跨国公司财务管理基础 (5)

Balance-of-Payments Accounting
• Based on double-entry bookkeeping
– Every credit transaction has an offsetting debit transaction
• Credit ≡ Source of Funds
Balance-of-Payments Accounting
• E.g. The American Red Cross donates $100,000 in goods for earthquake relief to Sri Lanka.
– This is a unilateral transfer – A debit entry and a use of funds since the donor’s (US’s) net worth is reduced – A matching credit entry for exports
Debit US exports Unilateral transfer $100,000
Credit $100,000
Balance-of-Payments Accounting
• Double-entry bookkeeping ensures that: Debits = Credits • The sum of all transactions must be zero:
• Currency inflows are “credits” (+) • Currency outflows are “debits” (-) • Major categories:
– Current Account (net flows of goods, services, income and unilateral transfers) – Financial Account (public and private investment and lending activities) – Capital Account (debt forgiveness or transfers of goods and financial assets by migrants as they enter or leave the US)
Balance-of-Payments Categories (Cont’d)
• Capital Account - reflects capital transfers that offset transactions undertaken without exchange in fixed assets or in their financing.
Credit $1,500,000
Balance-of-Payments Accounting
• US company decides to sell the SFr it received to the Fed for dollars.
– A private asset is converted into an official liability – A source of funds for the private asset account ($ received) – A use of funds for the official asset account ($ paid)
Balance-of-Payments Categories (Cont’d)
• Financial Account – reflects net purchases of financial assets:
– Portfolio investments – financial assets with maturity > one year – Direct investments – financial assets for which management control is exerted (at least 10% equity ownership) – Changes in reserve assets (holdings of gold and foreign currencies) held by official monetary institutions
• Treated as services because they represent payment for the use of capital
– Unilateral transfers can be credits or debits
• Pensions, remittances, and other transfers for which no services were rendered
• BOP is NOT a balance sheet. • It is a cash flow statement. • It tracks the continuing flows of purchases and payments between a country and all other countries. • It does NOT add up the value of all assets and liabilities of a country on a specific date like a balance sheet.
– A use of funds since private assets are increasing (painting acquired – a debit entry) – A matching use of funds and increase in liabilities ($ paid – a credit entry) Debit Private liabilities to foreigners US imports $1,000,000 Credit $1,000,000
Chapter 5
The Balance of Payments and International Economic Linkages
Balance of Payments
• BOP is an indicator of pressure on a country’s foreign exchange rate. • Changes in BOP may signal the imposition or removal of controls over payment of dividends, interest, license fees, royalty fees, and other cash disbursements to foreign firms or investors. • BOP helps to forecast a country’s market potential in the short run:
Balance-of-Payments Accounting
• Basic BOP Statement
Category Current Account Goods (export/import) Services (export/import) Income (receipts/payments) Unilateral transfers Capital Account Capital transfers Financial Account Portfolio investment (in U.S./overseas) Direct investment (in U.S./overseas) Government investment (in U.S./overseas) Changes in reserve assets $xxx $xxx $xxx $xxx -$xxx -$xxx -$xxx -$xxx $xxx -$xxx $xxx $xxx $xxx -$xxx -$xxx -$xxx -$xxx
Debit
Private foreign currency assets Official assets $1,500,000
Credit
$1,500,000
Balance-of-Payments Accounting
• E.g. A German sells a painting to a US resident for $1,000,000. Payment is made by check drawn on a US bank
Balance of Trade
Credit (+)
Debit (-)
Surplus/Deficit
Statபைடு நூலகம்stical Discrepancy
Balance-of-Payments Accounting
• E.g. US company exports tools to Switzerland for a price of SFr 2,000,000. Exchange rate = $0.75 / SFr So, the price = $1,500,000 Swiss exporter pays with a check drawn on a Swiss bank
Balance-of-Payments Categories
• BOP is the summary of a nation’s international economic transactions over a period of time
– All economic transactions between residents of the home country and residents of all other countries
Balance-of-Payments Categories (Cont’d)
• Current Account (net flows of goods, services, income and unilateral transfers)
– Exports of goods and services are recorded as credits – Imports of goods and services are recorded as debits – Interest payments and dividends can be credits or debits
– Decrease in assets – Increase in liabilities
• Debit ≡ Use of Funds
– Increase in assets – Decrease in liabilities
• A “statistical discrepancy” line is included to offset non-zero balances.
– If there is a trade deficit, that country is not likely to expand imports and may welcome investments that increase its exports.
Balance of Payments
– Reduction in US goods is a source of funds (a credit entry) – Increases in foreign currency assets is a use of funds (a debit entry)
Debit US exports Private foreign currency assets $1,500,000