The decoy effect

See how our decision-making changes when a decoy is thrown into the mix.

[Infographic] Tính khoa học trong việc định giá sản phẩm

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Giá cả là một trong những yếu tố quyết định sự sống còn của một mặt hàng khi được đưa ra thị trường, việc định giá không chỉ dừng lại ở mức xác định đúng giá trị của mặt hàng, để đảm bảo cho nhà sản xuất có lãi mà vẫn bán được hàng mà còn là định giá như thế nào để lôi kéo người tiêu dùng mua mặt hàng đó.

Tâm lý và hành vi của người tiêu dùng là điều mà những doanh nghiệp cần phải nắm bắt để đưa ra những chiến lược giá cả hợp lý. Nhiều cuộc khảo sát đã được thực hiện để tìm hiểu về vấn đề này và tìm ra không ít những cách thức giúp các doanh nghiệp đưa ra các mức giá hấp dẫn người tiêu dùng.

Infographic dưới đây trình bày kết quả của các cuộc khảo sát tiêu dùng cũng như những gợi ý trong việc định giá một cách khoa học.

Five ways Apple & Microsoft save taxes

30 May, 2013
Source



Some of the largest US multinationals resort to ingenious—though legal—practices to pay virtually no tax on their non-US profits, muchto the growing chagrin of governments and civil society.

One of them has a subsidiary in Ireland that does not pay income tax to any government in the world. Another has negotiated with the government of Puerto Rico to pay tax of just 2% on its profits.

ET outlines the five methods they deploy to avoid taxes:

Use transfer pricing to reduce non-US profits

Companies try to reduce tax rate by using transfer pricing—the rules that govern inter-company transactions within the same ownership.

Take Microsoft, whose operating systems reside in computers across the world. In 2011, according to the US senate investigations subcommittee, the company incurred 85% of its $9.1 bn R&D expenditure in the US. Yet, for tax purposes, Microsoft showed only 35% of this as contributed by Microsoft US.

Microsoft apportioned it to subsidiaries around the world in proportion to the revenues earned by them—termed a 'cost-sharing arrangement'. Thus, if its Irish arm accounted for 30% of its global revenues, 30% of Microsoft's R&D spend was expensed by this entity, enabling it to reduce its net profit further.

Apple has a similar structure, where economic rights of intellectual property for non-US sales are transferred to an Irish subsidiary. This Irish arm earned pre-tax profits of $22 bn in 2011, but Apple paid tax of just $10 mn on that income— an effective tax rate of 0.05%.


Use transfer pricing to reduce US profits too

Companies have also been transferring—and reducing—their US profits and tax liability. For example, Microsoft has a Puerto Rican subsidiary, Microsoft Operations Puerto Rico (MOPR), which holds the rights to sell to US customers.

'The US entities retain 53% of the gross profits and send the remaining 47% to MOPR in Puerto Rico, where it is taxed at a pre-negotiated rate of around 2%', says an earlier US Senate's investigation subcommittee.

By this method, the report adds, Microsoft saved $4.5 billion in taxes during three years.

Form an Irish company, but control it from the US

The tax laws of most countries, including the US, apply to companies on the basis of where they are registered. Thus, if a company is registered in the US, it is taxed in the US.

Ireland is different, in that it uses 'control' as the basis of taxation. Thus, a company that is registered in Ireland but controlled from, say, the US will not be liable to be taxed.

Multinationals exploit this loophole extensively. For example, an Apple subsidiary, Apple Operations International, earned $30 billion in net profit between 2009 and 2012. But the firm never declared tax residence
and paid no tax. Ireland's low corporate income tax rate of 12.5% is its main attraction.




In Pic: Apple Operations International, a subsidiary of Apple Inc, in the south of Ireland.

Even better, form two Irish companies

By setting up more than one subsidiary in Ireland, and structuring transactions between them, companies can lower even the 12.5% rate. The first Irish subsidiary, say A, will buy the intellectual property rights (IPR) from its US parent by participating in a cost-sharing agreement. This company would be controlled and managed outside Ireland, usually in the US, as in the case of Apple, or in a tax haven like Bermuda.

Since, it's controlled outside Ireland, it need not pay tax in Ireland. In the second step, A sub-licences the IPR to B, the second Irish subsidiary. Usually, B would be selling the company's product and services in non-US locations. So, for B, income would be in the form of sales and the expense would be payment of licensing fee to A, enabling it to lower its tax outgo further. This method is referred to as 'double Irish'.

A US senate panel report says Microsoft saved $4.5 bn in taxes between 2009 and 2011 by offshoring profits. Similarly, Apple has three Irish entities.

Go Dutch to save withholding tax

The Dutch tax system does not tax dividends and capital gains received from foreign subsidiaries. At the same time, it has zero withholding taxes on outgoing interest and royalties. So, both the inward and outward flow of money is not taxed.
In addition, the Netherlands has a multitude of tax treaties that reduces withholding taxes. So, effectively, if the payment goes from India to Netherlands, it will be subject to a lower withholding tax. Likewise from all countries with whom the Netherlands has a tax treaty.

The Dutch company will be placed between the two Irish firms, A Ltd and B Ltd. So, if B Ltd was paying royalties to A Ltd, then it would be liable for Irish withholding tax. But now the payment from B Ltd would be routed first to the Dutch entity, which in turn would transfer almost the entire money received to A Ltd.

This is because Irish tax laws exempt withholding taxes on royalties on payments made to companies in other European Union countries. Since the Dutch company is placed in between two Irish firms, this method is called the 'Dutch sandwich'.

In Pic: Apple Operations International, a subsidiary of Apple Inc, in south of Ireland.

How iPhone Is Made: A Surprising Report On How Much Of Apple's Top Product Is US-Manufactured

Editor's note: This piece was originally published on August 7, 2013 and has been repurposed with an updated infographic below.

By: Alex Hillsberg

Are the last chapters of the iPhone saga unfolding? Not by any stretch of imagination, if you ask the Apple (NASDAQ: AAPL[FREE Stock Trend Analysis]) faithful. Definitely starting, if you ask the Android challengers.

The world and word war between Android and Apple just keeps escalating to ever greater heights, and has been the most engrossing story in business for quite a number of quarters now. Let’s not even talk courtroom battles and intellectual property clashes here. Very few technologies are completely new. Most owe a debt of gratitude to forebears who laid the foundation for all the awesomeness we carry around in our bags and pockets. Let’s just talk about sales.

Clearly, Apple has never been as popular as it was in the 2nd quarter of 2013. In the Q3 earnings call, Apple reported that 31.2 million iPhones were sold in that quarter. This was a quarterly record for Apple. Contrast this with 26 million iPhones sold last year. The company’s flagship product still has firm believers worldwide. That’s not the whole story, however, because incredible as it may seem iPhone 5 sales figures in the last three quarters were lower than what Wall Street expected causing massive fluctuations in the value of Apple’s shares in the stock market.

From the left flank, it looks like the Android charge led by Samsung is gaining ground. In 2012, Apple lost its firm grip on the smartphone market and Android manufacturers were emboldened to match Apple’s products spec for spec and price point for price point. Apple still leads, but not by miles.

In the wake of rumors that Apple is set to abandon its one-size-fits-all design policy and release a budget iPhone and iPhones with larger screens, where does this leave its current standard bearer? Apple has also started “reshoring” production of some of its products (but not iPhones, yet) back to the US. Will this move eventually change the big picture that follows? In this infographic we trace the iPhone 5 supply and manufacturing chain. Did you know that 90 percent of all the rare-earth minerals used on an iPhone 5’s circuitry, screen, speakers, and glass cover are mined in China and Inner Mongolia?

How Apple's Decision To Buy Aluminum From Australia Forced Microsoft To Build Its Own Tablet

JAY YAROW AND SETH FIEGERMAN JUN. 25, 2012, 9:25 AM

Microsoft's decision to build its own tablet was spurred by Apple's iPad.

But not entirely for the reason you might think.

Nick Wingfield at the New York Times reportsthat in 2010, Microsoftexecutives learned, "Apple had bought large quantities of high-quality aluminum from a mine in Australia to create the distinctive cases for the iPad."

This was an eye-opener for Microsoft. Microsoft's partners do not go to the same lengths for their gadgets. HP, Dell, Acer, etc. just use whatever materials are available, and cheap.

The reason they do this is because they make little money from computers thanks to Microsoft and Intel. Microsoft charges a big fee for its Windows license. Intel charges a big fee for its chips. That leaves not so much room for profits.

As a result, PC makers aren't going to the same lengths Apple is going to make awesome hardware.

Microsoft realized that Apple has better hardware and better software in a complete package at a competitive price. (OK, maybe Microsoft wouldn't concede the better software bit, but we think deep in its heart it knows it is at least as good, if not better.)

Rather than wait around for HP to get its act together, Microsoft decided to go for it on its own.

This whole story is illustrative of the bind Microsoft is in. It sucked a lot of profit out of the PC business for years. When it was the only game in town that worked well. But, Apple is now the most valuable company in the world, and Google is disrupting its business model with a virtually free operating system.

Microsoft's old game plan isn't going to work as well in the future. Now it has to figure out how control rare materials from mines in Australia if it's going to compete. It's a weird new world.

Source

GAAP vs IFRS

GAAP (US Generally Accepted Accounting Principles) is the accounting standard used in the US, while IFRS (International Financial Reporting Standards) is the accounting standard used in over 110 countries around the world. GAAP is considered a more “rules based” system of accounting, while IFRS is more “principles based.” The U.S. Securities and Exchange Commission is looking to switch to IFRS by 2015.

What follows is an overview of the differences between the accounting frameworks used by GAAP and IFRS. This is at a broad, framework level; differences in accounting treatments for individual cases may also be added as this gets updated.

Comparison chart</> Embed this chart

	GAAP	IFRS
Stands for	Generally Accepted Accounting Principles	International Financial Reporting Standards
Introduction (from Wikipedia)	Generally accepted accounting principles (GAAP) refer to the standard framework of guidelines for financial accounting used in any given jurisdiction; generally known as accounting standards or standard accounting practice.	International Financial Reporting Standards are designed as a common global language for business affairs so that company accounts are understandable and comparable across international boundaries.
Used in	United States	Over 110 countries, including those in the European Union
Performance elements	Revenue or expenses, assets or liabilities, gains, losses, comprehensive income	Revenue or expenses, assets or liabilities
Required documents in financial statements	Balance sheet, income statement, statement of comprehensive income, changes in equity, cash flow statement, footnotes	Balance sheet, income statement, changes in equity, cash flow statement, footnotes
Inventory Estimates	Last-in, first-out, first-in, first-outor weighted-average cost	First-in, first-out or weighted-average cost
Inventory Reversal	Prohibited	Permitted under certain criteria
Purpose of the framework	US GAAP (or FASB) framework has no provision that expressly requires management to consider the framework in the absence of a standard or interpretation for an issue.	Under IFRS, company management is expressly required to consider the framework if there is no standard or interpretation for an issue.
Objectives of financial statements	In general, broad focus to provide relevant info to a wide range of stakeholders. GAAP provides separate objectives for business and non-business entities.	In general, broad focus to provide relevant info to a wide range of stakeholders. IFRS provides the same set of objectives for business and non-business entities.
Underlying assumptions	The "going concern" assumption is not well-developed in the US GAAP framework.	IFRS gives prominence to underlying assumptions such as accrual and going concern.
Qualitative characteristics	Relevance, reliability, comparability and understandability. GAAP establishes a hierarchy of these characteristics. Relevance and reliability are primary qualities. Comparability is secondary. Understandability is treated as a user-specific quality.	Relevance, reliability, comparability and understandability. The IASB framework (IFRS) states that its decision cannot be based upon specific circumstances of individual users.
Definition of an asset	The US GAAP framework defines an asset as a future economic benefit.	The IFRS framework defines an asset as a resource from which future economic benefit will flow to the company.

Contents: GAAP vs IFRS

1 Objectives of Financial Statements 2 Presentation of Earnings 3 Documents 4 Disclosure 5 Intangibles

6 Accounting for Assets 6.1 Fixed Assets 7 Underlying Assumptions 8 How IFRS impacts US companies 9 References

Objectives of Financial Statements

Both GAAP and IFRS aim to provide relevant information to a wide range of users. However, GAAP provides separate objectives for business entities and non-business entities, while the IFRS only has one objective for all types of entities.

Presentation of Earnings

GAAP emphasizes smooth earning results from year to year, giving investors a view of normalized results. Taxes, for example, are reported based on statutory rates, not on what the company actually paid. They are designed to help investors understand average capital spending and taxation for the company.

Documents

GAAP requires financial statements to include a balance sheet, income statement, statement of comprehensive income, changes in equity, cash flow statement, and footnotes. It is recommended that the balance sheet separates current and noncurrent assets and liabilities, and deferred taxes are included with assets and liabilities. Minority interests are included in liabilities as a separate line item.

IFRS requires financial statements to include a balance sheet, income statement, changes in equity, cash flow statement, and footnotes. The separation of current and noncurrent assets and liabilities is required, and deferred taxes must be shown as a separate line item on the balance sheet. Minority interests are included in equity as a separate line item.

Disclosure

Under GAAP, companies are required to disclose information about their accounting choices and their expenses in footnotes.

Intangibles

In GAAP, acquired intangible assets (like R&D and advertising costs) are recognized at fair value, while in IFRS, they are only recognized if the asset will have a future economic benefit and has a measured reliability.

Accounting for Assets

US GAAP defines an asset as a future economic benefit, while under IFRS, an asset is aresource from which economic benefit is expected to flow.

Fixed Assets

Under US GAAP, fixed assets such as property, plant and equipment are valued using thecost model i.e., the historical value of the asset less any accumulated depreciation. IFRS allows another model - the revaluation model - which is based on fair value on the date of evaluation, less any subsequent accumulated depreciation and impairment losses.

This is a great video comparing the treatment of fixed assets under IFRS and GAAP.

Underlying Assumptions

Under the IASB framework (IFRS), underlying assumptions such as accrual and going concern are given more importance. The concept of going concern, especially, is more well-developed in IFRS compared with US GAAP.

How IFRS impacts US companies

While U.S. companies use GAAP and do not directly use IFRS for their SEC filings, IFRS nevertheless impacts them. For example, in cases of global mergers and acquisitions, when they have non-US subsidiaries or non-US stakeholders like investors, customers or vendors. In several such instances, U.S. companies may be required to provide financial information in line with IFRS standards.

The looming transition from GAAP to IFRS will also be challenging for several U.S. companies.

The Two-Minute Game that Reveals How People Perceive You

We often write about B-school research findings in this space. Now we’re going to let you take part. This video, presented by Harvard Business School associate professor Michael Norton, is a game. In fact, it’s the same game Norton used in research he recently conducted, so when you play the game here, you’ll be doing exactly what Norton’s subjects did. The game is simple and doesn’t take long.

To play it, you’ll need a friend. Once you have a friend with you, just play the video and listen to Norton’s instructions. When you’re done, Norton will walk you through his findings.

The Costs of Racial “Color Blindness”

by Michael I. Norton and Evan P. Apfelbaum  

It’s a natural tendency, proven time and again in research: When you see a new person, one of the first things you notice is his or her race. In business life, however, we typically pretend wedon’tnotice—a behavior that’s called “color blindness”—because we want to reduce our odds of exhibiting prejudice or engaging in discrimination, or of seeming to do either.

Our research, conducted with our colleague Sam Sommers, of Tufts University, shows that there are drawbacks to the color-blind approach. In a series of experiments, we found that when people avoided referring to race in situations that cried out for a mention of it, other people perceived them as moreracially biased than if they’d brought the subject up.

We asked 30 white adult participants to play the role of the questioner in a version of the child’s game Guess Who? Each was paired with a partner (some partners were white, some black) who was assigned a target face from a sheet containing photos of 32 faces. The participants were told to ask their partners yes or no questions (“Does the person have a mustache?” “Does the person have blue eyes?”) to try to identify the target face, aiming to do so with as few questions as possible. Half the faces on each sheet were white, and half were black. Obviously, one of the fastest ways to zero in on the target would be to ask about race—the answer would eliminate half the field. But the questioners tended to shy away from that strategy, particularly when their partners were black: For example, just 57% of those who played with a white partner, and 21% of those who played with a black partner, used the word “black” or “African-American” in a question. And the people who did looked uncomfortable and anxious.

Guess Who?

After the exercise, we asked a different group (all white) to evaluate the questioners’ performance. The results were striking: These outside observers tended to perceive questioners who had ignored race as being more biased than those who had asked about it.

In another experiment, we asked white participants of various ages to play the game, again taking the role of questioner. We observed that avoiding race as an identifier appears to be a learned behavior: Although many participants under 10 asked about race, those over 10 generally didn’t.

Rather than avoiding race, smart companies deal with it head-on—and they recognize that “embracing diversity” means recognizing allraces, including the majority one, to avoid showing preference or creating a backlash. For example, Time Warner’s annual diversity summit isn’t just for people of color (or women)—it’s populated by white males, too. Talking about race can feel awkward, but over time more companies will discover that doing so is usually better than pretending it doesn’t exist.