Research Korner: Debt

Analytical procedures and going concern at the planning stage

Applicable Auditing Standards (based on HK Standard on Auditing 570)             Going concern is a fundamental principle in preparing financial reports and a vital assumption applied by the reporting entity. When going concern is claimed, the business necessarily means to continue operations for the foreseeable future with no indication to cease trade, liquidate, or seek protection from creditors to pay obligations.  It also indicates the strength of financial statements and components that are being reported such as realizing assets and discharging liabilities.  Going concern assumption undergoes auditing procedures to test if the assumption is appropriate and subsequently protect the decision-making implications of investors, creditor, suppliers, regulators and other users of financial statements.                       When the business has shown historically profitable activities and business stakes as well as provides evidence for easy access of financial resources, detailed analysis on going concert test need not be imposed.  Otherwise, the business will be applied with sequential audit trail set forth by pertinent auditing standards.  Going concern assumption is significantly injected with judgment of future outcomes for certain events/ conditions.  The soundness of these judgments is inclined on three notions.  As they are pushed further into the future, outcomes become more uncertain.  They are based on the contemporary facts relevant to the business.  Lastly, judgments are affected by size and complexity of the business, nature and condition of operations and degree of impact of external factors.             Some events/ conditions that may cause business risks and contribution to doubt on going concern assumption are the following: financial (net current liability position, excessive reliance on short-term loans, signs of withdrawal of support from creditors, negative operating cash flows, substantial degradation of valued assets, inability to pay on due dates, inability to comply with loan agreements, inability to obtain financing for new product, adverse financial ratios, etc.), operating (loss of key management yet to be replaced, loose of major market and business partners, shortages on factors of production, etc.) and other factors outside company’s control.  However, the business can mitigate the doubt by disclosing plans and strategies to solve the adversaries.                Two main tasks of auditors are assessing the validity of going concern assumption claimed by the business in preparing financial statements and evidence supporting such assessment.  Procedures of evaluation include identification of events/ conditions leading doubt to going concern, evidence and risks of misstatements.  In most cases, the management of the business executed preliminary evaluation that is required to be at least a going concern assumption for 12-month period.  However, the review of auditor can involve consideration of periods exceeding this required period if the effort significantly affect going concern assumption for the original time frame.  As judgment further in the future is more uncertain, evaluations exceeding the original period must have determined impact to going concern assumption.               The mitigation that management offers in the case the doubts to going concern validity is also audited to evidence feasibility and effectiveness.  One useful tool and basis is cash flow analysis where consideration is applied to reliability of inputs that generate the information, adequacy of supporting variables in reaching the forecasts, historical accounts and current performance.  When material uncertainty is proven, the financial statements of the business can gain an assessment that its contents have significant potential to mislead users.  However, if material uncertainty is proven but going concern is assumed, financial statements must show events/ conditions that can increase significant doubt to going concern validity or simply directly state doubt to such validity.  Regarding material uncertainty conclusions, the auditor can apply unqualified position where financial statements reflect them and sketch the important parts of the report that signal going concern issues.  If they are not reflected, qualified or adverse position can explicitly explain material uncertainty.        Financial Position of the Business (i.e. IOL)             Average collection period is increasing since 2006.  As a general rule, lower average collection period is optimal because the business need not wait long to receive cash payments from their credit sales.  The performance of the business for this ratio indicates that it has difficult time in converting account receivables into more liquid assets (i.e. cash).  It can also mean that the business is more exposed in acquiring bad debts and defaults.  Cash conversion cycle is adversely affected because of the pressure imposed by longer collection periods.  The time of outlaying cash and cash recovery is widened which signifies more time capital is tied-up to business processes (i.e. conversion of inputs to outputs).  Due to this, the business is required to source out additional capital to maintain daily operations because most of its current capital is tied-up.  This additional requirement is necessary to pay production expenditures, wages and overheads.  Failure to address these costs can lead to interruption and stoppage of work or even disposal of value-creating assets that suggest bigger problems.  High average collection period is aggravated/ mitigated by low/ high inventory turnover and high/ low average payment period.               Current ratio is decreasing since 2006.  From stronger liquidity in 2005, the business dropped to a ratio less than 1 suggesting that it cannot pay its obligations as they fall due.  These obligations are accounted to short-term liabilities such as debt and other payables while short-term assets that are used to pay them include cash, inventory and receivables.  With reduced current ratio, the business has more obligations than potential payments and signals the need to source financing to various channels.  The risk, however, is that the strain of overdue obligation which can force the business to enter credit agreements and other contracts that are obviously detrimental compared to options available if the strain is not too urgent or if it only has assets to pay them.  Lower current ratio is related to higher average collection period which implicated likelihood of bad debts.  With a more conservative analysis (i.e. getting the quick ratio), the exclusion of inventories, pre-paid expenses, and as proved, account receivables, can only aggravate the liquidity of the business.               Debt-equity ratio is rising since 2006.  This indicates that the business is becoming more dependent on interest-bearing debt financing than less risky internal or equity financing.  As a result, its earnings are also more volatile due to reductions by payment of the interest.  It can also put the business into greater agreement risks mentioned in current ratio such as collateral of value-creating assets and disposal when debts are long overdue.  In the case of dissolution, shareholders are in greater risks to recover investments because outside creditors are preferred in distribution of assets and may even demand the former to contribute to the losses.  In 2007, the business is sourcing debt that is two-times larger than proceeds from equity which can trigger the preceding consequences.  However, there is a need to investigate where the debt proceeds are invested.  This is important because debt-financed projects with significantly high returns compared to debt interest (i.e. debt coverage) can alternatively increase earnings.                Gross profit ratio is decreasing since 2006.  This can either mean that the business is generating fewer revenues or experiencing price increases on cost of goods sold than previous periods.  As a result, it decreases its opportunity to create savings for engagements in the future and payment of unexpected expenses.  Problems are likely rooted in ineffective production and marketing of products, inefficient relationship with suppliers and expensive logistics design.  On the other hand, the negative figures pertaining to profit after tax ratio show that the business has no earnings (i.e. at loss) from 2005 to 2007.  It is a difficult time for the business which various aggravations such as low collection period, current ratio and high debt-equity ratio.  This can also indicates that the projects the business is entering and financing are not contributing to profitability.  However, the ratio on profit after tax can be applied with tax holidays or incentives that can transform profit to positive figures.               Net asset per share is declining since 2006.  Assuming that shares outstanding are constant, this indicates that the assets of the business have lower values and new value-creating assets are yet to be included in its operations.  As a result, the interest and wealth of shareholders is not protected leading to their divestment.  The preceding possibility can aggravate the problem of the business on sourcing out safer funds to pay current obligations, prevent stoppage/ litigation and finally to report its financial statements as a going concern.  However, there is a need to investigate whether this ratio includes intangible assets which is eminent to the innovative products that the business is creating and planning to distribute.    Factors Evidencing Going Concern Problems             For the first product that the business launched into the market, it gained success although only temporary as shown by decline and moderate attention of the market for succeeding products.  With the promises of the new program developed over a three-year period, history of profitability is difficult to attach to its operations.  The market for Internet-based computer programs is exposed to numerous companies and similar products whose purchase decisions are unpredictable.  For example, computer programs bought in the internet through online payment is a transaction viewed risky by the market while bogus offers are inevitable.  As Internet business is global, predicting market response and demands is very difficult due to various culture, level of technology and economic status.  With cheap prices tagged on the product, the business is unsure that its investments for research and profit targets will be met.               Further, its access to financial resources is very limited especially with its adverse financial ratio.  It cannot rely on its debtors/ accounts receivables as it accumulated decreasing collection period, on its short-term creditors due to decreasing current ratio, on its long-term creditors due to increasing debt-equity ratio, on its retained earnings due to decreasing profit ratios and on its shareholders due to its decreasing assets per share.  The raising of funds to finalize and launch the new product has been possible because of sourcing from personal savings or borrowing with relatives as the company started with financing on this method.  Although this can evidence that the business has access to financial sources, additional working is required to validate the extent and depth of this kind of informal financing.  The absence of sufficient evidence of profitable history and access to financial resources is a sign that probable going concern problem is demanding for proof.               The launching of the new product is regarded as the breakthrough of the business in reversing previous trading problems with other lines of products.  However, this claim is inappropriate in judging events/ conditions to arrive at going concern assumption.  It is not based on facts at the time of judgment because past trading problems are undermined.  The success of the new product is related to the success of previous launchings.  Further, forecasting that the new product will be completed and launched in six months time triggered uncertain outcome as it is judged further in the future.  Three years that the product is under development and there is no evidence that its development is supported by a time-line.  The fast-paced and ever-changing level of Internet technology likely deemed innovativeness of the new product designed three years ago obsolete.  Its main features and forecasted reaction of the market are highly questionable with the level of technology today.               Forecasting the future performance of the new product is also exposed to several risks.  Although there is evidence that the business is issuing shares, the declining performance of post-first product launched and cheap price supports the idea that it is under the category of small and medium enterprises.  The environment is very competitive where big program developers can easily be pirated employees, sued due to infringement of trademark, and bought in case of financial difficulties.  It is also operating on a research extensive industry where earnings are not certain until a new product is not only successful in production but more importantly appealing to market preference.  There is also crucial emphasis on protection of proprietary and speed to market where the new product forecasted to be launched after six months can leak into the Internet or produced by other companies.  The nature and condition of the business and the industry are very unpredictable and bounded by changes in regulation (e.g. applying for patents).                   Solution to the Going Concern Problems             The business can present supporting details that can mitigate the implication of unhealthy financial statements.  For example, lower collection period can be trade-off by higher inventory turnover or lower payment period.  Lower current ratio can indicate high inventory turnover and shortage in cash assets is triggered by increase in bad debts due to lower collection period.  In effect, favorable data about inventory and payment terms of the business can mitigate going concern problem.  Further, high debt-equity ratio can reduce its inherent risk if loan documents can prove that most of the debts of the business are not interest-bearing.  This can relax the requirement for interest coverage and minimize the vitality of the success of the new product in its launching.  The negative profit after tax ratio can be relieved by government correspondence reflecting tax holidays that the business can use in the future.  Data about the current level of shares outstanding can verify the cause why net asset per share is reduced.  If it is caused by increases in issues, then the claim of the business that its assets are undervalued can gain ground.               Product features of the new product and its impact to purchasing decisions of users can be used.  It can also compare how the new product is similar to the first product to claim the former turnaround impact to sales.  Without this evidence, the forecasts that the new product is a breakthrough can only be assessed as having material uncertainty.  Information about target market, previous sales data, contribution of each specific segment, and other marketing reports is necessary.  The new product must also prove to assure that its features are compatible with the current needs of the market and the current level of technology.  Certifications that the product already has patent to prevent piracy and value-decreasing actions from competitors.  In simple terms, the business must provide information that the new product is supported by valuable, inimitable and non-substitutable features.               The business can also suggest plans on how to assure that the 6-month completion and launching of the new product is realistic.  It can present project plans, milestones, funding allocation and actions in case of project failure.  If the new product is proved to be valuable and has potential like the first product, the launching date is crucial to realize the cash flows and provide insight on how the business can protect its adverse financial ratios to becoming indication of bankruptcy.  Delay in project completion can reduced its value creation as the general rule states that the money hold today is more valuable than the money that will be hold tomorrow (i.e. time value of money).  Alternatively, the business can offer other plans to improve the current features of the product, increase investments in marketing, boosting relationships with business partners and the like.  This engagement must be supported by annual budgets, monthly performance reports, correspondence with suppliers and distributors and even performance appraisal of employees.          Bibliography Books   Electronic Sources

Analytical procedures and going concern at the planning stage

Applicable Auditing Standards (based on HK Standard on Auditing 570) Going concern is a fundamental principle in preparing ...

Contemporary Issues in Globalisation

Contemporary Issues in Globalisation: Do transnational corporations pose a threat to the powers of domestically elected governments?     Introduction Both democracy and the market economy have proliferated globally since the collapse of communism, and revolutionary developments in communication and information technology have helped trigger an increasing interdependence between countries at an unprecedented pace. Further, the end of the Cold War signaled the displacement of ideological obstinacy in favor of a heated pursuit towards economic advancement and competition for resources and technology. Economic statecraft, whereby nations use trade, loans, grants and investment to influence the action of other states, is now becoming more important.   Technological advancements and innovations have been dictating the turn of the present modern civilisation. The current setting upholds an environment that answers to the global needs of the world. Collectivism in the concept of global community has been the popular ideal for the last couple of years wherein development and progress of nations are becoming more and more dependent to each other. Internationalisation of industries is now the current trend amongst business organisations in its aim to increase market share and accumulate larger profit. However, this is not always the case especially among nations with poor living quality which at present cannot go hand in hand with the more economically progressive and developed nations.   This paper aims to present discussions regarding the contemporary issues of globalisation focusing on the impact of the involvement of transnational corporations in local government sovereignty. In this light, the characteristics and political as well as economic impacts of globalisation were discussed along with the relationship of the World Bank and the World Trade Organisation with the developing countries and their degree of involvement in local governance and decision-making as influential channels of transnational corporations towards internationalisation of businesses.     Globalisation Globalisation of both the economy and the society has confronted the world over the past decade (2000;1990). A shift of focus and interest from the local market to the international setting has demanded innovation not just in corporate leadership as new information, forms of communication, and technology. These are being offered to be utilised in encouraging and reinforcing interaction among individuals and the operating enterprise through international trade ( 1990). (2003) stated that globalisation has invaded our consciousness in many forms. Basically, it is an inclusive term for the emergence of a global society in which economic, political, environmental, and cultural events in one part of the world quickly come to have significance for people in other parts of the world (2004) and is often branded as the triumph of capitalism (2000).   The process of globalisation is commonly recognised to be characteristic of contemporary international developments. According to (1991) contemporary processes of globalisation have several dimensions: technological, cultural, religious, economic and political. First, it suggests that political, economic and social activity is becoming worldwide in scope. Secondly, it suggests that there has been an intensification of levels of interaction and interconnectedness among the states and societies ( 1991). Among these relations are those created by the progressive emergence of a global economy, the expansion of transnational links which generate new forms of collective decision-making and the development of intergovernmental and quasi-supranational institutions, among others (1990).   Globalisation represents the shift of the main venue of capital accumulation from the national to the supranational or global level ( 2000). In globalisation, people around the globe are more connected to each other than ever before. Information and money flow more quickly than ever. Goods and services produced in one part of the world are increasingly available in all parts of the world. International travel is more frequent. International communication is commonplace (2004). However, this phenomenon has both positive and negative effects. Included in the negative aspects are the rapid spread of diseases, illicit drugs, crime, terrorism, and uncontrolled migration. On the other hand, globalisation’s benefits are a sharing of basic knowledge, technology, investments, resources, and ethical values (2004).   Globalisation, has acquired considerable emotive force. For some, globalisation is a process that is beneficial, i.e. a key to the future world economic development and also inevitable and irreversible.  Others regard it with hospitality even fear, believing that it increases inequality within and between nations or organisations, threatens employment and living standards and thwarts social progress.      Political and Economic Impacts of Globalisation Economic globalisation is a historical process, the result of human innovation and technological progress. It refers to the increasing integration of economies around the world, particularly through trade and financial flows. The term sometimes also refers to the movement of people (labor) and knowledge (technology) across international borders. There are also broader cultural, political and environmental dimensions of globalisation. The term has come into common usage since the 1980s, reflecting technological advances that have made it easier and quicker to complete international transactions—both trade and financial flows. It refers to an extension beyond national borders of the same market forces that have operated for centuries at all levels of human economic activity—village markets, urban industries, or financial centers (2002).   Fewer trade barriers and unprecedented technological advances have accelerated the pace of globalisation through the efficient marketing and advertising strategies that a number of international business organisations invest in by utilising the services provided by the Worldwide Web ( 2001). Electronic data communication (EDC) facilitates the exchange of data at tremendous speeds; it sorts and integrates data with other information available to the recipients (businesses, banks, capital markets) from other sources. Individual countries and trading and currency blocs alike view the fast-moving e-business sector as having a direct impact on the countries’ and blocs’ competitiveness in the global market (1999). The tremendous growth of technological advancement has become the driving force of contemporary industries.    Globalisation has become identified with a number of trends, most of which have developed since World War II. These include greater international movement of commodities, money, information, and people; and the development of technology, organisations, legal systems, and infrastructures to allow this movement which includes ( 2004; 2002):   ·         An increase in international trade at a faster rate than the growth in the world economy ·         Increase in international flow of capital including foreign direct investment ·         Greater transborder data flow, using such technologies such as the Internet, Communication satellites and telephones ·         Greater international cultural exchange, for example through the export of Hollywood and Bollywood movies ·         Reduction in global cultural diversity through assimilation, hybridisation, Westernisation, Americanisation or Sinosisation of cultures ·         Erosion of national sovereignty and national borders through international agreements leading to organisations like the WTO ·         Greater international travel and tourism ·         Greater immigration, including illegal immigration ·         Development of global telecommunications infrastructure ·         Development of a global financial systems ·         Increase in the share of the world economy controlled by multinational corporations ·         Increased role of international organisations such as WTO, WIPO, IMF that deal with international transactions ·         An increase in the number of standards applied globally; e.g. copyright laws     The World Bank (WB) and the World Trade Organisation (WTO)             The World Bank. In 1944, right after the World War II, 730 policy-makers from 45 different countries participated in the economic conference held in Mount Washington Hotel in Bretton Woods, New Hampshire in order to put order the international finance system and ensure that a liberal capitalist world economy through multilateral institutions that will oversee and administer international free capital movement. As a result, the World Bank (WB) and the International Monetary Fund (IMF) was founded as autonomous agencies of the United Nations (UN) ( 1990). The International bank for reconstruction and Development (World Bank) primarily offers post-war development loans to finance infrastructure projects at the same time promotes private foreign investments through guarantees to investments initiated by private sectors.   The WB was repeatedly relied upon by impoverished governments around the world as a contributor of development finance as the key institution which the channels economic support and resources of developed countries to poor nations (1999). It provides long term loans, grants, and technical assistance, to help developing countries implement their poverty reduction strategies. These financial provisions are usually utilised for health and education reforms, environmental and infrastructure projects, including dams, roads, and national parks. In general, WB helps governments of developing countries to fight poverty and to improve the living standards of the people.   The World Trade Organisation. The WTO’s institutional directive is obviously indicated in its instituting charter, the 1994 Agreement Establishing the World Trade Organisation (WTO Agreement). The introduction of this global agreement highlights that the aims of the WTO are that trade and economic connections among WTO Members are supposed to be carried out with an outlook to elevating the standards of living, guaranteeing full employment and a great and progressively developing degree of real income and efficient demand, and increasing the construction of and trade in goods and services, at the same time as permitting for the most favorable utilisation of the world’s resources in line with the purpose of sustainable development, looking for both to look after and conserve the environment and to improve the means for doing so in a approach in agreement with their individual needs and concerns at diverse levels of economic growth” (WTO Agreement, 1st preambular clause).   Briefly, the principal purpose of the WTO is to double as the instrument through which global trade can turn out to be the means for sustaining the economic growth of Members, specifically the developing and least-developed Members. The economic growth of developing nations, and the employment of trade to attain such growth, has been a very old intention of the multilateral trading system and of the global governance construction of which the WTO is an element (The 2001 WTO Doha Ministerial Declaration, paras. 2 and 3). This intention is ultimately entrenched in the entitlement of individuals to take pleasure in higher standards of living, complete employment, and states of economic and social growth and progress” (United Nations Charter, art. 55(a)) in agreement with the right to sustainable development under international law (The 2000 United Nations General Assembly Millennium Declaration, para. 11).   The WTO is the sole global association addressing the international decrees of trade involving countries. Its major purpose is to guarantee that trade runs as efficiently, predictably, and liberally as probable. The end result is reassurance. Consumers and producers are aware that they can take pleasure in safe supplies and superior alternative of the completed products, components, raw materials and services that they utilise. Producers and exporters are aware that foreign markets will continue to be open to them. The consequence is similarly a more affluent, nonviolent and responsible economic world.     Developing Countries, the World Bank (WB) and the World Trade Organisation Developing countries are most of the time confronted with issues on economic and sociological instability. But aside from the economic and social problems that beset these countries, political constraints play a primary role and dictate most significantly the pace of growth and development among Third World countries. Self-vested interest among both the public officials as well as the private individuals in the form of unethical criminal collaboration that directly affects the welfare and social condition of the general public constitutes the serious hindrance to the competitiveness of the domestic state.  The WB and the IMF have always collaborating in initiating joint activities to alleviate the poor living conditions of the people living below poverty level among developing countries. Aside from projects and funding as well as loan allowances and assistance provided by these organisations, the WB and the IMF likewise offer technical assistance and surveillance to Third World countries.             In the 1990’s the WB and the IMF launched Heavily Indebted Poor Countries (HIPC) initiative to decrease the burden of developing countries concerning external debts to international financing institutions, organisations and developed countries. The guidelines and policies enacted by both organisations have been purposely conceptualised to link national policies, donor support, and development outcomes needed to reduce poverty in low-income countries through concessional lending and loan assistances of both organisations. These developmental projects and financial loans were monitored in order to determine and assess the result of the aid initiated by both organisations. Other evaluation procedures include the review of economic policies among developing countries and recommending corrective reforms to support the progressive objectives of WB and IMF. Aside from developmental activities and projects, the WB and the IMF are also working together to make their member countries financial sectors well-regulated by identifying the strengths and risks of a particular country’s financial system and economic policies ().   Decisions in the WTO are characteristically acquired by consensus among every member nations and they are approved by members' legislative bodies. Trade hostility is directed into the WTO's dispute settlement procedure where the center is on understanding agreements and pledges, and how to guarantee that nations’ trade policies stick to them. By lessening the trade obstructions, the WTO's scheme similarly collapses other barricades involving peoples and nations. The World Trade Organisation (WTO) Dispute Settlement Understanding (DSU) evolved out of the ineffective means used under the General Agreement on Tariffs and Trade (GATT) for settling disagreements among members.  Under the GATT, procedures for settling disputes were ineffective and time consuming since a single nation, including the nation whose actions was the subject of complaint could effectively block or delay every stage of the dispute resolution process (Bello and Holmer, 1994).  It remains to be seen whether countries will comply with the new WTO dispute settlement mechanism, but thus far the process has met with relative success.   The WTO's strengthened dispute resolution mechanism was designed to have the authority to sort out this "fine line between national prerogatives and unacceptable trade restrictions" ( 1996).  Several of the supplemental agreements to the GATT created during the Uruguay Round, such as the SPS Agreement, sought to specify the conditions under which national regulations were permissible even if they had the effect of restraining trade.  The United States, perhaps more than any other country, has found itself on both sides of this delicate balance.  In 1988, it was the United States who pushed for strengthening the Dispute Settlement provisions of the GATT during the Uruguay Round, in part because Congress was not convinced that, "the GATT, as it stood, could offer the United States an equitable balance of advantage" ( 1996).      Degree of State Involvement Management and Regulation State sovereignty is classically defined as being characterised with (1) the state’s supremacy over domestic matters, (2) state’s exclusive right to regulate its territory and its citizens, and (3) state’s right to guide its internal and external affairs without foreign interference (1996). Moreover, sovereignty “is the power that… enables entire body politic to exercise some control over its destiny” (1993). Tsai (2000) emphasised further the concept of sovereignty by contextualising it under the aspects of defensive and affirmative distinctions. Accordingly, “defensive sovereignty is the state’s inalienable right to avoid being adversely affected by decisions and events happening outside its jurisdiction while affirmative sovereignty is the state’s right to determine its own policies and developmental course” (2000). The definitions address common theoretical notion of the absolute nature of state sovereignty.   Along with the encompassing responsibilities and influence of the WB and the WTO are the issues on preservation of state sovereignty among their member countries.  The international laws that serve as guidelines and control of the activities of the WB and the WTO have been widely criticised for restricting and controlling individual state power and economic governance among developing countries that receive financial aids from the mentioned international financing institutions. Political analysts have been citing cases of state sovereignty infringement by the WB and the WTO particularly when economic provisions and conditions of these organisations are in conflict of interest with a developing country’s national economic policy. Since developing countries are in debt with the financial aids and loans, complete and full enactment as well as observation of local policies is undermined in order to submit to the terms presented by the WB and the WTO.   The relationships between the WB and the developing countries which they assist financially are governed with terms of conditionality or “the linking of the disbursement of a loan to understandings concerning the economic policy which the government of the borrower country intends to pursue” (1992). Under this conditional finance relationship, the WB have the right to independently examine a debtor country’s need of financial assistance and the prerogative to require adoption of some recommended economic policies amendments of the state before issuing the requested development aid (1998). WB decides the credit limits provided to a country’s domestic bank, decrease in the fiscal deficit, exchange rate depreciation as well as trade liberalisation policies (1987). Most of the time, the conditionality policies of the WB exceeds the macroeconomic recommendations for the country and through time, such practice has evolved into detailed economic reforms for the debtor which affects domestic governance of the assisted country resulting governance issues (1991).      At the core of the organisation recognised as the multilateral trading system are the WTO's agreements, discussed and sanctioned by a great majority of the world's trading countries, and approved in their legislative bodies. These agreements are the officially authorised essentials for global commerce. Fundamentally, they are contracts, promising member countries vital trade rights. They similarly compel governments to maintain their trade policies within established restrictions to everyone's advantage. The agreements were discussed and ratified by governments, but their principle is to assist producers of goods and services, exporters, and importers carry out their business. The objective is to progress the wellbeing and interests of the citizens of the member countries.   A major and foremost disadvantage for developing countries in acceding to the WTO is their capacity to be heard in the decision making of the organisation. Issues and proposals for restructurings in the WTO’s decision-making processes increased in eminence first following the fall down of the 1999 Seattle Ministerial Conference, on account of which Members undertook to have debates associated to internal transparency and involvement. The last foremost formal debate among Members on these concerns transpired for the duration of the July 2000 assembly of the General Council. Throughout that gathering, the then-General Council Chairman, Ambassador Kare Bryn of Norway, required to recognise, anchored on his discussions with Members, what he sensed were the typical of the debates (September 2000) with regards to internal accountability and involvement towards acquiring a consensus (February 2001).   Succeeding WTO procedure-associated documents, like the TNC Negotiating Principles and Practices (February 2002) and the draft manuscript of the Procedures for the Appointment of Directors-General have indicated to Ambassador Bryn’s declarations as pinpointing of “best practices” in the context of internal accountability and the involvement of Members in decision-making in the WTO (January 2003). Nonetheless, a number of Members have carried on expressing reluctance, exemptions, prerequisites or commentaries relating to Ambassador Bryn’s declaration (July 2002). This successfully denotes that there is no consensus, particularly from developing nations, on the points acknowledged by Ambassador Bryn as “best practices” for WTO decision-making procedures with regard to internal accountability and the involvement of Members.     Conclusion and Recommendations Since globalization represents the shift of the main venue of capital accumulation from the national to the supranational or global level (2000) and due to the adverse effects of such phenomenon, international businesses plan to venture into new horizons catering to the needs of the new markets and countries. Over the past half century, the developing countries have grappled with their relationship to the world trading system, the role of their trade policies in their economic growth, and the influence of the world economy on their prospects for growth ( 1995). The eventual recognition of the developing states and their contribution to the world economy enable firms to expand and apply their operations to such countries.   Unlike local and national organizations, global alliances are tasked with bigger responsibilities which made them highly accountable to every decision and policy they make. The vast influence and significant impact of the decisions and laws that result from intensive deliberations of member representatives of the World Bank and the World Trade Organization are normally faced with cultural challenges that threaten the stability and durability of the alliance which subsequently may lead to difficult realization of the goals of the organization. The conflicts which arise from differing cultural interpretation should be in the realm of constant evaluation and adjustment. Resolving immediately the differences that hinder the effective and efficient function of global alliances should be critically reviewed in order to promote development and growth of every member.

Contemporary Issues in Globalisation

Contemporary Issues in Globalisation: Do transnational corporations pose a threat to the powers of domestically elected governments? ...

HOTEL REFURBISHMENT

HOTEL REFURBISHMENT     The hotel construction and refurbishment industry consists of private companies and public authorities, with many individuals and organizations involved, from the manufacture of necessary components to the assembly and construction process. The hotel refurbishment project requires a registered architect and civil engineer under the direction of a project manager to execute the design and to make sure that it complies with the regulations governing building construction, at the same time conforming to the requirements of the owner. The architects or engineers convert the requirements into a set of drawings and written specifications that are usually sent to contractors for bidding. The successful bidding contractor will be the one responsible for the required manpower such as the plumber, painter, electrician, carpenter and other manpower required for the construction. Contractors carry out the work under the supervision of an architect and engineer who act as agents of the owner. Current Statutory Land Matters In the refurbishment of the 80 hotel bedrooms and 5 corridors, there are certain laws and various regulations and standards that must be taken into account and followed. These basic rules are the generally accepted technical rules for construction and refurbishment. These laws and regulations are designed to ensure safety during and after the refurbishment of the 80 hotel bedrooms and 5 corridors and to protect the building against damage and defects. The 80 hotel bedrooms and 5 corridors must be refurbished  in such a way that the public who will go to the building as well as the structures within the vicinity of the building will be safe. Regulations are also enforced to guarantee the owner of the hotel that the building will be profitable for him in the long run.             Fire protection and security are the basic concerns of many refurbishment regulations. The 80 hotel bedrooms and 5 corridors should be designed and refurbished in a manner that all the people inside can leave the building without the risk of injury and at the shortest possible time once a fire breaks. Generally, it is a standard for corridors and hotel bedrooms to be refurbished with escape routes and fire escapes, fire compartments and with the choice of material. Operational security concerns the safety of elevators and escalators, stairs, railings and parapets and the installation of emergency lightings. Regulations for operational security also include the alarm system for carbon dioxide in underground parking lots; and the non-slip nature of floor in traffic areas, sanitary rooms and kitchens. Refurbishment Control             Stability and construction physics are also major concerns in standards and regulations. Stability of the refurbishment project depends on how the hotel is designed and constructed. The designs and construction methods are govern by these regulations; plans and designs which includes stability calculations and material properties and specifications are checked by authorities and should passed their standards. Demonstrations of the internal structural strength of the construction and safe transfer of loads to the subsoil should also be practiced to determine the allowable maximum load that the building can withstand. Planning Issues             Construction planning of the hotel refurbishment project involves the weighing of the project costs and determining the most reliable options, making sure that the project is feasible at the most cost-effective time. Refurbishment planning is challenging because of the changes that must be handled as the construction proceeds. Financing             The cost of refurbishment of the 80 hotel bedrooms and 5 corridors ranges to roughly a millions dollars. It is very rare that an owner can afford the costs without outside assistance such as banks and other financial institutions. Sources of capital to finance the refurbishment of the 80 hotel bedrooms and 5 corridors depend on the type of low-rise. Financing of refurbishment depends on what type of business is going to be established. Basic sources of capital can be through equity finance, debt finance or internally generated funds. Cost Estimation             Cost of refurbishment of the 80 hotel bedrooms and 5 corridors depends on the nature, size, location and management organization of the project. Project managers and designers such as the architect and engineer should realize that the costs are only estimated values and may vary depending on the changes, schedule adjustments and site conditions.             Capital cost for the hotel refurbishment project includes: ·         land acquisition, including assembly, holding and improvement ·         planning and feasibility studies ·         architectural and engineering design ·         construction, including materials, equipment and labor ·         field supervision of construction ·         construction financing ·         insurance and taxes during construction ·         inspection and testing ·         owner’s general office overhead Engineers and contractors used different types of cost estimation and should be weighed and compared to determine the most cost-effective estimate. WORKS PROGRAMME Submission /Approval Period There are several factors to consider evaluating and estimating the refurbishment period of the 80 hotel bedrooms and 5 corridors. The scope and the method of refurbishment used in the project decide how long it will take to finish the project. The scope of a hotel requires a short time compared to high-rise structure. A typical hotel bedroom and corridor can take 3- 6 months refurbishment time which may vary depending on the location, construction methods and procurement processes involved.           Timeframe   Week                         1   2 3 4 5 6 7 8 9 10 11 12   Submission of Papers                           Excavation                           Substructure                           Superstructure                           Exterior Walls                           Weatherproofing                           Interior Finishes                           Mechanical                           Electrical                           Exterior Work                           Alteration                               Refurbishment Guidelines   The hotel bedrooms and corridors are the external façade of a building with large area of glazed portion that carries no superimposed load except wind load. Requirements for Hotel Bedrooms and Corridors: ·         Strength and Stability. The hotel bedrooms and corridors must be able to resist wind forces and transmitting them reliably to the building structure. They should be able to take up positive and negative wind pressure and must be able to avoid damage due to deflection or distortion under expected building movements. Members of the hotel bedrooms and corridor frames must be strong and durable which should be made of strong and corrosion-resisting materials. ·         Weather resistance. Hotel bedrooms and corridors should have the ability to keep out water and wind by using resistant infilling or paneling materials such as glass, metal, plastic sheet, or stone slab. They should have appropriately designed jointing or sealing provision. ·         Thermal insulation and condensation. Hotel bedrooms and corridors usually have air conditioning for cooling thus need arches that can minimize the loss. Double-glazing of appropriate material and design properly insulated with thermal effective materials under the right design. ·         Sound insulation. Many hotels are situated within congested downtown area and near a super highway, having a background noise of more than 70dB. Arch systems should be designed to reduce the noise entering the building. ·         Fire resistance. Hotel bedrooms and corridors should be fire resistant and by the use of fire resisting construction in the non-glazing portion of the arch, and sealing all voids and gaps between such compartments by fire resisting materials (, 2000)   The structural engineer must consider many different factors before selecting the final structural system of the hotel bedroom and corridor refurbishment project. Basic refurbishment properties such as height, shape, and usage as well as local economic conditions that affect the materials and labor costs; construction schedule, design loads both vertical and lateral; building behavior and occupant behavior; foundation considerations and coordination with mechanical systems (, 1986) are all factors that influence the structural system. Generally, structural systems for hotel bedrooms and corridors are flexible and limitations only come from the material used in the construction. Typical materials used for structural systems of arches are steel and concrete.             Steel is a common material used for the refurbishment of bedrooms and corridors used in high-rise hotels and are popular due to its high strength to weight ration and variety of members can be fabricated from it. Steels can be wide flange sections, open web joists, tube steel, angles, plates and channel sections each one has its uses depending on its characteristics.             Wide flange sections are used for their high strength and easy connection while open web joists are used for their economic value because of their low weight. Tube steel, also known as Hallow structural section, is used for its high resistance to torsion and is ideal for members that span long, unbraced distances. Angels are most common for beam-to-beam and beam-to-columns connections as well as to form truss structures. Plates are also commonly used for beam-to-beam and beam-to-column connections while channel sections are easy to bend thus commonly use in curved areas (, 1994).   Steel frames are fabricated in pieces and then shipped to the building site. The method used is determined by the forces that the connection of pieces or sections must transfer. Beam to column connections usually consists of plates or angels that are bolted or welded to the members. If the members are wide flange sections, the angles or plates are connected directly to the web or flange of the section. If the members are tube steel section, a slot is cut in the sides of the section and a plate is inserted through the tube. If a pile system is being used, the piles are either driven into the ground using a pile driver, or they are concrete that is poured into a drilled hole.  The pile cap is then poured over the piles (, 1994).             Cast in place concrete is concrete that is poured on the building site and cures in place. The steel reinforcing aids the concrete in resisting tensile stresses on the arch. The amount of reinforcing and its configuration contributes to the strength of the concrete and the strength of the system as whole. Another method to reinforce concrete is with the use of cables that are placed inside the concrete when it is poured and then are tensioned as the concrete cures. This method is called post-tensioning. The tension cables form a steel net that lends strength to the concrete and act to compress the concrete. This helps tension forces created by loading conditions and increases the bearing capacity of the concrete (, 2005). On the other hand, pre-cast concrete is poured into moulds and allowed to cure before it is transported to the building site. The reinforcing is placed in the moulds before the concrete is poured.             REFERENCES

HOTEL REFURBISHMENT

HOTEL REFURBISHMENT The hotel construction and refurbishment industry consists of private companies and public authorities, with...