Question: On October 3, 2000, E-centives, incorporated
On October 3, 2000, E-centives, incorporated in the United States, made an initial public offering on the Swiss Stock Exchange’s New Market. The company raised approximately US$40 million. E-centive’s offering circular stated that no offers or sales of the company’s common stock would be made in the United States, and that there would be no public market for the common stock in the United States after the offering. The Swiss Exchange’s New Market The Swiss Exchange launched the New Market in 1999. The New Market is designed to meet the financing needs of rapidly growing companies from Switzerland and abroad. It provides firms with a simplified means of entry to the Swiss capital markets. Listing requirements for the New Market are simple. For example, companies must have an operating track record of 12 months, the initial public listing must involve a capital increase, and to ensure market liquidity, a bank must agree to make a market in the securities. E-centives E-centives, Inc. is a leading online direct marketing infrastructure company. The company offers systems and technologies that enable businesses to build large, rich databases of consumer profiles and interests. In return, consumers receive a free personalized service that provides them with promotional offers based on their interests. At the time of the public offering, E-centives maintained over 4.4 million e-centives online accounts for members. The company does not charge members a fee for its service. Instead, the company generates revenue primarily from marketers whose marketing matter is delivered to targeted groups of E-centives members. E-centives currently employs more than 100 people in its Bethesda, Maryland headquarters, and its offices in Redwood City, New York, and Los Angeles. As of the offering date, the company had little revenue and had not been profitable. Revenue for the year-ended December 31, 1999, was US$740,000, with a net loss of about US$16 million. As of June 30, 2000, the company had an accumulated deficit of about US$39 million. E-centives’ growth strategy is to expand internationally. To date, the company has focused on pursuing opportunities in the United States. E-centives intends to expand into Europe and other countries. The company is currently considering expanding into Switzerland, the United Kingdom, and Germany.19 Required: 1. Refer to Exhibit 1-8, which lists factors relevant for choosing an overseas market for listing or raising capital. Which factors might have been relevant in E-centives’ decision to raise capital and list on the Swiss Exchange’s New Market? 
2. Why do you believe E-centives chose not to raise public equity in the United States? What are the potential drawbacks related to E-centives’ decision not to raise capital in the U.S. public markets? 3. What are the advantages and disadvantages to E-centives of using U.S. GAAP? 4. Should the SWX Swiss Exchange require E-centives to prepare its financial statements using Swiss accounting standards? 5. Learn more about the New Market at the SWX Swiss Exchange’s Web site (http://www.swx.com). What are the listing requirements for the New Market? What are the financial reporting requirements? Does E-centives appear to fit the profile of the typical New Market Company?
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EXHIBIT 1-8 Factors Relevant in Choosing an Overseas Market 1. What is the extent of interest in a company shown by financial analysts and investors who normally participate in a market? 2. What is the level of trading activity on the exchange? Higher trading volume means more potential buyers of a company's securities. 3. How easy is it to raise capital? Some jurisdictions have complex listing or ongoing reporting requirements that may be difficult or impossible for a smaller company to meet. 4. What is the availability of capital in a market? 5. What is the reputation of the exchange? A growing international company may want the increased credibility and recognition that come with listing on a preeminent market such as the New York Stock Exchange. 6. To what extent does the company desire to raise its profile and establish its brand identity in a particular market? A stock exchange listing can benefit companies that operate or plan to operate in an overseas country. 7. To what extent are the market's regulatory environment and language similar to those in the company's home market? For example, a company from an English-speaking country with a common law (British-American) legal and regulatory system, such as Australia, might find it easier to list in the United Kingdom than in Continental Europe. 8. To what extent do institutional investors face statutory or self-imposed restrictions on the proportion of their investment portfolio that they can hold in securities of foreign companies? Sometimes these restrictions force a large international company to list on many stock exchanges to have access to sufficient institutional capital. These restrictions are difficult to overcome in some jurisdictions. 9. What are the nature and activities of investors in the market? For example, large pension funds in the Netherlands, Switzerland, and the United Kingdom invest heavily in equities of both domestic and foreign companies. 10. What is the likelihood that the company will be required to have locally listed shares to carry out a merger or acquisition in a particular country? 11. Will there be a need for locally listed shares to be used in employee stock option plans?|
> What does double-dipping mean in accounting for foreign inflation?
> How does accounting for foreign inflation differ from accounting for domestic inflation?
> What is a gearing adjustment, and on what ideas is it based?
> As a potential investor in the shares of multinational enterprises, which inflation method, restate-translate or translate-restate, would give you consolidated information most relevant to your decision needs? Which information set is best from the viewp
> Examine Exhibit 1-2 and compute the compounded annual growth rate of merchandise trade versus the global trade in services for the 20 year period beginning 1985 and ending 2005. What implication does your finding have for accounting as a service activity
> Briefly describe the historical-cost-constant purchasing power and current-cost models. How are they similar? How do they differ?
> As more and more companies span the globe in terms of their operating, financing, and investing activities, they will increasingly turn to international financial reporting standards when communicating with domestic and non-domestic financial statement r
> Following are the remarks of a prominent member of the U.S. Congress. Explain why you agree or disagree. The plain fact of the matter is that inflation accounting is a premature, imprecise, and underdeveloped method of recording basic business facts. To
> Consider the statement: “The object of accounting for changing prices is to ensure that a company is able to maintain its operating capability.” How accurate is it?
> Inc. In 1993 Icelandic Enterprises was incorporated in Reykjavik to manufacture and distribute women’s cosmetics in Iceland. All of its outstanding stock was acquired at the beginning of 2001 by International Cosmetics, Ltd. (IC), a U.S
> Kashmir Enterprises, an Indian carpet manufacturer, begins the calendar year with the following Indian rupee (INR) balances: During the first week in January, the company acquires additional manufacturing inventories costing INR 2,400,000 on account an
> On December 15, MSC Corporation acquires its first foreign affiliate by acquiring 100 percent of the net assets of the Armaselah Oil Company based in Saudi Arabia for 930,000,000 Saudi Arabian riyals.(SAR). At the time, the exchange rate was $1.00 = SAR3
> A 100 percent–owned foreign subsidiary’s trial balance consists of the accounts listed as follows. Which exchange rate—current, historical, or average—would be used to translate these accounts to parent currency assuming that the foreign currency is the
> Company A is headquartered in Country A and reports in the currency unit of Country A, the Apeso. Company B is headquartered in Country B and reports in the currency unit of Country B, the Bol. Company A and B hold identical assets, Apeso100 and Bol100,
> Use the information provided in Exercise 6. Required: a. What would be the translation effect if Shanghai Corporation’s balance sheet were translated by the temporal method assuming the Chinese yuan appreciates by 25 percent? By the current rate method?
> Re-examine Exhibit 1-1 which describes the outsourcing process for HP’s production of the Proliant ML150. For each leg of the production chain, identify the various accounting and related issues that might arise. EXHIBIT 1-1 Outsou
> Shanghai Corporation, the Chinese affiliate of a U.S. manufacturer, has the balance sheet shown below. The current exchange rate is $.0.15 = CNY1. Required: a. Translate the Chinese dollar balance sheet of Shanghai Corporation into U.S. dollars at the
> Sydney Corporation, an Australian-based multinational, borrowed 10,000,000 euros from a German lender at the beginning of the calendar year when the exchange rate was EUR.60 = AUD1. Before repaying this oneyear loan, Sydney Corporation learns that the Au
> U.S. Multinational Corporation’s subsidiary in Bangkok has on its books fixed assets valued at 7,500,000 baht. One-third of the assets were acquired two years ago when the exchange rate was THB40 = $1. The other fixed assets were acquired last year when
> On January 1, the wholly-owned Mexican affiliate of a Canadian parent company acquired an inventory of computer hard drives for its assembly operation. The cost incurred was 15,000,000 pesos when the exchange rate was MXN11.3 = C$1. By yearend, the Mexic
> On April 1, A. C. Corporation, a calendar-year U.S. electronics manufacturer, buys 32.5 million yen worth of computer chips from the Hidachi Company paying 10 percent down, the balance to be paid in 3 months. Interest at 8 percent per annum is payable on
> Assume that your Japanese affiliate reports sales revenue of 250,000,000 yen. Referring to Exhibit 6-1, translate this revenue figure to U.S. dollars using the direct bid spot rate. Do the same using the indirect spot quote. EXHIBIT 6-1 Sample of Sp
> What do current, historical, and average exchange rates mean in the context of foreign currency translation? Which of these rates give rise to translation gains and losses? Which do not?
> What is the difference between the spot, forward, and swap markets? Illustrate each description with an example.
> How does the treatment of translation gains and losses differ between the current and temporal translation methods under FAS No. 52, and what is the rationale for the differing accounting treatments?
> In what way is foreign currency translation tied to foreign inflation?
> Accounting may be viewed as having three components: measurement, disclosure, and auditing. What are the advantages and disadvantages of this classification? Can you suggest alternative classifications that might be useful?
> What lessons, if any, can be learned from examining the history of foreign currency translation in the United States?
> Under what set of conditions would the temporal method of currency translation be appropriate. Under what set of conditions would the current rate method be appropriate?
> Compare and contrast features of the major foreign currency translation methods introduced in this chapter. Which method do you think is best? Why?
> Briefly explain the nature of foreign currency translation as (a) a restatement process and (b) a remeasurement process.
> What is the difference between a transaction gain or loss and a translation gain or loss?
> A foreign currency transaction can be denominated in one currency, yet measured in another. Explain the difference between these two terms using the case of a Canadian dollar borrowing on the part of a Mexican affiliate of a U.S. parent company that desi
> The Offshore Investment Fund (OIF) was incorporated in Fairfield, Connecticut, for the sole purpose of allowing U.S. shareholders to invest in Spanish securities. The fund is listed on the New York Stock Exchange. The fund custodian is the Shady Rest Ban
> Regents Corporation is a recently acquired U.S. manufacturing subsidiary located on the outskirts of London. Its products are marketed principally in the United Kingdom with sales invoiced in pounds and prices determined by local competitive conditions.
> Exhibit 5-9 ranks 34 countries on earnings opacity. Which five countries have the most surprising placement? Why do you say so? EXHIBIT 5-9 Earnings Opacity Ranking of Countries from Least to Most 25. South Africa 26. Malaysia 27. Italy 28. Pakista
> The Organisation for Economic Cooperation and Development (OECD) published its revised Principles of Corporate Governance in 2004. Required: Obtain the document from the OECD Web site (www.oecd.org). a. Outline the six sections of the OECD’s corporate
> Explain how international accounting differs from purely domestic accounting.
> Exhibit 5-8 is the corporate governance disclosure of the Volvo Group. Some of the disclosures relate to independence requirements for the board of directors and audit committee. Required: a. What is the independence requirement for the board of direct
> The Global Reporting Initiative (GRI) has developed a set of guidelines for social responsibility reporting. Required: Go to the GRI Web site (www.globalreporting. org) and find its guidelines. The disclosure guidelines are categorized as indicators of
> Corporate social responsibility (CSR), as practiced by business, means many different things. Consider the following: “At one end of the broad span of CSR lie corporate policies that any wellrun company ought to have in place anyway, policies that are ca
> Exhibit 5-4 presents the independent assurance report on Roche’s sustainability reporting. The auditor’s engagement was carried out “in accordance with International Standards on Assurance Engagements (ISAE) 3000.” Required: a. Go to the World Wide Web
> Exhibit 5-3 presents the safety and environmental disclosure of Roche. Required: Comparing the three years: (1) Which measures show an improved record of safety and environmental protection? (2) Which measures show a worse record of safety and envir
> Exhibit 5-2 presents the employment disclosure of Roche. Required: a. How do the employment levels compare between the periods presented? Where are Roche’s employees located? b. Which regions of the world have the highest turnover ra
> Exhibit 5-1 presents the business-segment and geographic-segment information of Lafarge, a French company that uses International Financial Reporting Standards (IFRS) in it consolidated financial statements. /// Required: Go to the Web site of the In
> The Outlook section in Daimler’s 2008 annual report may be found at http://ar2008.daimler. com/daimler/annual/2008/gb/English/pdf/ 04_DAI_AR2008_Management-Report.pdf (pp. 82–87). Required: Provide (1) a list of items forecasted (e.g., sales, profits,
> Why are multinational corporations increasingly being held accountable to constituencies other than traditional investor groups?
> The chapter discusses the objectives of investororiented markets: investor protection and market quality. Transparent financial reporting is important for achieving these objectives. What is transparent financial reporting? Explain how transparent financ
> Outsourcing, especially from vendors located abroad, has become a politically sensitive issue, especially in the United States. Do you think this argument has merit? What are the consequences of this debate for international accounting?
> Analyze Alibaba’s business model relative to all the different forms of digital and online marketing covered in this chapter.
> Given that Alibaba does not own or distribute any of the merchandise exchanged on its sites, describe what factors had to develop for the company to succeed.
> As a digital retailer, how does Alibaba provide value to Chinese consumers? What sets of values are unique to the Chinese market?
> Should all companies consider reducing their sales forces in favor of telemarketing? Discuss the pros and cons of this action.
> Refer to Appendix 2, Marketing by the Numbers, to determine the marketing return on sales (marketing ROS) and return on marketing investment (marketing ROI) for Company A and Company B in the chart below. Which company is performing better? Explain.
> Many marketers are still learning how to use social media platforms effectively to engage customers in meaningful relationships. Locate three social media platforms used by the Kenneth Cole brand to engage customers. Is the brand’s marketing message cons
> Kenneth Cole believes that his controversial tweets improve business and provoke conversation and awareness. Is this an effective use of social media to engage customers with the brand? Why or why not?
> Discuss advantages and disadvantages of “Buy” buttons for social media sites like Pinterest and search engines like Google. What are the advantages and disadvantages for marketers making their goods available through “Buy” buttons on these sites?
> What competitive advantage does Pinterest (www.pinterest.com) have over other social media that might make its “Buy” button more successful?
> Although mobile advertising makes up a small percentage of online advertising, it is one of the fastest-growing advertising channels. But one obstacle is measuring return on investment in mobile. How are marketers measuring the return on investment in mo
> Visit www.krazycouponlady.com and browse a deal you would consider purchasing. After identifying the deal, conduct an online price comparison at various retailers to determine the range of prices you would typically pay for the product. Present your conc
> In a small group, search the internet to locate a controversial or failed social media campaign. Present an analysis of the failed campaign. Make a recommendation on how to address the controversy.
> What is phishing, and how does it affect internet marketing?
> Discuss the benefits of direct and digital marketing to buyers and sellers.
> Can Alibaba succeed in countries outside of China? Why or why not?
> Identify specific ways SunGard’s transformational plan addresses the different steps of managing the sales force.
> How would the challenges faced by SunGard have impacted sales productivity had the company not initiated its transformational plan?
> What are the positive and negative aspects of SunGard’s new sales force structure?
> At what level of sales would it be more cost efficient for Wheels to use sales agents compared to its own sales force? To determine this, consider the fixed and variable costs for each alternative. What are the pros and cons of using a company’s own sale
> Refer to Appendix 2 to answer this question. Determine the number of salespeople Wheels needs if it has 1,000 bicycle shop accounts that need to be called on four times per year. Each sales call lasts approximately 2.5 hours, and each sales rep has appro
> Read Staples’s code of ethics at www.staples.com/sbd/cre/marketing/staples_soul/documents/staples- code-of-ethics_english.pdf. Is the situation outlined above consistent with Staples’s ethics policies? Is “walking the customer” a violation of the ethics
> Identify three online price-comparison shopping sites or apps and shop for a product you are interested in purchasing. Compare the price ranges given at the three sites. Based on your search, determine a “fair” price for the product.
> A company’s sales force creates and communicates customer value by personally engaging customers and building customer relationships. With its Market Basket approach, was Staples focusing on building customer value and relationships? Explain.
> The profitable growth potential for SnipSnap is in the enterprise market where it provides mobile promotion services to retailers. SnipSnap is working with retailers to create and manage geo-conquesting campaigns. Research what this is and create a prese
> Research other types of apps that rely on smartphone cameras to redeem a sales promotion offer. Explain how they work and how they are similar to and different from SnipSnap.
> In a small group, design a sales promotion campaign using online, social media, and mobile marketing for a small business or organization in your community. Develop a presentation to pitch your campaign to the business or organization and incorporate wha
> What is sales promotion? Discuss its growth as a short-term consumer promotion tool.
> What is social selling, and how is it affecting the sales function in organizations?
> Name and describe the four sales compensation elements. What are the various compensation combinations, and how can they be used to achieve the company’s marketing objectives?
> Will “Selling the SunGard Way” really work? Why or why not?
> Based on the information in this case, how might Allstate measure the effectiveness of the Mayhem campaign?
> Discuss issues of selecting advertising media for the Mayhem campaign. How might this process differ from that of campaigns for other companies?
> Bridgestone Corporation, the world’s largest tire and rubber producer, recently agreed to plead guilty to price-fixing along with 25 other automotive suppliers. What is price-fixing? Discuss other recent examples of price fixing.
> Analyze Allstate’s Mayhem ads based on the process of creating an advertising message as outlined in the text.
> Why has Allstate’s “good hands” slogan withstood the test of time to become advertising’s longest-running slogan?
> Calculate the cost per thousand (CPM) and cost per point (CPP) for each program. How should advertisers use these measures when planning a television media buy?
> How many households are expected to watch each program? C3 Rating 7.9 Program Sunday Night Football The Big Bang Theory The Voice Cost per 30 second spot $594,000 $317,000 $264,575 5.1 3.9 $168,435 $169,730 How I Met Your Mother 3.2 Agents of S.H.I.
> Are the FTC’s current regulations and guidelines regarding online advertising adequate for regulating native advertising and sponsored content? Is it likely that the FTC will issue new guidelines or regulations? Explain.
> Are companies responsible for ensuring consumers understand and can distinguish between sponsored content and other content? Explain.
> Mobile advertising is one of the fastest growing sectors of digital advertising, but how is mobile advertising effectiveness measured?
> Compare and contrast Facebook’s, Google’s, and Twitter’s ad networks. Which is most effective for advertisers?
> In early 2016, the Wounded Warrior Project suffered a major blow to its fundraising when reports surfaced suggesting that the nonprofit organization spent too much of its money on travel, conferences, and high-end events rather than direct assistance to
> Search YouTube for three of your favorite television commercials, each using a different execution style. For each ad, identify the execution style used and the audience targeted. Is it a good ad? Be prepared to present the commercials and support your c
> What channel design decisions do manufacturers face for maximum effectiveness?
> What is an advertising agency? Discuss the changes in advertising agencies today compared with how they operated in the past?
> Discuss how marketers can break through the cluttered advertising environment.
> By what primary purposes are advertising objectives classified? Explain.
> Has the Mayhem campaign been effective? Support your answer.
> Is the consumer marketing approach taken by “Live Tests” appropriate for all B-to-B marketers? Explain?
> How does the “Live Tests” campaign demonstrate the characteristic of integrated marketing communication? What grade would you give “Live Tests” on integration effectiveness?
> Which promotional mix elements does Volvo Trucks use?
