caves ; 1996 ) declaring that based on the study 1985 multinationals operating in. More easily level autonomy members multinationals at overseas the higher utilization strategy transfer pricing. Becomes less menentu-nya environment operation member of the company the more significant portion export sales than domestic sales and higher earnings potential then motivation taxes on transfer pricing more extensive. Transfer pricing problem is too regardless of phenomena business big companies in multi unit will expand business abroad at mengoprasikan their business in decentralization and implement concept cpst-reveneu or concept corporate profit center. Ideally , concept decentralized profit center was also device that could measuring and evaluate performance of which also one aims management and motivation management units multinationals concerned in achieving the purposes of the company. 

Purpose of transfer pricing
In general , purpose quotations transfer is to transmits data financial among departments or divisi-diisi company and as they were mutually uses goods and services each other ( henry simamora , 1999 : 273 ) besides the purpose ; transfer pricing sometimes used for evaluate division and motivate manager division division the seller and buyer toward decisions harmounious with purpose company as a whole. Transfer a pricing system should satisfy three objectives : acurate performance evaluation , goal congruence , and preservation of divisional autonomy ( joshua ronen and george mckinney , 1970 : 100-101 ). While in scope multinational corporations , transfer pricing used for , minimizing taxes and duties which they secrete world-wide transfer pricing can effect overalls corporate incame taxes. Particulary .this is true for multinational corporations ( hansen and mowen , 1996 : 496 ).

Transfer to a methodology the determination of the priceTransfer prices may be based on the cost of the difference of the increase or a price. Environmental influences over prices caused to transfer some questions about the methodology of the determination of the price. The principle or price antarperusahaan beseem transfer transactions with supposes that happen antarpihak unrelated instimewa in a competitive market .
According to the law on income tax as. guiler methods by :
1. A method of uncontrolled price equivalent
This method of transfer of price based on determined with reference to the price used in a transaction equivalent between company that independent or equivalents of the company to a third party are not related 

2 .A method of transactions uncontrolled equivalent
This method applied to transfer assets intangible. This method acknowledges royalty reference level with reference to uncontrolled transaction in which an intangible asset of the same or similar diverted. As a method of uncontrolled price equivalent , this method relies on comparative market .
3. A method of selling price back
This method of calculating transaction prices beginning with a reasonable price charged on the sale of goods meant to the purchaser who independent. Margins that is adequate to close the burden and profit nomal then subtracted from the price is to acquire the price inter-university transfer of the company.

4. A method of determining the cost plus
This method useful when goods spring so diverted antarperusahaan foreign affiliates or if an entity is wro contractors to the other companies .
5. A method of comparable profit
This method supporting a general view stating that taxpayers have a situation similar should get all similar in return for a certain period of time .
6. A method of disseverance profit
This method used in case of reference market the product or not available. This method includes the division profit produced through with the privileged related transactions between affiliated company which is based on a reasonable manner.

7. Method determination price other
This method can be used if prices produce size reasonable more accurate .

Financial Risk Management

The main purpose of financial risk management is to minimize potential losses arising from unexpected change in price currency , credit , commodities and equity. Risk of price volatility facing this is known as risk market. Risk market contained in various forms .
Though focus on volatility prices or rate , accountant management need to evaluate risk other as :

1. Risk liquiditas arise because not all products financial risk management can be traded on freely.
2. Discontinuity market reference to a risk that the market does not always effect change price gradually
3. Credit risk is the possibility that the opposing party in a contract management resikotidak can fulfill its obligation
4. Regulation risk is risk arising because the public authority forbid the use of a financial products for a specific purpose
5. Tax risk  is a risk that transactions hedge no particular can obtain tax treatment desired .
6. Accounting risk is a chance that a transaction hedge cannot noted as part of a transaction that will protected value .

ROLE OF ACCOUNTING

Management accounting play a particularly important role in the process of risk management. They help in acknowledges exposure market , mengkuantifikasi balance associated with strategy response risk an alternative , measuring potential facing company against certain risks , noted products hedge particular and evaluate program hedge. 

A fundamental framework beneficial to identify different kinds of risk market potentially can be called as mapping risk. This skeleton prefixed to the observation of the various relations risk market against triggered the value of a firm and competition. Trigger value referring to the condition financial and outposts operating performance chief financial affecting value of a company. Risk market risk includes exchange rate and foreign exchange rates , risk and commodity prices and equity. Currency the sources of purchase decreased value relative against the state money domnestik , and this change may cause domestic competitors capable of being sells at a lower price , this is called as competitive risk of currency hand. An accountant management should file a function thus the probability of being associated with a series of each of the output to the trigger of value. Another role played by the accountants in the process of risk management includes the process of balancing the quantification pertaining to an alternative strategy response risk.  The risk of foreign exchange rate is one of the most common form of risk and will be faced by the multinational company. In the world of floating exchange rate , risk management includes : 

( 1 ) the exchange rate movement

( 2 ) the measurement of foreign exchange rate risk faced by the company

( 3 ) the design of strategy adequate protection  and 

( 4 ) the control of risk management internal .
Money managers have had information about the possibility of directions , time , exchange rate changes and magnitude and can devise measurements defensive adequate with more efficient and effective .

Management Planning And Control

MANAGEMENT PLANNING AND CONTROL (Perencanaan dan kendali manajemen)

Planning and control management very important for the company , in this multinationals. However, reduction in trade barriers national perennially currency float , risk sovereignty , restriction against sender fund cross-border national differences in national tax system , differences rates interest rate and influence commodity prices and equity mercurial against assets , profit , and capital cost company is variable that complicate management decision. Global competition and fast penyebarn information support the narrowness national differences in practice accounting management. Pressure additional includes among other changes markets and technology growth privatization incentives charge , and performance and coordination operation global through a joint venture and clasps strategic other.

Company in doing control management need planning instrument that can identify factor-faktor relevant in the future , scanning to the environment external and internal. The device helps the company to recognize opportunities and challenges occur. One of the device is analysis wots-up involving its strength and weakness company pertaining to operating environment company. Accountant also will help the planner company to obtain data are beneficial in decision strategic planning.

Then , a decision to do overseas investment is the all-important element in strategy global a multinational corporations. Investment environment risk followed by foreign, complicated, and continuously changing. Formal planning is a necessity and commonly performed in a frame of meantime compare benefits and capital investment are proposed. The difference in legal tax , accounting system , the inflation rate , the risk of nationalizing , a framework of currency , segmenting the market , in a diversion abridgement profit was arrested and differences in their language and culture add the intricacy of elements that seldom encountered in the domestic. Adaption ( customizations ) by the multinational company upon the model of planning investment traditionally has been carried in three areas : ( 1 ) determine the measurements of return that relevant for investment multinationals , ( 2 ) a measure of expectation cash flow , and ( 3 ) calculate capital cost of the multinational company.

A manager shall determine return rate relevant to mengalisis chance foreign investment. However , return rate is a relevant points of view : project foreign or a company. The returns of two this perspective can differ significantly as some things : ( 1 ) restriction by government on repatriation as profit and capital , ( 2 ) the cost permit , royalt , and other payment that is profit to induk company but is a burden to subsidiary ; ( 3 ) the difference the national inflation rate , and ( 4 ) change foreign exchange rate , and ( 5 ) the difference tax .

Money managers have meet many of the purposes by giving response to group investors and noninvestor in organizations and in their environment. If foreign investment unpromising return that has been adjusted risk whose value more than return obtained competitors local , then shareholders induk company will be better to invest directly in.

MAKING BUSINESS MODEL 

The determination of the business model was an image of big , and consisting of formulations , and evaluating the implementation of the long term business plan an enterprise .

It includes four main dimensions :

1. Acknowledges factor-faktor main relevant company to progress in the future .
2. Formulate a technique that is adequate to forecast of future developments and analyzing company ability to conform or make use of the development .
3. Develop data sources to support pilihn-pilihan stratrgis .
4. Certain methods menstranslasikan menjaid serangkain the act of being specific .

PLANNING INSTRUMENT

A system is applicable to collect information over competitors and the market conditions. Good competitors and the market conditions analyzed to see influence both against notch competition and profitability company. Inputs obtained from this analysis used to plan measurements that diguankan to defend or enlarge market share or you , to know and make use of new products and occasion market. One of the device is analysis wots-up. This analysis concerning strength and weakness company pertaining to environtment operations of the firm. This technique help management in generates a series of a viable strategy.

CAPITAL BUDGETING

There are several procedure to determine capital structure optimum of an enterprise , measuring capital cost an enterprise , and evaluate an alternative investai based on condition uncertainty. Rules the decision to investment options generally need pendiskontoan cash flows are investment has been adjusted for risk based on interest rates adequate : weighted average coal capital cost company.

COST OF MULTINATIONAL CAPITAL

If investment abroad be evaluated use the model of cash flow terdiskonto , the discount rate proper must be developed. The theory of capital meantime specifically use of capital cost the company is as the level of that disconto ; thus a project should produce at least return equal to the capital cost the company to may be accepted. Level that it is related to the proportion of debt and equity in the structure of corporate finance are :

ka = weighted average coal capital cost ( after taxes )

ke = the cost of equity

Ki = cost utan before taxes

E = equity value of the company

D = the value of debts of the company

S = value of the company 's capital structure ( e d )

T = marginal tax rates

Similar problems are related to the measurement of the components of an average debt capital cost. In a country , cost effective interest rate debt is multiplied by ( 1-t ) because its flowers are commonly load that can be deducted for tax.

MANAGEMENT INFORMATION SYSTEMS

The information systems all over the world belonging to a corporation is crucial thing in support of the corporate strategy , including the planning process. This task challenge , because a fundamental framework multinational naturally more complicated than a fundamental framework country .

Information management and hiperinflation. Fas no.52 , obliging translasi temporal , use the method of as explained upon before , when doing translation of sccounts affiliated company that is in foreign lingkungan berinfliasi high. Despite provisions of a kind and fas no.52 national provides guidance are beneficial in neyusun report currency hard , the provisions are not meet information needs of companies operating in countries with high inflation.

In the environment high inflation , the financial statement is in accordance with fas 52 tending to evoke distortions of reality through :

• more judging or assessing less income and load
• reported profits or losses translasi big is difficult tobe interpretation
• mendistorsikan comparison performance antarwaktu .

Issues in financial control

Control system management aimed at achieving purpose company with the most effective way and most efficient. Otherwise system financial control system is quantitative measurement and communication that facilitates control includes : ( 1 ) communication tujaun-tujuan financial properly in organization , ( 2 ) memeperinci criteria and standards in performance evaluation , ( 3 ) overseeing the performance , and ( 4 ) communicate deviation between the performance actual and plan to parties is responsible. Financial control system strong allow management puncak to focus attention on the subsidiary that leads to goals common . Control system consisting of operational policy and finance , reporting internal structure , budget operation and guide procedures consistent with its purpose management summit .

Analysis Of International Financial Report

Analysis Of International Financial Report,

(Analisis Laporan Keuangan Internasional)

International financial analysis report ( alki ) required because there 's rising international investment and done with intent to keuanganantar companies and between the time data is down there.

Analysis Of International Business Strategy

Analysis business strategy is an important step first in analysis financial report. This analysis provide understanding qualitative over companies and all their competition relating to environmental economic case. With identifying of thruster profit and business risk which is ultimate, analysis business strategy or effort will help analysts to make forecasting realistic

Thw difficulties analysis Of international business strategy :

1. Accessibility of information

Analysis business strategy difficult especially in some countries because of lacking andalnya information on the macro economic development. Received information on industry also hard done in many of the states as well as to the quality and amount of information highly diverse companies. Special accessibility of information about the company very low in developing countries. Recently many large corporate who performs registration and acquire capital in overseas markets had expanded the disclosure of them and voluntarily turn to the principle of accounting internationally recognized as a standard financial reporting international.

2. A recommendation to do an analysis

Limitation of data make an effort to do the analysis afterwards business strategy by using the method of traditional research being difficult to do. Often often done travel to study the business climate and bagaimanan local industry and the company actually operates , especially in the developing countries

Analysis Of Accounting

Accounting analysis purpose is to analyze the extent to which the company reported reflect economic reality .

Stepin doing evalusai accounting quality of a company:

a) Identify the major accounting policies

b) Analyze accounting flexibility

c) Evaluate accounting strategy

d) Evaluate the quality of disclosure

e) Indentification potential problems

f) Make adjustments for accounting distortions

International Financial Analysis

International financial analysis report

A source of information for analysis reports international finance is :

1. The financial report , a supporter of schedule and the record on the financial statements

2. The background of wealth companies and pengungkapannya

International financial analysis techniques have been used is :

1. Analysis of the data compare trend item-item periodically for two years or more like the trend of profit, debt ratings, a change of the revenue, the growth of geometric etc.

2. Analysis of the ratio of comparing items one with another item financial statements with the purpose of obtaining the same understanding about profitability company , leverage , liquidity and efficiency.

An indicator of return :

1. Earnings per share = net profit growth of common shares

total of common stock from common shares outstanding

Return on assets = Net income / Total Assets

Return on equity = Net income / Owners' equity

2. Liquidity and Risk Indicators:

· Current Ratio = Current Assets / Debt

· Debt to equity ratio = Total Debt / Owners' equity

Mechanism To Resolve The Differences Accounting Principle Among Countries

Some approach that can do is :

- some analysts re- presenting size accounting foreign according to a group principle that internationally recognized or conforming to other basic more generally .

- few others develop complete understanding over accounting practice a group of countries in particular and limit their analysis against companies located in these countries .

Difficulties And Weakness In The Analysis Of International Reeport

A. Access to information

Information about thousands of company of the world has widely available in recent years. Source of information in amount innumerable emerging through world wide web ( www ). Company in the world today have a web site and its annual report available for free from various sources other .

B. Timing information

Timing the financial report , annual report , report to the regulator vary in the countries .

C. Hindrance language and terminology .

D. Issues currency foreign .

E. Differences in type and format financial report .

International Accounting Harmonization

International Accounting Harmonization
(Harmonisasi Akuntansi International)

Harmonizing is a process to increase compatibility ( concordance ) accounting practice by determining the limits how big practices the diverse.

Harmonizing accounting includes harmonizing :

1. Accountancy standards ( pertaining to measurement and state disclosure )

2. Disclosure made by companies public related to offer securities and recording on a stock exchange

3. audit standart survey harmonizing international

THE DIFFERENCE BETWEEN HARMONIZATION AND STANDARIZATION

Globalization also bringing implication that things formerly considered is the authority and responsibility of each state not not affected by the international community . So is pelapoan financial and accounting standard . One of qualitative of information accounting is diperbandingkan given the importance of this in the world trade and investment international . In this obtained full comparability prevailing broad internationally , standardization necessary international accountancy . At the other side the factor-faktor certain special in a state making each akuntantansi required standards applicable national in that country . It can be seen in view comparator the accounting standard in indonesia and united states the face . In a common the accounting standard in Indonesia there are accounting cooperative who are not necessarily needed in the united states . Based on international accountancy standards complete and comprehensive .

The concept that was more popular than standarization to bridge various kinds of accounting standard in evry country country is the concept of harmony . Harmonizing accounting standard siartikan as to minimize absence of difference many countries accounting standard . Harmonizing can also defined as a group of nations agree on the accounting standard a similar but i think the implementation of not adhering to a standard to be expressed and recommended by agreed standard together .

Harmonizing

- Processes to increase kompabilitas ( kesesuian ) accounting practice by determining the limits of how big the practices can be varied

- not using approach one measure for all

- but accommodate some of the covenant and has experienced a tremendous progress in the past year in an international manner

- harmonization far more flexible and open

Standardization

- determination of a group ostentation and narrow

- application of one standard or rule single in all situation Standardization - does not apply differences interstate

- more difficult to diimpelemntasikan internationally

CRITISM OF INTERNATIONAL STANDARDS

Some authorities said that international accountancy standards penentusn is a solution to be too simple for all the trouble complicated . Furthermore , it might be feared that the adoption of international standards will cause "standard exaggeratedly" . A company must arrangement of national, responding to pressure politics, a social, and whose economy is getting memorize and was made to comply with the requirements auxiliary international being intricate and berbiaya big.

JOIN RECONCILIATION AND RECOGNITION

Reconciliation and mutual recognition two approaches put forward as possible solution used to solve the problems related to the contents of the financial report of cross-border :

1 . Reconciliation

Through reconciliation , foreign companies can construct financial report by using accounting standard country of origin , but should provide reconciliation between measurements accounting important ( as net profit and equity a shareholder ) in the country of origin and in the country where financial report reported.

2 . Mutual recognition ( which also called the "had balik" / were )

Mutual recognition happen if the regulator outside native country receives financial report foreign companies based upon the principles country of origin .

MAJOR INTERNATIONAL ORGANIZATION PROMOTING HARMONIZATION OF ACCOUNTING

Glimpse of the main international organization that propels harmonizing accounting Six organization has become a key player in the determination of the international accountancy standards and in promoting harmonizing international accountancy:

1. International accounting standard boards( iasb )

2. comission of the european union ( eu )

3. International organization of the capital market comission ( iosco )

4. International federate accountant ( ifac )

5. The united nations antarpemerintah a working group on international accounting standards and reporting , part of the united nations conference on trade and development

6. A working group on accountancy standards organization of cooperation and economic development .

FINANCIAL REPORTING AND PRICE CHANGE

FINANCIAL REPORTING AND PRICE CHANGE

(PELAPORAN KEUANGAN DAN PERUBAHAN HARGA)

There are two term in price swings to be understood as follows :

1. price changes common happen if on average price all goods and services in an economy undergo a change. Units monetary gain advantage or suffered loss purchasing power. Price increases overall called as inflation ( inflation ) , the subsidence price called as deflation ( deflation )

2. price changes specific reference to change in price goods or services certain caused by changes in demand and bidding. So inflation rate per year in a state may hover around 5 % , while prices one unit apartment with one bedroom may be inflated by 50 % over the same period

The impact of inflation to a company

The effects of inflation in the financial position and achievements of the company can be in inefficiency achievement by the decision of a manager who did not understand the impact of that. For example, if the business financial holding cash on financial assets during the period during which experienced inflation rate increase to 10 %, mean as much as 10 % of the ability to purchase end of the period of the commencement of inflation. The effects of inflation in assets nonkeuangan be reflected in the report, and the balance of payment of profit during periods of price increases, earnings from the sale of now be matched against their inventories was probably comes from the purchase of the monthly and against some calculation depreciation histori cost of land, building, and equipment purchases were from a few years ago, though true that inventories of replacing a fixed asset and can become more expensive.

Accounting alternatif size

In general the ability to purchase accounting according to include all sensorial system in maintaining the ability of a purchase as real capital or shareholder, equity in the company in accounting to make the exchange of common level of price. The present value according to accounting on the other hand, include all sensorial systems on the listing of the present value or changes in the price of specifically. By inserting akuntansibiayasekarang and replace the value of an accounting system , which basically means that maintains physical capital, production capacity, or operation of assets at company ; and spending ( now ) accounting or sale price, which shareholder means to keep but in a term applied to the sale price for net assets of the company .

The present value : forget accounting

Although we are talking about and forget the present value of accounting in vidual , the accountant and many economists believe that in accounting system combining both based on the real value.

International financial reporting standards

First reaction of iasc ( now iasb ) to accounting inflation in 1977 in the ias 6 , Accounting responses to changing prices. Iasc try to establish the standard major in abridgement choice who is and must first based on consensus about its members of an organization that ias 6 be very concise. International accountancy standards panitia believe that further experiment is necessary before it can provide consideration that is demanding company to claimed the financial report of the main , using a system that uniform and thorough to reflect a change of prices. Company financial statement that presents the main base charge at the principal matter will assist historical evolution to provide additional information that reflects the effect of the price volatility. The main types of information that reflects the effect of the price volatility recommended for the disclosure ias by 15 , that is,

1. A number of adjustment or adjust the amount of shrinkage hak milik , a factory , and equipment .

2. A number of adjustment or adjust the sum charged sales .

3. Adjustments related to post monetary , an effect in borrowing , or flower capital , at adaptations that as it has been be counted in determining income by method of accountant

4. A whole effect on the outcome adjustment as good as any other material reflect effect in changing prices reported under an accounting method adopted.

5. A method of cost now adopted , equipment and plant and inventories.

6. A method adopted counting information sue at in matter first , includes nature uses index .

Comparison national rules and practices

Practice accounting , inflation varying worldwide and to a consideration concerning level rates and inflation impact. Experience accounting inflation a substantial been obtained following hiperinflasi occurring most frequently in south america , especially in argentina , brazilian and cili.di england , profession accounting introduce ssap 16 in 1980. Officials withdraw ssap 16 in 1988 following deterioration criticism and tiers inflation of business. In the u.s. , regulation first introduced with the legal worn by the sec in 1976. Am ok and state disclosure current a charge required by sfas 33 in addition to the disclosure income that has been adjusted , supplies , plant and equipment it takes to be disclosure together by increase and decrease in costs now adjust for am ok.

Inflation accounting in south america

With hiperinflasi infesting in some recent years in several countries in south america , especially brazil and argentina , this is not mngejutkan pressures that there is to adopt systems inflation accounting. In brazil, the inflation adjustment accounting used in the early 1950s , but a regulation / law the new company in 1976, namely approach pengindeksasian common to give back fees historical under terms of purchasing power now as a date from the financial statement. All companies must give back the balance with respect to property, building, and fixtures and deprisiasi relating, investments, and expenses suspended and equity holders in argentina , inflation accounting system introduced especially passing initiative and intervening profession accounting. In 1972, a statement used as the main issues, recommended publication pelapaporan additional financial am ok. In 1995 , the terms of adjustment am ok moved following a period of inflation low.

Accounting value now in the netherlands

In dutch the people of holland conscious of value accounting now for a long time . Two reasons why focus on dutch if no requirement to cost now or of accounting am ok that is , first involving theory professor theodore limberg , often called adja theory value replacement because kepeloporannya work in holland the 1930s . He focus on the strong relations between economic and accounting and believes revenue should not produced without resources for business of income from a continuity or continuation. Income is a function of income and values replacement rather than expenses historical. In extra limberg maintain that information value must now used all the decision-making.

The second reason is to see at dutch to learn from experience from company philips multinational dutchmen who was a pioneer supplier financial report value now . Philips is so a nice example and valuable of application practice in accounting value now .

In a financial filing value now , philips use value now with the replacement process with penyesuian reflects the degree to which an additional advantage of financial assets of borrowing than capital equity .

Values now used by the department of purchase for asset fixed ; by the department permesinan to design the specifications equipment , and by building design and the department permesinan building to building buildings .

FOREIGN CURRENCY TRANSLATION

Foreign currency translation is the process of reporting financial information from one currency into other currencies. Foreign currency translation done to prepare joint financial statement that gives a report by readers information about operating the company globally , by taking into account the financial report of foreign currency of a subsidiary firm against foreign currency induk company. Additional three reasons he did translasi foreign currencies , which is this :

1 . records the transactions of foreign currency ;

2. account for its effect on corporate translasi currency ; and

3 . communicate with interested people foreign stocks.

DIFFERENCE BETWEEN THE TRANSLATION AND CONVERSION OF FOREIGN CURRENCY

Foreign currency translation not equal to conversion. Translation is just change units monetary like an existential balance sheet expressed in english pounds served reëxamined into value equivalent of us dollars. No exchange physical happened , and no transaction related that happen like when performed conversion. The busrts in foreign currency is been translated be of value equivalent of domestic currency exchange rates foreign exchange rate based on the price of a single unit of currency is expressed in other currencies. Currency of the country major trading bought and sold in the global market.With connected through a sophisticated telecommunication network , market participants include an intermediary bank and other currencies , the effort , the individual , and professional traders.

Transactions foreign currency happen to spot market , forward , or swap. Currencies are bought or sold at spot general should delivered soon is in a couple a working day. Exchange rate spot market influenced by many of , including the different levels of inflation among countries , differences interest rates national and expectations to the direction of the exchange rate in the future. The transaction in market forward is agreement to exchange a currency to a specific amount into another currency at a date in the future. Kuotasi on the forward expressed with a discount or premiums from the spot. Swap transactions involving spot purchases and sales forward spot or sale or purchase forward , over a currency simultaneously . Investors often utilizing swap transactions to take advantage of interest rates higher in a foreign country , at the same time protect ourselves to the movement of unfavorable rate of exchange rates foreign exchange .

THE TERM IN FOREIGN CURRENCY TRANSLATION

* conversion

Translation the one currency with other currencies

* exchange rate at this time

Current level of money influence on the financial statement.

* translasi foreign currency

The description or a count the number of using foreign currency as a unit of calculation.

* contract transaction forward

An agreement to perform translasi the currencies of different countries with an specif and time were approved.

* currency functional.

Major currencies used in a business and income and storage money .

* rate historical

Foreign currency exchange rates prevailing when assets or obligation with foreign currency first time in get.

A glossary translasi foreign currency adapted from psak ( sfas no.52 ) , 1981 .

1. Attribute , characteristic quantitative a post measured for the purposes of accounting. Example , cost histories and cost of replacing a that is an attribute of an asset .

2. Of converting , pertukatan a currency into currency other .

3. Exchange rate now , exchange rates prevailing on the financial report relevant .

4. Discounted , when the rate of exchange that the next lower than levels valid today .

5. position net assets at risk , surplus assets measured in or berdenominasi in foreign currency and rate now ditranslasikan by the use of an obligation are measured or berdenominasi in foreign currency and ditranslasikan by the use of the present .

6. foreign currencies , a currency besides currencies used by a country , currency besides currency reporting used by the company .

7. financial statement is in foreign currency , a financial statement that the use of foreign currency as a unit of measurement .

8. Foreign currency transactions , transactions ( i.e. sale or purchase of goods or services , loans or debt or receivable hade ) with expressed in terms of currency denominated functional in addition to the company .

9. Translasi foreign currencies , the process to declare jumlah-jumlah that berdenominasi or measured in a currency into currency another by means of the rupiah 's exchange rate of exchange between the two eyes the money .

10. foreign operatio , an operative who produces financial report ( 1 ) the combined or consolidated or reckoned based on equity method in the financial report of the company filer and ( 2 ) will be prepared in foreign currency denominated in addition to the complainant reporting the company .

11.forward exchange contact, a treaty to interchanging the currencies of different countries by using rate certain ( rate forward ) on a particular date in the future .

12. Currency functional , major currencies yanga suatau used by firm in its business activities , and in producing or using kasnya .

13. Exchange rate histories , exchange rate exchange rates foreign currencies use at the time of an asset or obligation in foreign currency bought or happen .

14. Local currency , currency a particular state used ; currency reporting used by an operative domestic or abroad .

15. The outposts monetary , an obligation to pay or right to receive a number of the unit of currency in a fixed value in the future .

16. Currency reporting , currencies used in composing company financial report.

17. The settlement date the date when a debt is paid by a receivable collected.

18. The spot , the exchange rate for exchanging currency in time immediately .

19. The transaction , the date when the accounting records are recorded in a transaction such company .

20. Adjustment translatoin , adjustment arising from process translasi financial report of currencies functional an enterprise being denominated trhe report.

21. A unit of measurement , currencies used to measure assets , obligation , income and load .

THE ADVANTAGES AND DISADVANTAGES OF FOREIGN CURRENCY TRANSLATIONS

If point of view local currency used ( viewpoints company local ) , the entry of adjustment translasi in profit walk need not perform. Include gains and losses translasi in profits could mendistorsikan relations financial original and can be misleading users the information. Profits or losses translasi shall be dealt from the perspective of local currency as adjustment against equity owner.

If currency reporting induk the company constitutes a unit of measurement of financial report be translation ( viewpoints companies ) , highly inadvisable to admit of profits or losses translasi earnings soon as possible. Viewpoint induk company see the son of foreign companies as the expansion of induk the company. Gains and losses translasi reflecting the increase or decrease in equity foreign investment in currency domestic and must be recognized .

1. Suspension of :

Adjustment translasi foreign currency accumulated separately capital as part of the merger

2. Suspension and amortization

Suspend the gains and losses is mengamortisasi adjustment beyond age benefits related items in the balance sheet

3. A portion of an adjournment

Concede the loss immediately when the , but only if realized just admitting of advantage

4. No of an adjournment

EFFECT OF FOREIGN CURRENCY TRANSLATION METHOD ON THE FINANCIAL STATEMENT

Although most technical issues in accounting tending to solved by itself in line with the passage of time , foreign exchange translasi terrnyata is an exception. That this trend will continue unabated supported by the development of events such as the collapse of domination of currency dollars , the movement of the value of the currency was approved by the government , and globalization the world capital markets , that has increased the importance of reporting and disclosure of finance. The development of events like this had major role increase their interest eksekutif- � � for finance , accountant , and financial community in the importance of economic and the consequences of translasi foreign exchange. Let 's see what defines and development of accounting teki-teki intemasional this.

Single rate method

Based on approach translasi this, financial statements foreign operations, regarded by holding company, self-organizing as an entity having a domicile of reporting their own. This is the neighborhood where local accounting affiliated company mentraksaksikan these foreign affairs of the business. To retain flavor local exchange of the report , a way to be found to translasi can be held by minimal distortion. A most excellent way is the use of a method of exchange rate in force. Despite the draw and simple , in a conceptual manner a method of exchange rate applies more blame by some for ruining the basic objective of consolidated financial report , that is because present, to benefit shareholders holding company, financial position and the results of operations and the parent companies of his son from the perspective of exchange is single. maintaining exchange is reporting induk as a unit of measurement of the company. In the methods of exchange rate applies, consolidated results would reflect perspekfif-perspektif exchange of each country where the companies are. For example , if a company assets dip = roleh a child abroad for va 1,000 when kursnya is $ 1, va = 1 the cost of historisnya from the perspective of dollars was $ 1,000 ; from the perspective of local exchange also $ 1,000. If the rate change into va 5 = $ 1, the cost of the assets of historical perspective dollar (translastion historically) , will cost $ 1,000. If the local exchange is fixed. Method rate also apply blame because assumes that all assets local affected by exchange rate risk ( that is, assumes that exchange fluctuations domestic ekivalen, caused by exchange rate fluctuations translasi walk , is an indicator change intrinsic value assets the ). This is rare right because the value of inventories and assets stay abroad generally supported by inflation local.

Multiple rate methods

The methods by combining double the rupiah 's exchange rate of exchange tramped , historically in the process of translation.

3 a method of a kind of it will be discussed here .

A method of historical .

Based on approach historical, that was popular in the us and everyplace of another before 1976 , assets smooth and the liability of a firm children in foreign exchange translated in reporting its parent by using rate in force. Assets and liabilities non-lancar ditranslasikan with the historical. Item-item financial report, except the burden of depreciation and amortization, ditranslasikan with an average exchange rate of each month operating or weighted average coal with the base of all the period will be reported. The burden of depreciation and amortization ditranslasikan by wearing historical rate prevailing at the time of the asset concerned obtained. This methodology unfortunately, has a weakness. For example , this method has a lacking justification conceptual. A definition that definition of assets and liability and non smoothly doesn ' t explain way classifications like that determine exchange rate which would used in the process transiasi .

Method monetary nonmoneter. As do method historical applies, method moniter nonmoneter wear pattern classifications the balance to determine rate translasi proper. Because monetary item-item solved in treasury ; discharging rate applies to mentranslasikan item-item foreign exchange produce exchange domestic ekivalen that reflects value realization or value its completion .

A method of temporal approach according to temporal , exchange translasi is a process of converting measurement ( that is , the presentation of a certain value reëxamined). Because of that, this method can not be used to change the attribute of an item that is being measured ; this method can only transform a unit of measurement. Balances translasi foreign exchange, for example, just turn ( restate ) denomination persediaan. not appraisement aktualnya. Gaap in the united states , assets cash measured based on jumiah owned on the scales. Receivable and debt expressed in numbers expected to be received or paid down at maturity. Obligations and other assets measured on the price holds when an item � � item is earned or incurred ( the price of historically ). But even so, some of them are measured based on the price prevailing on the financial statements ( walk ), the price of like a stock under the rules of a charge or market. In short , there are pertaining to dimension the time of money values this .

Translation method can be classified into two types of a method of using rate translasi singular to re- presenting balances in foreign currency into value equivalent in currency domestic or methods using many technical exchange rate.

1. Method single exchange rate

This method has long popular in europe , applying a rate exchange rates , namely rate current and the exchange rate to all assets and liabilities smoothly. Earnings and the load in foreign currency generally ditranslasikan by using rate the exchange rate prevailing at the time the outposts recognized. However to ease outposts is generally ditranslasikan by using weighted average coal rate exchange rates proper for that period.

2. A method of double exchange rate

A method of combining double the rupiah 's exchange rate and histories the exchange rate of the rupiah 's exchange rate of exchange is now in the process of translasi .

3. A method of kini-nonkini

Based on a method of kini-non now, smoothly assets and liabilities smoothly subsidiaries abroad ditranslasikan into currency exchange rate of reporting induk company was based on now. Assets and an obligation is not smoothly ditranslasikan based on the histories. The outposts report earnings of the burden (except depreciation and amortization) ditranslasikan based on average exchange rate prevailing in every month operating or based on the weighted average coal during the whole period of reporting.

4. Method moneter-nonmoneter

Method moneter-non monetary also use scheme classifications the balance you, to determine rate translasi proper. Assets and liabilities monetary ditranslasikan based on exchange rate today. Outposts non monetary assets fixed, long-term investment , and supplies investors ditranslasikan by using rate histories. Outposts report profit ioss ditranslasikan with using procedure equal to described for the concept kini-non now.

5. Temporal method

By using the method temporal, tranlasi currency is process of converting of measurement or repeated presentation of a certain value. This method not changing attribute a post measured , but only unit of measurement change.

EVALUATION AND SELECTION OF FOREIGN CURRENCY TRANSLATION METHOD

Based on method temporal,outposts monetary as cash flow,receivable, and debt be translated based on exchange rate today. Outposts monetary ditranslasikan with rate maintains the grounds of measurement at first. Specifically, assets whose value in the report foreign currency of cost histories, be translated based on exchange rate histories. Why ? This is because costs histories in foreign currencies be traanslated with rate exchange rates histories produced a histories in currency domestic.

Fourth method discussed at one time once used in united states and can be found to this day in various countries. In general, this method inflict results translasi foreign currencies quite different.

Third methods first ( method rate now, method kini-non-kini, and methods moneter-non-moneter ) used in acknowledges assets and obligation which is at risk of or able to be protected from risk foreign currency. Then, translation method consistently applied by taking into account the difference .

Which the best ?

Exchange rate now proper

So far, the rupiah 's exchange rate of exchange a term used in reference to a method of translasi histories or rate now. An average rate of profit often used in a report to the outposts of the burden. Some countries using the rupiah 's exchange rate of exchange for the transaction of different different. In this environment should be chosen few the rupiah 's exchange rate of exchange that is. Some of the recommended an alternative is :

1. the payment of a dividend rate of exchange

2. free market , exchange rate and

3. the penalty or preference that can be used , as in an activity related export import.