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Week 8 Assignment 2: Report for Management - Foreign Currency Risk




Question;Week;8 Assignment 2 Submission;Assignment 2: Report for Management - Foreign Currency;Risk;Due Week 8 and worth 240 points;XYZ, Inc. is a U.S.-based company in the process of;acquiring a subsidiary in a country whose functional currency is not the U.S. dollar.;Use the report template, located in the online course shell, to create a report;for management that details the risks involved in operating a subsidiary in a;functional currency with the U.S. dollar as the reporting currency.;Note: You may create and / or make all necessary;assumptions needed for the completion of this assignment.;Write a four to five (4-5) page report in which you;1. Specify the potential foreign subsidiary?s business;operation, the functional currency used, and the type of intercompany;transactions anticipated between the acquiring company and the potential;subsidiary. Describe the two (2) major financial statement translation methods;currently used in US GAAP (i.e., the current rate method and the temporal;method). Determine the major procedural differences inherent in applying each;method. Analyze the fundamental manner in which balance sheet exposure differs;under the two (2) methods in question.;2. Compare and contrast the effects on income that result;from the use of both the current rate method and the temporal method to;translate cost of goods sold. Determine the key inherent risks and discuss the;related impact on the investors from the use of each method in question.;3. Suggest one (1) strategy for determining and disclosing a;translation adjustment when parent company management has translated the;financial statements of a foreign subsidiary into its reporting currency.;Determine the main steps that you would take in order to determine a;translation adjustment, and indicate the places within the financial statements;where you would report the amount of the translation adjustment in question.;4. Recommend one (1) way by which to translate the;subsidiary?s financial statements. Include consideration of the foreign;exchange risk within your recommendation. Provide a rationale for your;response.;5. Use at least two (2) quality academic resources in this;assignment. Note: Wikipedia and other Websites do not qualify as;academic resources.


Paper#38923 | Written in 18-Jul-2015

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