Business combinations can be domestic or international. If a business combination is international, a U.S. parent companys 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. Discuss the case for or against the use of the U.S. dollar as a consolidated companys functional currency.

1. Does the foreign exchange play a role in these transactions?

2. What is translation?

3. What if the foreign subsidiary has economical, social, cultural or political conflict?

4. What about pegged exchange rates?