PPT
Kendrick18
Alpha_Group_Project.pptx.pptxOrganizational Expansion Project
Canada
Brief Overview
Canada
Capital is Ottawa
Covers 9.8 million square kilometers
Second largest country by area
English and French are top two languages
Reasons of choice
Close proximity to U.S.
Similar accounting practices and standards
Common top language
Culture
Influenced by European and French cultures
Multicultural
Accommodate and dynamic
Customs and Values
Very opened minded
Diversity
Fairness
Equity
Religion
Main religion is Christianity
Atheism is growing among young people
Culture Cont.
Challenges
Foreign languages, different practices, and different etiquette
Other markets are shaped differently
Ex. India is shaped by historical, socioeconomic, and geopolitical context variables.
Population
Canada’s population attracts businesses due to the increase of consumers with disposable income
Canada’s market also shows the potential to grow and expand economically
Political and Economic Factors
Political Factors
Canada as a democratic country has a stable political situation, and its positive attitude. It is reflected in the trade negotiations with several countries.
Canada’s political system is a parliamentary democracy, with its own social and political institutions.
Canada also has a well-developed social safety-net to protect citizens from financial inequities.
That positivity lead the development of investment links through FTA agreement
Political and Economic Factors Cont.
Economic Factors
Canada is within the top ten trading nations and one of the wealthiest countries in the world.
As part of NAFTA, Canada has a trade agreement with Mexico and USA which allows the economy to thrive.
Household spending slowed down
GDP growth rate slows
Unemployment rate at 6.3 %
Mirrors U.S. with market oriented economic system
The connection between the industry and the overall economy is highly important and for that reason are extremely connected
Legal Implications
The Canadian Marketing Association also has a code of ethics and standards which include: Truthfulness, which is an accurate representation of products and support of claims, made.
Personal Information protection, which is defined in the Personal Information Protection and Electronics Documents Act (PIPEDA).
Two of the most important assets an organization can possess are their image and reputation. Creating the perfect image in the public's eye is essential for the thriving of any company.
Overview and Historic Comparison
Standard Setting Board
Canadian Accounting Standards Board establishes accounting and financial info standards
Used for entities outside of the public sector
11 voting members and 2 non-voting members
Public Sector Accounting Board
Sets accounting standards for public sector
Accounting Practices
ISAB developed amendments that require entities to disclose their material accounting instead of significant accounting (passed in February 2020)
Working on helping entities distinguish accounting policies from estimates (final amendment is hoped to be in quarter 4 of 2020).
Required to include a balance sheet, profit and loss account, and a statement of cash flows for financial reporting.
Overview and Historic Comparison Cont.
GAAP vs IFRS
Canada used its own form of GAAP until it was replaced with IFRS
Canada adopted IFRS on January 1, 2011 (IFRS- Canada, n.d.)
Adopted due to the market pressure to improve financial reporting comparability (Nadeau, n.d.).
Foreign Currency
Exchange rates and any conversion issues
Companies operating internationally should know exactly when to trade its currency to avoid making losses
Cash management
The organization need to increase its collections of cash, control its disbursements and utilize any excess cash optimally
Intercompany transactions
maximizes allocation of income and deductions and this enables an organization to continue to expand slow and therefore need to be considered when an organization is seeking international expansion.
Foreign Currency Cont.
Risk management and hedging
Effective practice equips federal government organizations to respond proactively to change and uncertainty by using risk-based approaches and information to enable more effective decision-making throughout an organization
Translation for financials
At the date of the balance sheet, foreign-currency assets and liabilities are translated into Canadian dollars to preserve the normal measurement at either historical cost or current value.
The sale is translated at the historical rate to produce a historical price in Canadian dollars.
The accounts receivable (or accounts payable) is translated at the closing rate to produce a current value in Canadian dollars.
Taxation
Compliance
Government does not provide any formal requirements for what a compliance program should include
Types of taxes imposed
Consumption Taxes (sales tax)
GST (federal Goods and Services Tax)
HST (Harmonized Sales Tax)
PST (Provincial Sales Tax)- not used in all areas
Corporate Taxes
Federal Corporate Tax Rate is 15% after regular 13% general tax reduction
Taxation Cont.
Setting up the right cash management process
Canada should figure out what is going to bring in money the quickest and most efficient way
Transfer pricing
Canada’s rules apply if:
Two or more entities are involved
At least one of the entities is a Canadian taxpayer
It is a cross border transaction involving Canada (Transfer Pricing, 2020)
Canada follows the arm lengths policy (Transfer Pricing, 2020)
Interesting Facts
COVID-19
Companies may want to use the expected cash flow approach when preparing budgets to reflect uncertainties that COVID may bring.
Discount rates should not be included in projected cash flows
Some companies may need to look at IAS 36- Impairment of assets, along with an impairment test of goodwill and intangible items.
Tax agreements
Canada is a signatory for Multilateral Competent Authority Agreement (MCAA) on the automatic exchange of financial information.
They have exchange relationships with 118 jurisdictions, 94 through double tax and 24 through TIEAs
Conclusion
Canada would be a good location to expand for a few reasons
Close proximity
There is no crossing oceans to get there, just crossing the border
Similar language
Similar legal system
Similar spending habit
Similar consumer income
References
About the AcSB. (2020). Retrieved July 30, 2020, from https://www.frascanada.ca/en/acsb/about
Accounting Considerations Related to COVID-19. (2020, March 31). Retrieved July 30, 2020, from https://www.iasplus.com/en-ca/publications/publications/2020/clearly-ifrs-accounting-considerations-related-to-coronavirus-disease-2019
Deng, Z., & Sinkovics, R. R. (2018). Rapid expansion of international new ventures across institutional distance. Journal of International Business Studies, 49(8), 1010-1032
Hessing, M., & Summerville, T. (2014). Canadian natural resource and environmental
policy: political economy and public policy. UBC Press
IFRS- Canada. (2020). Retrieved July 30, 2020, from https://www.ifrs.org/use-around-the-world/use-of-ifrs-standards-by-jurisdiction/canada/
Transfer Pricing - Canada. (2020, April 24). Retrieved July 30, 2020, from https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/information-been-moved/transfer-pricing.html
Quarter, J., Mook, L., & Armstrong, A. (2017). Understanding the social economy: A Canadian perspective. University of Toronto Press.
Risk Management. (2013, May 17). Retrieved August 02, 2020, from https://www.canada.ca/en/treasury-board-secretariat/corporate/risk-management.html
