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Accounting standards and procedures in the United States have a major influence on the translation exposure of U.S.based MNCs. One such standard is the requirement
Accounting standards and procedures in the United States have a major influence on the translation exposure of U.S.based MNCs. One such standard is the requirement that MNCs use a weighted average exchange rate when consolidating finandal statements from foreign subsidiaries. Suppose that Canton Co. is a U.S.-based MNC with a foreign subsidiary in Germany, which deals in euros. The local earnings of this German subsidiary over a two-year period are shown in the following table, along with the weighted average exchange rate of the euro. For each of the two years, enter the translated earnings for the German subsidiary (in dollars) in the last column of the table. Because of a change in the weighted average exchange rate of the euro, the translated carnings of the German subsidiary, in dollars, TOTAL SCORE: 1H
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