IFRS and International Finance
Contact Hours / Week:
Description of the course:
In this course you will learn the major differences between GAAP and International Financial Reporting Standards IFRS. As well we will put together an action plan for you to follow to determine which IFRS rules apply to your company and how to best adopt them. The course is an introduction to Financial Accounting & Reporting designed for business students with the assumption that the knowledge of a unique accounting system is not sufficient. The main purpose of this course is to deal with the measurement of value created (and value creation from the point of view of outside decision-makers) and the use of financial accounting information.
In addition, this course provides an introduction to the workings of the foreign exchange markets, the impact of economic policy on exchange rates, the nature of foreign exchange risk, and assessment of the cost of capital for foreign projects. The first part introduces the different elements of the overall FX Interbank market and explores valuation and hedging of risk-free nominal FC cash flows. The second part discusses the determination of exchange rates, monetary policy, and the international links between exchange rates, inflation rates and interest rates. Moreover, the balance of payments is studied and its impact on exchange rates and country risk is considered. The third part examines various concepts of exchange risk and analyzes hedging with forward contracts and foreign currency options. The fourth part considers longer term operational exposures and discusses the need to manage foreign exchange risk in a continually operating international business.
By the end of this course, students should be able to:
• Outline the scale of international differences in financial standards.
• Give examples of the differences regarding IFRS, and why they are important.
• Summarize the likely causes of the differences.
• Explain how countries can be put into groups by similarities of accounting practices.
• Outline the main players in international harmonization of accounting, and how successful they have been.
• Give examples of some IFRS accounting standards and their main instructions.
• Explain the organization and institutional details of foreign exchange and international money markets.
• Explain and apply orthodox theories of exchange rates and open economy macroeconomics.
• Explain and to give examples of modern central bank practice of monetary and exchange rate policy implementation
• Explain and apply insights provided by behavioral economics into expectations formation and decision making on the foreign exchange market.
• Analyze the causes of historical exchange rate movements, and some of the contributory factors to a variety of financial crises, with reference to the models covered.
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