Adidas is one of the leading manufacturers of sportswear, footwear, toiletries and sports equipment. It sponsors many sports teams including basketball, tennis, rugby, and gymnastics football. It is based in Germany where its founders originated. It trades with many countries across the globe as it can be ranked among the largest manufactures of sportswear. They include Portland, the United States of America, Spain, Australia, South Africa, Japan, UK and Taiwan. These may be distributors, subsidiaries, branches or licensees. Knowledge on the particular law that applies in the contracts undertaken is important as Adidas deals with many countries. It happens because any disputes that may arise from payments or other terms of contracts need to be solved legally.
There are various legal systems that are used internationally. There is the common law and code law. Common law is based on case law. It works in cases when issues have to be taken to court and each party is given a chance to defend themselves even though it may seem clear who the guilty party is. On the other hand, code law is based on codification and it is related mostly to civil law. Most countries use both legal systems as civil law may be applied in some cases and common law is applies in others. Common law is practiced in the US, UK, India, Pakistan, Hong Kong, and Australia. Code law is practiced in Brazil, China (with some exceptions), Japan, Mexico, and Russia. There is Generally Accepted Accounting Principles (GAAP) that guides companies in accounting matters. On international contracting the law that applies in a contract is determined by the contract terms as agreed. An aggrieve party can sue the company in the home county where the particular law is applied (Hood & Young 1979).
Culture and Adidas Company
Diversity in international accounting is depicted in the following areas; legal systems, taxation, inflation, political and economic systems and culture. A company’s culture will influence the way international ground rules are drafted and administered.
“Organization culture is the set of important values, beliefs, and understandings that members share in common. Culture provides patterned ways of thinking, feeling, and reacting that guide decision making and other activities of organizational participants” (Kast & Rosenzweig1958)
Culture will affect the way the financial rules are drafted and implemented in Adidas. There may be the GAAP but Adidas may have drafted their own guiding standards that will be applicable. This may cause differences especially in reporting and handling assets, disposal, warranty, revenue recognition and bad debt management. This may impact their overall financial statements. In revenue comparisons with other competitors like Nike, they may be in the same level but have a big margin due to the reporting structure by Adidas. The analysis and interpretation of financial statement may differ, too. There are nations that may be conservative and those that may be more open to give information on their performance and financial positions in countries that Adidas trades with; this will ultimately affect the way Adidas trades. There may be need to employ people who are conversant with this cultural diversity among nations (Burnes 2004).
These cultural differences cause problems that may relate to various issues like quality standards. Accounting principles on disclosure; measures and recognition placed on several issues are of significant consideration in this endeavor. It may need to be expressly stated in contracts what will be applied to avoid disputes that at times may take longer to solve. This may cause delays in business transactions and animosity between trading partners (Doupnik, 2007).
References
Burnes, B. (2004). Managing Change: a strategic approach to organizational dynamics. Essex: Prentice Hall Publishers.
Doupnik, S. T., Perera, M. H. B. (2007). International accounting (3rd ed.) Boston, Mass: McGraw Hill publishers.
Hood, N., & Young, S. (1976). The economics of multinational enterprises. London: Longman Publishers.
Kast, E. F., & Rosenzweig, E. J. (1985). Organization and management: a system and contingency approach (4th ed.). McGraw-hill Inc.