International Accounting
5th Edition
ISBN: 9781259747984
Author: Doupnik, Timothy S., Finn, Mark T., Gotti, Giorgio
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 10, Problem 7Q
When might it be appropriate to evaluate the performance of a foreign subsidiary in terms of local currency rather than in terms of parent company currency?
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Students have asked these similar questions
Which of the following suggests that the foreign entity's functional currency is the parent's currency?
a.
Intercompany transaction volume is low.
b.
Debt is serviced through local operations.
c.
There is an active and primarily local market.
d.
Sale prices are influenced by international factors.
What are the circumstances under which the capital expenditure of a foreign subsidiary might have a positive NPV in local currency terms but be unprofitable from the parent firm’s perspective?
Why is it so difficult to estimate the value of retained profits when translating the financial statements of a foreign subsidiary? Normally, how is this issue resolved?
Chapter 10 Solutions
International Accounting
Ch. 10 - Prob. 1QCh. 10 - What makes calculation of NPV for a foreign...Ch. 10 - How does the evaluation of a potential foreign...Ch. 10 - Prob. 4QCh. 10 - How does an ethnocentric organizational structure...Ch. 10 - Prob. 6QCh. 10 - When might it be appropriate to evaluate the...Ch. 10 - Prob. 8QCh. 10 - Prob. 9QCh. 10 - How can a local currency operating budget and...
Ch. 10 - Prob. 11QCh. 10 - What is the advantage of using a projected future...Ch. 10 - Prob. 3EPCh. 10 - Prob. 4EPCh. 10 - Imogdi Corporation (a U.S-based company) has a...Ch. 10 - Philadelphia, Inc. (a Greek company) has a foreign...Ch. 10 - Fitzwater Limited (an Irish company) has a foreign...Ch. 10 - Prob. 9EPCh. 10 - Viking Corporation (a U.S.-based company) has a...Ch. 10 - Duncan Street Company (DSC), a British company, is...
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Clarke Company operates a subsidiary in another nation. What does the phrase functional currency signify in reference to this subsidiary? How is the nominal value of the functional currency determined?arrow_forwardWhich cash flows are important for an overseas investment: those generated by the subsidiary in the country in which it operates or those sent to the parent firm in dollars?arrow_forwardWhat modifications may be made to the domestic cost of capital for a foreign venture to account for currency rate and political risk?arrow_forward
- Functional currency is the currency that influences sales price, labour, material and other costs of a company’s goods and services. (a) Explain factors that should also be considered to determine the functional currency of a foreign operation. (b) Explain what will happen if a business transaction is denominated in foreign currency but reported in functional currency.arrow_forwardWhich of the following situation is NOT the case that a domestic company is exposed to foreign currency exchange risk? a. A firm commitment to enter into a foreign currency transaction. b. A forecasted foreign currency transaction that has a high probability of occurrence. c. An investment in a domestic subsidiary. d. An actual existing foreign currency transaction that results in recognition of assets or liabilities.arrow_forwardClarke Company has a subsidiary operating in a foreign country. In relation to this subsidiary, what does the term functional currency mean? How is the functional currency determined?arrow_forward
- What adjustments might be made due to exchange rate riskand political risk to the domestic cost of capital for a foreigninvestment?arrow_forwardWhat are the consequences of accounting for foreign currency translation on financial statement analysis?arrow_forwardwhat are implications for analysis of financial statements that result from the accounting for foreign currency translation?arrow_forward
- What term is used to describe the process of reducing foreign exchange risk? Choose the correct. A)international accounting B)exposure C)hedging D)harmonizationarrow_forwardWhat are the relevant cash flows for an international investment:the cash flow produced by the subsidiary in the country whereit operates, or the cash flows in dollars that it sends to its parentcompany?arrow_forwardHow does a parent company determine the appropriate method for translating the financial statements of a foreign subsidiary?arrow_forward
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