Voyevodins' Library _ "International Business: Competing in the Global Marketplace" / Charles W.L. Hill ... Chapter 19 ... subsidy, swaps, systematic risk, tariff, tax credit, tax haven, tax treaty, technical analysis, temporal method, theocratic totalitarianism, time draft, time-based competition, timing of entry, total quality management, totalitarianism, trade creation, trade deficit, trade diversion, trade surplus, trademark, transaction costs, transaction exposure, transfer fee, transfer price, translation exposure, transnational corporation, transnational financial reporting, transnational strategy, Treaty of Rome, tribal totalitarianism, turnkey project, unbundling, uncertainty avoidance, universal needs, value creation, values, vehicle currency, vertical differentiation, vertical foreign direct investment, vertical integration, voluntary export restraint (VER), wholly owned subsidiary, World Bank, World Trade Organization (WTO), worldwide area structure, worldwide product division structure, zero-sum game Voevodin's Library: subsidy, swaps, systematic risk, tariff, tax credit, tax haven, tax treaty, technical analysis, temporal method, theocratic totalitarianism, time draft, time-based competition, timing of entry, total quality management, totalitarianism, trade creation, trade deficit, trade diversion, trade surplus, trademark, transaction costs, transaction exposure, transfer fee, transfer price, translation exposure, transnational corporation, transnational financial reporting, transnational strategy, Treaty of Rome, tribal totalitarianism, turnkey project, unbundling, uncertainty avoidance, universal needs, value creation, values, vehicle currency, vertical differentiation, vertical foreign direct investment, vertical integration, voluntary export restraint (VER), wholly owned subsidiary, World Bank, World Trade Organization (WTO), worldwide area structure, worldwide product division structure, zero-sum game


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Chapter 19 Outline

Critical Discussion Questions

  1. Why do the accounting systems of different countries differ? Why do these differences matter?

  2. Why are transactions among members of a corporate family not included in consolidated financial statements?

  3. The following are selected amounts from the separate financial statements of a parent company (unconsolidated) and one of its subsidiaries


       Parent    Subsidiary
    Cash $180 $80
    Receivables 380 200
    Accounts payable 245 110
    Retained earnings 790 680
    Revenues 4,980 3520
    Rent Income 0 200
    Dividend income 250 0
    Expenses 4160 2960
    Notes:
    1. Parent owes subsidiary $70.
    2. Parent owns 100 percent of subsidiary. During the year subsidiary paid parent a dividend of $250.
    3. Subsidiary owns the building that parent rents for $200.
    4. During the year parent sold some inventory to subsidiary for $2,200. It had cost parent $1,500. Subsidiary, sold the inventory to an unrelated party for $3,200.



    Given this,

    1. What is the parent's (unconsolidated) net income?

    2. What is the subsidiary's net income?

    3. What is the consolidated profit on the inventory that the parent originally sold to the subsidiary?

    4. What are the amounts of consolidated cash and receivables?

  4. Why might an accounting-based control system provide headquarters management with biased information about the performance of a foreign subsidiary? How can these biases best be corrected?
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