Foreign accounting problems;

              FOREIGH
PMttWS
WE ARE ALL AWARE of the tremendous expansion of
United States investments in other countries during the
last few years. The Department of Commerce tells us
that United States private investments abroad amounted
to approximately $60 billion in 1962, as compared with
$19 billion in 1950. These numbers are impressive not
only because of the significant increase but also because
of the magnitude of the amounts.
We get some idea of the number of new entries into
foreign markets from the results of surveys included in
the annual publication of the American Institute of Cer­tified
Public Accountants, Accounting Trends and Tech­niques.
The 1963 results, based on a review of 1962
annual reports, indicated that 403 of the 600 companies
included in the survey had foreign subsidiaries. In an
earlier survey conducted by the AICPA in 1949, the
annual reports of only 165 of 525 companies indicated
the presence of foreign subsidiaries. These figures, of
course, refer only to subsidiaries, and then relate only to
those instances where the existence of subsidiaries is ap­parent
from annual reports. It is safe to assume that a
greater number of companies have foreign operations,
however minor, and certainly a higher proportion of
the companies than the two-thirds indicated in the 1963
survey have some dealings with foreign markets and,
therefore, have some interest.
Reasons for Increase:
There are a number of reasons for increased invest­ments
abroad. Primary, of course, is the desire to enter
new markets. In addition, many companies hope to take
advantage of sources of raw material or of lower costs
such as wages. Tax advantages have been a significant
factor to be considered when establishing new locations.
It is also possible that in some instances the act of enter­ing
foreign operations may be in the nature of a de­fensive
move in order to continue to sell in certain
economic or geographic groups. The European Common
Market is the best example of such a group where in­vestment
may be required in order for a United States
company to continue to compete.
Accountants Are Involved:
In every instance that I can think of, the basic moti­vation
for investing in other countries is profit. Accord­ingly,
the financial manager is directly involved in the
why, where, how, and how much of such investments
and, also, in their maintenance.
I believe that profit motivation as a reason for ex­panding
investments in other countries may be good for
our country's foreign relations. At least alliances based
on mutual profit can often be stronger and more last­ing
than those based on fear or dubious gratitude.
22 THE QUARTERLY