19.2 Financial Statements

  1. LG2

Several features differentiate internationally based reports from domestically oriented financial statements. Among them are the issues of foreign subsidiary characterization, the functional currency approach of U.S. MNCs, and the translation of individual accounts.

Subsidiary Characterization and Functional Currency

For a multinational company based outside the United States, its foreign subsidiaries’ type of operations will determine the translation method the firm will use. For U.S.-based MNCs, the determining factor is the functional currency of each subsidiary. Table 19.2 provides further details on these points.

Table 19.2

Subsidiary/Currency Operations and Translation Method

Type of operation Translation ...

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