Tesco limited is a British listed retail company with significant restructuring in its operations for the last five years. The company seeks to diversify its risk, returns, and business operations in Anglo Saxon, Germanic/Latin, and Asian countries. The report will analyze Canada in the Anglo-Saxon region, Germany from Germanic-Latin countries, and Japan from the Asian nations to determine the most appropriate investment option. Besides, the report will review the retail industry in the three nations as Tesco Limited is a retail company. Furthermore, a thorough analysis will be conducted into the countries’ transparency regarding corruption levels, financial reporting, and the environment by conducting a comparative analysis with identified business risk. Therefore, a final recommendation will be offered on which country the company should invest in based on the report findings, risk, expected returns, and overall business operations.

Summary Explanation Why the Three Countries Were Selected

Great importance is accorded to each nation’s selection process to minimize risks and maximize returns of Tesco limited through regional expansion. In this report’s analysis, the three nations selected are Canada in the Anglo-Saxon region, Germany from Germanic-Latin countries, and Japan from the Asian nations. Additionally, the countries will help the company accomplish its regional expansion objective by diversifying and minimizing investment risk. Through extensive research, it was established that all three countries adhere to the International Financial Reporting Standards (IFRS) in their accounting systems. Equally,it is mandatory to adopt the accounting methods in Canada, as all listed companies must comply with IFRS (Nobes et al., 286). Still, Germany adopts IFRS accounting standards in the European Union (Pontoppidan et al., 185). At the same time, Japan is a bit lenient in its accounting techniques as it allows voluntary adoption of the IFRS for the listed companies (Sugiyama et. 144). Hence, adopting the IFRS in preparing, presenting, and disclosing the accounting reports by public listed companies in these nations is a primary factor behind their preference. It also helps in minimizing investment risk and improving business transparency. This will be discussed later in the report under the impact of adopting IFRS on Foreign Direct investment.

Furthermore, the three countries are among the highest-ranking on the 2020 Kearney Foreign Direct Investment Confidence Index, as shown in appendix 1 (Kearney.com). The three countries are ranked second (Canada), third (Germany), and fourth (Japan) positions. Likewise, the countries scored well on nations that adopt IFRS under cultural grouping, as shown in appendix 1. Besides, the three countries were among the best-ranking countries on cultural averages on corruption, with Japan being the least corrupt country in the corruption index among the selected nations. Similarly, every country’s current economic, political, and environmental factors have been analyzed, as shown in Table 1 under the appendices. Likewise, the Post-BREXIT impacts on FDI, air pollution crisis in Japan and Canada, the impact of Covid-19, and political trade wars in Canada and the USA are examined to help reach the best investment option. Thus, this includes factors such as the aging population in Germany and Japan, which has potential effects on the European Union economies to aid in the conclusion.

Summary Explanation Why the Industry Is Selected In the Three Countries

The intensive analysis was done in determining the appropriate industry for the investment with the highest returns among retail, telecommunications, and banking industries, as shown in appendix 2 of Global power of retailing top 25, FY2018 (Deloitte). All three industries have growth prospects. However, retail is the best among the three due to high economic growth rates in the three countries that translates to a high propensity to spend, innovation, and increasing consumer demands. Further, as shown in appendix 2, the retail industry is recommended as the best investment option. Since Tesco limited is ranked 10^th, it has a high growth opportunity to be a significant retail controller like Wal-Mart Stores Inc. that is ranked as the global retail company. Besides, the retail industry’s revenue streams are expected to increase in online shopping because of the three nations’ current Covid-19 pandemics. Equally, technological advancements and innovation have helped the retail industry drive product values, simplifying customer services, especially online purchases. Therefore, the retail industry has substantial growth opportunities in Germany, Japan, and Canada due to high consumer demands, improved propensity to spend, and technological advancements.

Consequently, investing in the retail industry is a strategic investment option for Tesco limited in the three countries, especially due to potential consumers’ cultural characteristics. Hence, the company can increase its sales through diversification and expand its market share on the global market. Likewise, investing in the retail industry will help the company achieve its strategy in operating as a two-tier by expanding into non-food products in the UK markets and aggressive expansions into the international grocery markets (tesco.com). Therefore, the retail industry will align with the second strategy in the global markets besides creating long-term business value.

Part B: Comparative Analysis of Three Nations

Comparative Analysis of the key PRE-IFRS Development Factors

The countries’ PRE-IFRS factors affect international accounting practices in the legal and tax system, sources of finances, and economic and political ties. The adoption of the IFRS accounting system in Canada commenced in 1968 following the CICA handbook creation. Between the years 1968 and 2006, Canada was using GAAP under US influence. However, in 2006, the country decided to adopt the IFRS and converged towards the accounting system up to 2011 (Cormier et al., 120). In 2011, the country fully implemented IFRS adoption as the accounting system, as shown in Appendix 3 below. Besides, Germany uses the European Regulations of 1606 implemented on 1 Jan 2005 that required all listed companies to adopt IFRS in the accounting system. However, from 1 Jan 1998 to 31 Dec 2004, listed companies would use either IFRS or GAAP (Cussatt et al., 32). Still, Japan has a voluntary accounting system, and listed companies may use GAAP, IFRS, and Japan’s Modified International Standards (Ozu el at., 10). However, IFRS was introduced in 2010 in the country.

Comparative Analysis of the Key PRE-IFRS Cultural Dimension

The development of the accounting principles was directly impacted by the relevant developmental factors of every country. For instance, Anglo-Saxon nations’ development factors opposed the Asian and German-Latin countries regarding financial sources, legal, and tax systems. Likewise, the differences were scrutinized through Hofstede’s culture dimensions, where the capital markets sources of finances (Canada) and finances sourced through the governments (Germany and Japan) led to a further division on Anglo-Saxon, German-Latin, and Asian countries. Therefore, the PRE-IFRS cultural dimensions played a major role in developing the IFRS in the three countries.

Comparative Analysis of the Key PRE-IFRS Accounting Values

The differences in finances, legal, and tax systems led Canada to display investor centered PRE-IFRS accounting values. However, both Germany and Japan displayed creditor-oriented values. The investor and credit- centered values are based on Grays Accounting values and were adopted in the three countries. Equally, these accounting values developed major differences in preparing financial statements among various individual companies making comparability difficult. Hence, thisthreatened the FDI in international business trade (Cormier et al., 120). Thus, there was a need to develop an accounting system that would enhance professionalism, transparency, flexibility, and optimism inglobal trade.

Summary of the Major Changes in the Accounting Processes

The need for harmonization in international accounting systems led to the adoption of IFRS by various countries. The POST-IFRS in Canada is mandatory for all public listed companies to use IFRS. Germany uses the IFRS system under European Union regulations. However, the system is voluntarily adopted in Japan. The Canadian system is investor-oriented while the Germany and Japan system is creditor-oriented. Besides, Canada has favorable terms that minimize investment risks due to minimal government interference (Cormier et al., 120). However, Japan and Germany have made minimal changes since adopting the IFRS regarding addressing finance sources from statutory regulations. Thus, this tends to increase investment risks.

Part C: Overall Investment Recommendation

The assessment reveals that Canada fully adopts the IFRS accounting system. Hence, it is the best investment avenue as this is an assurance of reduced investment risks. It is also shown that the country focuses on investor-oriented accounting values, which are a critical consideration for Tesco limited. At the same time, the accounting system ensures transparency in accounting information reporting (Cussatt et al., 169).Likewise, it offers a substantial growth opportunity in the retail industry. This is despite the trade wars with the United States. Japan and Germany have credit-oriented accounting principles driven by rules on the government’s sources of funds. The two countries have slightly improved from statutory control since adopting IFRS. This has increased transparency and flexibility in disclosure requirements. Equally, the two countries have high investment attractiveness and low corruption levels. However, Germany is affected by regulations on the European Union, and Japan’s IFRS system is voluntary. Still, Japan and Germany face economic constraints from an aging population that would not offer direct labor to global diversification (Cussatt et al., 167). Therefore, through extensive considerations, Tesco limited should diversify into Canada due to the full adoption of IFRS that is investor-oriented that assures transparency, decreased investment risk, hence high potential to maximize profit margins.

Works Cited

Cormier, Denis, and Michel L. Magnan. “The advent of IFRS in Canada: incidence of value relevance.” Journal of International Accounting Research 15.3 (2016): 113-130.

Cussatt, Marc, Li Huang, and Troy J. Pollard. “Accounting quality under US GAAP versus IFRS: The case of Germany.” Journal of International Accounting Research 17.3 (2018): 21-41.

Deloitte. “Global Powers of Retailing | Deloitte | Consumer Business Industry Reports.” Deloitte, 2020, https://www2.deloitte.com/global/en/pages/consumer- business/articles/global-powers-of-retailing.html. Accessed 13 Sept 2020.

Kearney.com. Kearney.Com, 2020, https://www.kearney.com/documents/20152/17744880/The+2020+Kearney+Foreign+Dir ECT+Investment+Confidence+Index.pdf/18e45f29-867f-2cad-1899- 8294b94e89d5? t=1592240888756. Accessed 13 Sept 2020.

Nobes, Christopher W., and Stephen A. Zeff. “Have Canada, Japan, and Switzerland adopted IFRS?” Australian Accounting Review 26.3 (2016): 284-290.

Ozu, Chikako, et al. “Transitioning to IFRS in Japan: corporate perceptions of costs and benefits.” Australian Accounting Review 28.1 (2018): 4-13.

Pontoppidan, Caroline Aggestam, and Isabel Brusca. “The first steps towards harmonizing public sector accounting for European Union member states strategies and perspectives.” Public Money & Management 36.3 (2016): 181-188.

Sugiyama, Sachiko, and Jesmin Islam. “Empirical findings from the reconciliations in the first IFRS compliant reports prepared by Japanese-owned subsidiaries in Australia.” Advances in accounting 35 (2016): 143-158.

tesco.com. “Https://Www.Tesco.Com/”. Tesco.Com, 2020, https://www.tesco.com/groceries/. Accessed 13 Sept 2020.

Appendices

Appendix 1- The 2020 Kearney Foreign Direct investment confidence index

Table 1

Country	Canada	Germany	Japan
Covid-19	Yes	Yes	Yes
Environmental pollution	Yes	No	No
IFRS	Fully implemented	Under EU regulations	Voluntary
Aging population	NO	Yes	Yes
Accounting values	Investor-oriented	Credit-oriented	Credit-oriented

Appendix 2- Global power of retaining top 25, FY2018

Appendix 3- the adoption of IFRS in Canada

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