Challenges of Global Expansion and Balance of Payment Transaction Case Study

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Balance of Payment Transaction and Challenges of Global Expansion

The BoP (Balance of Payments) refers to all transactions across a country border. Under the balance of payments transactions, all the payments coming into the country is denoted as a plus sign while the transactions going out of the country is a denoted as a minus sign. When an Australian consumer imports American goods, the transaction enters the American balance of payments as credit or positive sign into the U.S. current account. On the other hand, when Americans import goods and services from another country, the transactions enter the U.S. BoP as a debit or negative sign. (Chan, 2012).

Objective of this paper is explore the concept of the U.S. balance of payments.

U.S. resident purchases a German Mercedes Benz

When an American resident purchases a German Mercedes Benz C230, the transaction is a debit under the CA (Current Account). The current account tracks the good and services flow in and out of the United States. The Mercedes Benz C230 is a German car and when an American resident purchases this car, the transaction will be recorded in the debit under the current account. When U.S. resident purchases foreign goods and services, the transaction increases a capital outflow as being revealed in the table below:

U.S. Current Account

Credit

Debit

An American resident purchases a Mercedes Benz C230

-$35,000

2. U.S. Resident Purchases an American Chevelot Impala

When an American resident purchases the Chevelot Impala, there is no entry to the American BOP statement because the Chevelot Impala is an American car, and the transaction is domestic and no international transaction involves.

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3. Foreigner purchases GE (General Electric) Dryer

When a foreigner purchases a GE (General Electric) dryer, the transaction is credit or positive under the U.S. current account in the balance of payment statements. Thus, a foreigner purchasing an American product increases a capital inflow as being revealed in the table below:

U.S. Current Account

Credit

Debit

Foreigner purchases a General Electric dryer

+$100

4. U.S. resident purchases the UK stock

Stocks are assets under the balance of payments transactions. When an American resident purchases the UK stock, the transaction is recorded as a debit under the balance of payment statement in the KA (Capital Account) since the foreign stock's purchase increases the capital outflows as being revealed in the table below:

U.S. Capital Account

Credit

Debit

An American resident purchases the UK stock

-$10,000

5. U.S. Resident has Borrows funds from a British Broker to Purchase the Stock.

When an American resident borrows money from a British broker to purchase stocks, the transaction is a debit under the capital account in the U.S. balance of payment because it increases the capital outflow. (Wolf, 2009).

Part Two

Difference between the U.S. GAAP used by the GAP and IFRS used by Inditex and H&M

GAAP is an accounting principle adopted by the U.S. SEC (security and exchange commission), and used to prepare the standardized….....

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