1.Outline the key PRE-IFRS development factors, cultural dimensions and accounting values of the UK as would be predicted under the Hofstede and Gray classification models - use a summary table format (refer to the examples in your PPTs).

Explain in your answer what the connections/links/correlations exist between these PRE-IFRS Development factors, dimensions and values.

NOTE: DO NOT USE THE HOFSTEDE SITE TO ANSWER THIS QUESTION - YOUR PREDICTIONS FOR A NATION'S CULTURAL DIMENSIONS MUST BE BASED JUST ON THE NATION'S PRE-IFRS DEVELOPMENT FACTORS - WHY?

[cont'd]

https://policypress.wordpress.com/2017/02/28/ what-does-the-post-brexit-future-look-like/ AYN424 - International Accounting Semester Two - 2017, Lecture Five: Harmonisation and Transition in Europe and Enforcement Issues: Anglo Saxon Nations - United Kingdom Case - BREXIT Impacts Major Group Project: Discussed in Workshops in Week Four - How Do We Answer Question One of the Individual Requirements? Summary Table - Selection of Companies - In-Class Discussion 2 3 Example Provided by Susan Porchun - Past AYN424 Student 4 5 6 7 Lecture Five - Comparative Accounting - Anglo-Saxon Nations Chapter Six - Doupnik & Perera (2015, 4th. Ed). Accounting environment, profession, regulation, principles/practices - Differences in the adoption, administration, application and enforcement of IFRS globally. NOTE CHAPTER SIX EXTRACT IS AVAILABLE UNDER THE LECTURE FIVE FOLDER 1. Lecture Five - Chapter Six: - Comparative Accounting in Europe (Part One) - Country: United Kingdom (Anglo Saxon Accounting Classification). Why Are We Starting With The UK? 8 Comparative Accounting (cont'd) 2. Lecture Six - Chapter Six (cont'd) -Germanic Latin Countries - Germany and Mexico; 3. Lecture Seven - Chapter Six (cont'd) - Asian Countries - Japan and China. Note Can you Use Singapore or India in Your Project as an Asian Country? Why or Why Not? Why Can't You Use the United States in Your Project? 9 Comparative Accounting (cont'd) Learning Objectives for Weeks Five, Six and Seven 1. Describe some aspects of the ORIGINAL, PRE-IFRS environment which impacted on the financial accounting, reporting, disclosure and enforcement polices and practices which operated in five countries: China, Japan, the United Kingdom, Germany and Mexico. KNOW WHY YOU CAN'T USE THE US FOR YOUR PROJECT. 2. Explain in your own words the nature of the key, POSTIFRS financial accounting, reporting, disclosure auditing and enforcement/regulatory practices in the selected countries. 3. Discuss the mechanisms in place for regulating/enforcing accounting and financial reporting in the selected countries. 10 Comparative Accounting (cont'd) Learning Objectives 4. Be able to compare and contrast the key, POST-IFRS financial accounting principles and practices used by companies in these five countries - using a table format. 5. Identify the key areas where the POST-IFRS national accounting practices in these countries differ from International Financial Reporting Standards (IFRS) and the consequences for investors. 11 Comparative Accounting (cont'd) Learning Objectives 6: For the Five Nations Analysed, be able to, in your own words, identify any key, current issues that could have a positive or negative impact on the flows of Foreign Direct Investment (FDI) into each of these nations - e.g. Britain's exit from the European Union. NOTE: THERE ARE THREE (3) DIFFERENT TIME PERIODS WE HAVE TO CONSIDER IN RELATION TO THE UK IN TERMS OF THEIR OVERALL BUSINESS AND ACCOUNTABILITY PRACTICES TOWARDS INVESTORS: 1) THE UK BEFORE IT JOINED THE EUROPEAN UNION (EU) IN 1973; 2) THE UK AS A MEMBER STATE OF THE EU - WITH THE EU ADOPTING IFRS IN A 2002-2005 TRANSITIONAL ARRANGMENT - AND PRE-BREXIT; AND 3) THE UK POST-BREXIT - BRITAIN. 12 The UK Joins the EU in 1973, the EU Adopts IFRS Across a Three Year Period (2002-2005), and BREXIT Begins in 2016 - Article 50 (Exit Strategy) Triggered in March 2017 - Terms Being Negotiated in August, 2017 13 May triggers article 50 with warning of consequence for UK British PM addresses packed Commons minutes after European council president receives article 50 letter UK envoy Tim Barrow (left) hands Donald Tusk the letter giving Britain's formal exit notice. Photograph: Emmanuel Dunand/AP 2 Anushka Asthana, Heather Stewart and Peter Walker Thursday 30 March 2017 01.13 AEDT First published on Wednesday 29 March 2017 23.42 AEDT Theresa May has told parliament that she accepts Brexit will carry consequences for the UK, as a letter delivered to Brussels began 14 a two-year countdown to Britain's departure from the EU. May triggers article 50 with warning of consequence for UK (cont'd) British PM addresses packed Commons minutes after European council president receives article 50 letter The prime minister made a speech on triggering article 50 minutes after the European council president, Donald Tusk, confirmed he had received notification. He declared that \"the UK has delivered Brexit\" nine months after a bruising referendum campaign. \"We understand that there will be consequences for the UK of leaving the EU. We know that we will lose influence over the rules that affect the European economy. We know that UK companies that trade with the EU will have to align with rules agreed by institutions of which we are no longer a part, just as we do in other overseas markets. We accept 15 that,\" she said. Brexit: All you need to know about the UK leaving the EU By Alex Hunt & Brian Wheeler BBC News24/03/2017 http://www.bbc. comews/uk-pol itics-32810887 16 Think About the Potential Impacts on the European Union - Class Discussion - Is Brexit a Rejection of Globalisation? - In-Class Handout https://www.theguardian.com/business/2016/jun/26/brexit-is-the-rejection-of-globalisation 17 Mandatory Question One: For Non-Presenters and Presenters and Reading List - Lecture Five Required Readings: Note: These Readings are Also Relevant For Your Major Group Project and For the Final Exam - and Are Available in Files Directly Underneath this Lecture Five PPT File. 1) Reading One: Text Book - Chapter Six (Chapter Six Extract Related to the UK is Available Under the Lecture Five Folder) Referencing: In text Doupnik and Perera (2015, p. 480) OR (Doupnik & Perera, 2015, p.480) Reference List Doupnik, T.S. & Perera, H. (2015). International Accounting (4th ed.). New York, NY: McGraw Hill (cont'd)................................... 18 Mandatory Question One (cont'd): For Non-Presenters and Presenters and Reading List - Lecture Five Required Readings: Note: These Readings are Also Relevant For Your Major Group Project and For the Final Exam - and Are Available in Files Directly Underneath the Lecture Four PPT File. 2) Reading Two (pp. 4-12 Only): S. J. GRAY - 'Towards a Theory of Cultural Influence on the Development of Accounting Systems Internationally' Reference: Gray SJ 1988 'Towards a theory of cultural influence on the development of accounting systems internationally', Abacus, vol.24:1, pp. 1-15 (cont'd)................................... 19 Mandatory Question One (cont'd) : For Non-Presenters and Presenters and Reading List - Lecture Five Required Readings: Note: These Readings are Also Relevant For Your Major Group Project and For the Final Exam - and Are Available in Files Directly Underneath the Lecture Five PPT File. 3) Reading Three - pp. 7-8: David Borker - 'Is There A Favorable Cultural Profile For IFRS?: An Examination And Extension Of Gray's Accounting Value Hypotheses' - International Business & Economics Research Journal - February 2013 Volume 12, Number 2, 2013 The Clute Institute http://www.cluteinstitute.com/ Mandatory Question One (cont'd) : For Non-Presenters and Presenters and Reading List - Lecture Five Required Readings: Note: These Readings are Also Relevant For Your Group Project and For the Final Exam - and Are Available in Files Directly Underneath this Lecture Five PPT File. 4) Reading Four: Read the Short, 2017 Articles Combined into One File Under the Lecture Five Folder - Related to the Post-Brexit Impacts on the British Economy and FDI into Britain - Title - 'Brexit economy: UK faces slowdown amid living standards squeeze' Note: Please feel free to do your own research on the impacts on the British economy and FDI into Britain as a result of BREXIT - and then share this information with your workshop group. 21 Mandatory Question One: For Non-Presenters and Presenters - Lecture Five Question One: Using the Chapter Six text reference, the Lecture Five PPTs and the Gray's Accounting Values Extract provided in the Lecture Four Materials: 1. Outline the key PRE-IFRS development factors, cultural dimensions and accounting values of the UK as would be predicted under the Hofstede and Gray classification models - use a summary table format (refer to the examples in your PPTs). Explain in your answer what the connections/links/correlations exist between these PRE-IFRS Development factors, dimensions and values. NOTE: DO NOT USE THE HOFSTEDE SITE TO ANSWER THIS QUESTION - YOUR PREDICTIONS FOR A NATION'S CULTURAL DIMENSIONS MUST BE BASED JUST ON THE NATION'S PRE-IFRS DEVELOPMENT FACTORS - WHY? 22 [cont'd] Flow of Information STUDENT-BASED EXAMPLE - Pre-IFRS: Summary Table of Countries Flow of information: PRE-IFRS Development factors Cultural Dimensions Accounting Values Investigate differences across cultural groupings (Anglo-American vs Germanic-Latin) Favourable IFRS profile vs non-Favourable IFRS profile BUT....DOES THIS TABLE ACTUALLY PROVIDE A COMPARATIVE ANALYSIS? Source: Taylor, 2015; Hofstede Centre, 2015; Gray, 1988; Mandatory Question Two: For Presenters - Lecture Five Question 2: a)Identify the CURRENT, POST-IFRS, key accounting policies, principles, practices and regulations of the United Kingdom as provided for you in the Lecture Five PPTs and in Chapter Six of your text - REFER TO EXAMPLE ON NEXT SLIDE. b)In your own words discuss whether you believe there has been any changes from the PRE-IFRS accounting values of the UK (as set out in your answer to Question One), to their POSTIFRS accounting policies, principles, practices and regulations (as set out in your answer to Question 2 (a)). Why do you think changes have or have not taken place in the POST-IFRS framework in the UK? [cont'd] 24 Post-IFRS Accounting: Germany - STUDENT-BASED EXAMPLE OF REQUIRED TABLE - THIS INFORMATION FOR THE UK CAN BE FOUND IN CHAPTER SIX OF YOUR TEXT AND THE RELEVANT LECTURE PPTS FOR EACH NATION Accounting Profession Dominated by Auditing Auditing profession is lead and controlled by the Wirtschaftsprfer (WPK) and all registered accounting a mandatory members Also Second tier body of certified accountants for medium enterprises and a group of tax advisors Accounting Regulation Governed by commercial law, tax law and procurements issued by the profession Commercial law indicates the accounting principles as well as sanction for noncompliance Financial reports must be true and fair and also published in the official federal gazette as by legislation Conservatism is established under the title of prudence in the Stock Corporation Law As of 2005 all listed companies must compile reports to IFRS standards Accounting Principles and Practice Commercial Code I main basis for accounting requirements which places high value on creditor protection Since 2005 IFRS standards implementation 3 main changed have been made: 1. Intangible assets have to be recognized 2. Deferred tax must be recognised and Source Doupnik & Perera, 2015, p. 258 - 265 3. Must be fair value accounting of financial assets Mandatory Question Two (cont'd) : For Presenters - Lecture Five Question 2 (cont'd): Reading Available Under the Lecture Five Folder c)Read pp. 7-8 of the David Borker article as detailed in the reference list and discuss whether you think the UK had a PRE-IFRS favourable cultural profile for IFRS adoption and why this is or is not the case. d)Read the Short Articles Set Out in Reading Four and the Article Extracts Provided in Your Lecture Five PPTs and provide four key reasons why the experts believe that the British economy has either strengthened or weakened in Britain following Brexit. 26 Remember in Your Presentation and Weekly Submissions and Discussant Responses to Start Your Answers With a Summary Introduction Highlighting How The Previous and Current Lecture Materials are Integrated - See Example Below Situation Rise of Multinational enterprises and global capital markets; Need for global comparison of financial reports in order to safely and confidently invest - avoid economic crisis; Problem: Worldwide Accounting Diversity; Development Factors Differences across key country PRE-IFRS development factors primary reason for accounting diversity; No. 1 = Sources of Finance,nthis will determine the purpose for financial reporting; Cultural Dimensions Hofstede's 5 cultural dimensions (PRE-IFRS) categorise the culture of countries' listed corporations; This composition will shape the PRE-IFRS accounting systems, reporting and overall accounting values adopted; Accounting Values Gray's accounting values highlight the core attitudes towards accounting reporting and standards within a corporation; Directly reflect a country's propensity to attract FDI, which is so integral in today's globalised world; SOLUTION? POST-IFRS - Eliminate the effects of culture on business reporting through international harmonisation; Problem: What version of IFRS is adopted? Whole IFRS (Canada) or Hybrid IFRS (EU) or No IFRS (US)? Determined by Determines Determines Triggers Sources: Doupnik & Perera, 2015, Wu, 2006; Taylor, 2015; Gray, 1988 Lecture Five: Comparative Accounting MOVING FROM PRE-IFRS (Nation-Based Accounting/Reporting) to POST-IFRS (One Set of High Quality Global Accounting/Reporting Standards) A Five Nation Analysis PRE-IFRS POST-IFRS PRE-IFRS - Europe - Nation-Based Accounting and Reporting Requirements THERE ARE THREE (3) DIFFERENT TIME PERIODS WE HAVE TO CONSIDER IN RELATION TO THE UK IN TERMS OF THEIR OVERALL BUSINESS AND ACCOUNTABILITY PRACTICES TOWARDS INVESTORS: 1: THE UK BEFORE IT JOINED THE EUROPEAN UNION (EU) IN 1973 - PRE-IFRS and UK National Rules Only; 2: THE UK AS A MEMBER STATE OF THE EU - PREIFRS PERIOD FROM 1973-2001 - WITH THE EU ADOPTING IFRS IN A 2002-2005 TRANSITIONAL ARRANGMENT (POST-IFRS); AND 3: THE UK POST-BREXIT - BRITAIN. Why Do These Accounting/Regulatory Changes Matter 30 and to Whom? Lecture Five: Comparative Accounting (cont'd) - United Kingdom - As a Member of the EU/PRE-BREXIT What Would You Predict Were the POST-IFRS Accounting Values Adopted by the United Kingdom Given the UK's Key PRE-IFRS Development Factors and Using the Hofstede's and Gray Classification Models? Would There Be any Significant Changes to These Values POST-IFRS? Why/Why/Not? NOTE: DO NOT USE THE HOFSTEDE SITE TO ANSWER THIS QUESTION - WHY NOT?? 31 United Kingdom (cont'd) - Refer to Chapter Six of the D & P Text - pp. 303-310 General Background: Population of about 60 million, comprised of England, Northern Ireland, Scotland, and Wales Among the five countries covered in this course, its financial structure is closest to the U.S. 15,000 Private Limited Companies (PLCs) with about 2,500 of these listed on the London Stock Exchange. 32 United Kingdom (cont'd): PRE and POST IFRS The Origins of the Accounting Profession in the UK World's first association of professional accountants, The Society of Accountants in Edinburgh, established in 1853 Six professional chartered bodies coordinated through Consultative Committee of Accountancy Bodies (CCAB) The profession developed in response to the needs of industry and has influenced the development of professions in a number of other countries. The Institute of Chartered Accountants in England and Wales - a world leader in the Accounting and Finance Profession - see attached slides + Note the Global Accounting Alliance Compared to the U.S. the certification requirements focus more on work experience and less on university education. 33 ICAEW is a world leading professional membership organisation that promotes, develops and supports over 140,000 chartered accountants worldwide. We provide qualifications and professional development, share our knowledge, insight and technical expertise, and protect the quality and integrity of the accountancy and finance profession. As leaders in accountancy, finance and business our members have the knowledge, skills and commitment to maintain the highest professional standards and integrity. Together we contribute to the success of individuals, organisations, communities and economies around the world. Because of us, people can do business with confidence. United Kingdom (cont'd) - PRE-IFRS and Before Joining the EU in 1973 Summary Overview: (Note: Combination of Gray's and Hofstede's Classification Models Used) Legacy of British accounting First country to develop an accountancy profession Fair presentation (true and fair view) Exported British accounting around the world Accounting in the UK developed as an independent discipline, pragmatically responding to the needs and practices of business - company law requirements are important, however, accountants continue to retain considerable amounts of flexibility in the application of professional judgment 35 36 Borker Article - Global Convergence Movement: UK NATIONAL ACCOUNTING VALUES PRIOR TO JOINING THE EU - Have These Values Changed With the Mandatory Adoption of EU-Based Directives/Regulations? Will These Accounting Values Change POST_BREXIT for Britain? 37 The UK - POST IFRS - Remember that the UK is Still Part of the European Union and Therefore Must Comply With EU Directives Until A Formal Exit Strategy Has Been Agreed Between the UK and the EU (Currently Taking Place - August, 2017) http://www.iasplus.com/en Adoption of IFRSs in Europe effective in 2005 In June 2002, the European Union adopted an IAS Regulation requiring European companies listed in an EU securities market, including banks and insurance companies, to prepare their consolidated financial statements in accordance with IFRSs starting with financial statements for financial year 2005 onwards. 38 So...As a Member of the EU and PRE-BREXIT...the UK adopted the EU Endorsed Version of IFRS....What Does this Mean Exactly? NOTE THAT, in the EU, it was thought to be legally and politically unacceptable to impose IFRS on companies, given that IFRS is issued in English only and that the IASB frequently changes the content of the IFRS. In June 2002, the European Union adopted an IAS Regulation requiring European companies listed in an EU securities market, including banks and insurance companies, to prepare their consolidated financial statements in accordance with IFRSs starting with financial statements for financial year 2005 onwards. Consequently, the EU Regulation 1606 of 2002 refers ONLY TO 'IFRS as endorsed by the EU' - AND THIS ONLY APPLIES TO LISTED COMPANIES 39 40 41 European European Financial Financial Reporting Reporting Advisory Advisory Group Group Is this European Union IFRS Endorsement Process a Threat to One Set of Global Accounting Standards? Can the Power of US-Based Global Corporations Also Be 42 Considered a Threat to IFRS Convergence? United Kingdom (cont'd): Post-IFRS Accounting Regulation SO...? What Were the ACTUAL POST-IFRS Regulations in Place in the UK - PRE-BREXIT? The Companies Act, accounting pronouncements, and stock exchange rules comprise accounting regulation. Similar to the U.S., and unlike Germany and Japan, tax rules do not significantly influence financial reporting - i.e. there are two different sets of accounting records - one set of reports is prepared based on the accounting rules in the accounting standards - while the other set of accounts is prepared using the tax laws - tax is only paid on the taxable income that results from the tax laws - What does this actually mean? - refer to in-class discussion - FOCUSES ON LISTED COMPANIES AND ACCOUNTABILITY BY THE MNC DIRECTORS TO THE INVESTORS 43 United Kingdom (cont'd): POST-IFRS Accounting Regulation These Were the ACTUAL POST-IFRS Regulations in Place in the UK - PRE-BREXIT Standard-setters have historically taken a principles-based approach using a statement of principles as a conceptual framework. Has not historically had a strong, regulatory type agency, but recent scandals have led to increased regulation. - FOCUSES ON LISTED COMPANIES AND ACCOUNTABILITY BY THE MNC DIRECTORS TO THE INVESTORS (cont'd) 44 United Kingdom (cont'd): These Were the Current Principles and Practices in Place - PRE-BREXIT POST-IFRS Accounting Principles and Practices A primary objective of accounting is to support an effective capital market. The true and fair view principle is paramount...but what does this mean? True and fair view override requires that companies not comply with standards that would result in misleading financial statements. Professional judgment is essential additional component to true and fair view. 45 United Kingdom (cont'd) - These Were the ACTUAL POST-IFRS Regulations in Place in the UK - PRE-BREXIT UK Companies Reporting Requirements Include: Balance Sheet and Profit and Loss Account Cash Flow Statement Statement of Accounting Policies and Notes to Financial Statements Auditors' Report Directors' Report Why are these Reports required? 46 United Kingdom (cont'd) - These Were the ACTUAL POST-IFRS Regulations in Place in the UK - PRE-BREXIT - Will This Change With Brexit?(cont'd) Accounting regulation and enforcement Companies Act Broad financial reporting framework Financial Reporting Council oversees: Accounting Standards Board Issues Financial Reporting Standards (FRSs) UITF clarifies FRSs Auditing Practices Board Issues auditing standards Financial Reporting Review Panel Enforces compliance with FRSs Professional Oversight Board Oversees auditing profession Audit Inspection Unit Monitors the audit of listed companies Accountancy Investigation and Discipline Board Investigates and disciplines accountants for professional misconduct Unusual features of British accounting True and fair override 47 So...What Accounting Framework Will Britain Adopt After Brexit? Institute of Chartered Accountants in England and Wales (ICAEW ) - News 21 Oct 2016 12:33pm: http://economia.icaew.comews/october-2016/brexit-may-lead-to-divergence -between-eu-and-uk-accounting-frameworks-frc \"Brexit may lead to divergence between EU and UK accounting frameworks\" Brexit could have \"significant implications\" for the future adoption of international financial reporting standards, the Financial Reporting Council (FRC) has warned Just what these implications will be will depend on the exit terms the UK government negotiates with the EU, but one of the most likely changes is that the UK will end up taking back the assessment of new standards prior to adoption. 48 So...What Accounting Framework Will Britain Adopt After Brexit (cont'd)? Institute of Chartered Accountants in England and Wales (ICAEW ) News 21 Oct 2016 12:33pm: http://economia.icaew.comews/october-2016/brexit-may-lead-to-divergence-between-eu-and-uk-accou nting-frameworks-frc \"Brexit may lead to divergence between EU and UK accounting frameworks\" (cont'd): As the UK will no longer be bound by EU regulation, it will be able to adopt its own version of IFRS which could end up differing from the EU's. This would also have major consequences for UK listed companies that report using IFRS. \"After leaving the EU the UK won't, it's fair to assume, use EU-adapted IFRS,\" an FRC spokesperson explained. 49 So...What Accounting Framework Will Britain Adopt After Brexit (cont'd)? Institute of Chartered Accountants in England and Wales (ICAEW ) News 21 Oct 2016 12:33pm: http://economia.icaew.comews/october-2016/brexit-may-lead-to-divergence-between-eu-and-uk-ac counting-frameworks-frc .....The potential consequences of Brexit are highlighted in the FRC's 2015/16 annual review of corporate reporting in the UK, which was published today. Paul George, the FRC's executive director for corporate governance and reporting, made it clear that the regulator continues to support the use of a single set of high quality global standards by UK listed companies. \"Investors have told us they want comparability when reading company accounts,\" he said. 50 So...What Accounting Framework Will Britain Adopt After Brexit (cont'd)? Institute of Chartered Accountants in England and Wales (ICAEW ) News 21 Oct 2016 12:33pm: http://economia.icaew.comews/october-2016/brexit-may-lead-to-divergence-between-eu-and-uk-accou nting-frameworks-frc Nevertheless, he stressed that any standards adopted in the UK post Brexit would have to be \"of the requisite quality and capable of implementation at an appropriate cost\". Nigel Sleigh-Johnson, head of the ICAEW Financial Reporting Faculty, agreed. \"What may or may not happen is very uncertain for now,\" he said. \"What isn't in doubt is the significance of the use by UK-listed companies of high quality international standards, given the status of London as a global financial centre.\" 51 PRE and POST-BREXIT: What Will Be the Overall Economic Impacts of Brexit on the British Economy and its Level of FDI? 52 BREXIT Impacts: Is the British Economy Strengthened or Weakened POST-BREXIT? Guardian Brexit watch Brexit economy: UK faces slowdown amid living standards squeeze https://www.theguardian.com/politics/2017/jun/22/brexit-economy-uk-slowdown-living-standards-costs The latest monthly Guardian analysis finds households experiencing rising costs and firms concerned over political uncertainty. Katie Allen - Thursday 22 June 2017 21.01 AEST Last modified on Wednesday 9 August 2017 21.32 AEST Britain's vote to leave the EU has squeezed living standards, hit consumer spending and dampened the country's growth prospects, a Guardian analysis of economic news over the year since the referendum shows. One year since voters narrowly opted for Brexit, the Guardian's monthly tracker of economic news paints a gloomy picture, with households facing rising costs and firms fretting over falling 53 demand and political uncertainty. BREXIT Impacts: Has FDI into Britain Strengthened or Weakened POST-BREXIT? http://cep.lse.ac.uk/pubs/download/brexit03.pdf 54 Introduction - (2016, p. 2) Foreign direct investment (FDI) comprises investments from outside a country to start up new subsidiaries, to expand existing establishments or to acquire local companies. The UK is a major recipient of FDI with an estimated stock value of over 1 trillion, about half of which is from other members of the European Union (EU), according to UK Trade and Investment (UKTI, 2015). Only the United States and China receive more FDI than the UK. 55 Introduction - (2016, p. 2) Countries generally welcome FDI as it tends to raise productivity, which increases output and wages. FDI brings direct benefits as foreign firms are typically more productive and pay higher wages than domestic firms. But FDI also brings indirect benefits as the new technological and managerial know-how in foreign firms can be adopted by domestic firms, often through multinationals' supply chain (Harrison and Rodriguez-Clare, 2009). FDI can also increase competitive pressure, which forces managers to improve their performance. 56 Introduction - (2016, p. 2) There are at least three reasons why FDI might fall following BREXIT: First, being fully in the Single Market makes the UK an attractive export platform for multinationals as they do not bear potentially large costs from tariff and non-tariff barriers when exporting to the rest of the EU. Second, multinationals have complex supply chains and many co-ordination costs between their headquarters and local branches. These would become more difficult to manage if the UK left the EU. For example, component parts would be subject to different regulations and costs; and intra-firm staff transfers would become more difficult with tougher migration controls. Third, uncertainty over the shape of the future trade arrangements between the UK and the EU would also 57 tend to dampen FDI. NEW Data Now Available on Brexit Impacts on FDI - 2017: Foreign investment in U.K. rose in year of Brexit Published: Feb 2, 2017 2:21 a.m. ET - By Paul Hannon http://www.marketwatch.com/story/foreign-investment-in-uk-rose-in-year-of-brexit-2017-02 -02 Global FDI was an estimated $1.52 trillion in 2016. The United States was the top destination with $385 billion, an 11 percent rise from 2015. Britain was second with $179 billion, up almost six-fold because of three big M&A deals, and China third with $139 billion. 58 Economic Impact of Exit Bill - Brexit http://www.cnbc.com/2017/03/24/ Yes, UK, you will have to pay the bill before you leave the EU: Brussels warns ahead of Negotiations - 7 Hours Ago CNBC.com Stefan Wermuth | Reuters - | 24/03/2017 The European Commission has repeated that there will be an "exit bill" for the U.K. before it leaves the European Union - something that the U.K. government has refused multiple times. The issue is sparking a lot of controversy just as the negotiations are about to kick off. 59 Brexit - http://www.cnbc.com/2017/03/24/ President Jean-Claude Juncker of the European Commission told the BBC on Friday that the U.K. "cannot pretend that it was never a member of the union". "The British government and parliament took on certain commitments as EU members and they must be honoured. This isn't a punishment or sanctions against the UK," Juncker said. The bill, which has been calculated by EU officials and it includes the UK's share of debts, pensions and unpaid bills, is estimated to be about 60 billion euros ($64.79 billion). 60 61 Your Task in the Presentation Questions is to Determine - Using the Reading Four Articles and the Extracts Provided in the Lecture Five PPTs - Whether the British Economy Has Strengthened or Weakened Post-Brexit - You Can Also Reflect on Whether You Agree With the Arguments that FDI Into Britain Will Fall as a Result of Brexit. Also Consider Whether You Believe Britain Will Continue to Adopt IFRs - If So - What Version? - If Not - What Accounting Standards Will it Move To? 62 Next Week: Lecture Six Germany and Mexico - Germanic/Latin Countries 63