Importance of Business Interests in Foreign Countries
Samsung is one of the largest organizations in the technology industry, linked to its philosophy of orientation concerning a wide array of electronic devices tailored to individual populations. It has a positive policy and marketing strategy that deals with internationalization (Almutairi et al., 2019). The organization utilizes a diversification structure, leading the multinational conglomerate to operate in different sectors such as the electronics manufacturing industry.
The technology organization further operates in a market with relatively easy market entry as technological development and minimal product diversification have resulted in many market entrants. Its interest in foreign countries is a major risk for Samsung if it does not continually develop the processes necessary to address different regions worldwide (Almutairi et al., 2019). The organization should balance high-quality products and affordability to maintain a large market share. This is difficult due to the varying nature of countries, making companies in the smartphone manufacturing industry keen on innovation and foreign markets as they need continual growth in customer loyalty to remain competitive.
Business Interests’ Impact on Accounting-related Policies
Samsung has faced numerous tumultuous periods in recent years owing to the changing demographics in its electronics markets worldwide. For instance, South Korea sought to revitalize its businesses and asked Samsung to reinvest in the home country instead of outsourcing its production to Vietnam (Arnold & Lewis, 2019). Samsung’s conglomerate nature needs to adhere to each country’s accounting norms to prevent litigation if it fails to consider proper accounting designs.
Furthermore, Samsung faces great economic turmoil due to the changing business environments posited by the war in Ukraine and covid-19 effects. Global supply chains faced a significant alteration, factors that affect the company’s accounting policies to reflect changes in the markets (Arnold & Lewis, 2019). Samsung’s supply chain needed revamping following the need for different supply chains to mitigate covid-19 effects worldwide during 2020 and 2021.
Accounting Processes
Business Accounting Cycle
Samsung’s accounting cycle involves sourcing documents such as ledgers, conducting a trial balance, and developing financial statements to reflect the company’s position in the electronics industry (Samsung, 2019). The organization uses standard business practice, producing a quarterly financial statement.
Bad Debt Expense
The company’s bad debt expense account illustrates it has been losing money from the failed collection of payments or other revenue generation schemes (Samsung, 2019).
Revenue Recognition
Samsung recognizes revenue based on the likelihood of its probable significance in terms of reversing the organization’s cumulative revenue. The company determines revenue when the risk or reward of ownership is transferred to the buyer, or its consideration amount is measurable. Its financial statements are recorded with Korean IFRS, while audits adhere to International Auditing Standards (IAS) (Samsung, 2019).
Inventory Methods
Samsung manages inventory using Lean Six Sigma. This is an inventory management system aimed at boosting manufacturing processes. The organization uses a reduced cycle time through its SLIM model (Samsung, 2019). Additionally, it creates most of its products in the 3rd quarter, taking advantage of a boost in demand. Finally, Samsung regulates product development as most of its inventory is manufactured in-house. Samsung faces compliance issues by developing a solution to financial accounting problems. The organization needs to develop an accurate notion of each country of operation’s laws to adhere to Korean and local accounting policies.
Conclusively, Samsung operates in a highly competitive industry that requires innovation and adherence to strict and prudent accounting practices to ensure success. It uses a SLIM and internationalization strategy due to its global nature. Samsung uses Korean IFRS and the IAS to ensure compliance with accounting policies. It keeps ledgers, and journals, producing quarterly income statements and balance sheets to illustrate its position within each fiscal year.
References
Almutairi , M., Mehta , S., Al Rashidi, F., Villa , M. A., & Anggawinata, F. (2019). Analysis of Samsung’s Internationalization Process and The Strategies Implemented to Generate an Effective Positioning of Its Brand and Products in Foreign Markets. Journal of the Community Development in Asia, 27–39.
Arnold, G., & Lewis, D. (2019). Corporate Financial Management. Pearson Education Limited.
Samsung. (2019). (rep.). SAMSUNG ELECTRONICS Co., Ltd. 2019 Business Report For the year ended December 31, 2019 (pp. 1–261).