In a global world, business combinations can be domestic or international. If a business combination is international, a U.S. parent company’s foreign subsidiaries can still conduct business activities in their local currencies. However, consolidated financial statements must be in U.S. dollars. In other words, the currencies of the non-U.S. subsidiaries financial statements must be translated to U.S. dollars. Read Appendix 5A in your text (p.311) and note the current rate and temporal methods of foreign currency translation. Select one of these methods and list its strengths and weaknesses. Be sure to mention which rate you choose in the subject line.
Sample Solution