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The chapter presents an overview of major currency and international capital market movements after World War II, showing that the movements brought about by US investments in the fifties and sixties that created the offshore Eurodollar bear resemblance to what is now taking place between the United States as the world's investor and China. International money is created in a triangular process of long and short lending intermediated by short borrowing. The imbalances often recorded on US current account are to some extent counterbalanced by the huge returns accruing to businesses of the west. This follows the “dark matter” theory but with the twist that real value is extracted through foreign direct investment in line with the rationale of Eurodollar flows. However, threats are also created in this way. Rather than in superficial notions of instability in currency markets, the high returns on capital abroad have been instrumental both in the deindustrialization of the west and the maintenance of a high rate of consumption through the financialization of the housing market. The eventual overdrive precipitated the crisis starting in 2007, but the dollar relationship with China continues unabatedly.

The research describes the procedure for accounting for the items of the consolidated cash flow statement as a consolidated financial statement. The authors also discuss the operating, investing, and financing activities of the consolidated cash flow statement and various aspects of the items included in it. Moreover, the authors consider the direct and indirect methods and exchange rate differences in foreign exchange funds (i.e., spot rate, reporting rate, various aspects of average rates, and money). The accounting and compilation of unrelated transactions in the financial statement are given. The authors also consider the purpose of the consolidated cash flow statement, the requirements for presenting the statement of cash flows, the distinction between cash equivalents and other financial assets, and the purpose of the consolidated cash flow statement, which is reliable for foreign investors and prospective investors and approximates the financial statements of large companies. Foreign currency funds, interest and dividend cash flows, profit tax cash flows, and noncash transactions are considered when drawing up a statement of operations using direct and indirect methods.

In view of the recent enhanced concerns of the SEC and PCAOB that Accounting Principles Board Opinion No. 23 (APB 23)–asserting firms do not comply with the “sufficient evidence” criteria of APB 23, we examine whether APB 23–asserting firms that declared their foreign earnings as permanently reinvested abroad are less likely to repatriate those foreign earnings under the American Jobs Creation Act (AJCA) of 2004, compared with similar non-asserting firms. The asserting firms are required to disclose sufficient evidence that validates an ability to meet their domestic cash needs with only earnings generated in the United States and their plans to indefinitely reinvest foreign earnings outside the United States. Estimates show that asserting firms are more likely to repatriate their foreign earnings than non-asserting firms. In addition, we find that the probability of making an election to repatriate permanently invested foreign earnings under the AJCA of 2004 is higher for firms with nonbinding foreign tax credit (FTC) limitations that have made an APB 23 declaration to permanently invest foreign earnings abroad. These findings suggest that asserting firms’ declarations to indefinitely reinvest foreign earnings abroad are not well grounded, thereby indirectly validating the SEC’s and PCAOB’s increased scrutiny for supporting evidence for APB 23 assertion. The estimates also show that the likelihood of making an election to repatriate foreign earnings under the AJCA of 2004 increases with asserting firms’ liquidity constraints and financial distress: the financial characteristics listed as part of APB 23 criteria of sufficient evidence and highlighted by the SEC and PCAOB comment letters, indicating that asserting firms raid permanently reinvested foreign earnings to satisfy their financial needs and constraints.

This study is aimed at developing and validating an index designed to measure the level of social disclosure of external social programs of firms listed on the Brazilian stock market.

The index of social disclosure is composed of 13 items distributed in three dimensions: past information, prospective actions, and accessibility. Its validation involved: (a) pre-test, (b) analysis by referees, (c) exploratory factor analysis, (d) Cronbach’s alpha test, and (e) final validation. The sample is composed of 83 Brazilian firms listed on the Brazilian Stock Exchange from 2005 to 2009.

The index presented robustness in all validation stages. It was found that size, industry sector, internationalization, auditing, and listing on social responsible investment funds are decisive factors for increasing the level of social disclosure.

The index of social disclosure evaluates external social programs only. Hence, some types of social information are not captured, such environmental ones. Besides, the sources of information for the index are restricted to annual and sustainability reports, so that information from other sources, such as official announcements and company websites, are not captured.

The social disclosure index developed can be useful to analysts and investors assessing listed firms, as well as to financial-market regulators defining policies applicable to the disclosure of corporate social information.

(a) Construction of a social disclosure index validated and tested in Brazilian firms, which is liable to replication; (b) Utilization of a representative sample of firms listed on an important emerging stock market.

Bosco, Liu, and West's chapter on underground lotteries in rural China is one that begs permission to cross the boundaries between parts of this volume, for it deals with the integration of the Chinese economy with others, and it also poses certain moral questions about the nature of markets and rationality in economic exchanges (see also Suarez, this volume). But the authors, after reviewing the evidence, ultimately conclude that China's underground lotteries must be viewed in relation to that country's phenomenal economic development in recent decades. They show that the rise of illegal underground lotteries in China is tightly connected to the development of the modern capitalist economy there, and that although it seems at first glance to be powered by irrationality and superstition, it actually functions according to capitalist principles – at least as viewed by the participants. They also argue that rural villagers who place bets in them are not mere victims of nonsensical beliefs or of opportunistic “outsiders,” but rather that they are participating in their own way in a system in which luck clearly plays a very large role, but one over which they have little control, and one that is grounded in the historical commercialized economy of China (see also Richardson, 1999). It is interesting to note the way that participants rationalize the lottery and their actions through their assumption that it is rigged – their approach to it is markedly different from that of someone from, for example, Japan or the United States, where such a lottery is assumed from the start to not be rigged. Bosco and co-authors well demonstrate here the importance of viewing a cultural phenomenon as part of a greater whole, and one in a constant state of flux.

An environmental accident at a Placer Dome mine triggered a contagion effect across the Canadian mining industry. The decline in equity prices was moderated by prior disclosure of a high-level commitment to environmental management. Investors appear to interpret this information as a signal of expertise in the management of environmental risks and costs. The same companies are positioned to make the most credible financial disclosures about environmental management, and yet the evidence suggests that financial disclosures themselves have a negative impact on company value. There may be a miscommunication between investors and analysts on the one hand and mining company executives on the other, which could explain why mining company managers report their companies’ shares are undervalued.