The Value Contribution of a Subsidiary of a Multinational Firm

question 47

Essay

The value contribution of a subsidiary of a multinational firm to the firm can be reported in the income statement or balance sheet of the consolidated firm. Explain the reporting of the changes in the value of a subsidiary as a result of the change in an exchange rate - changes to the income and the assets of the subsidiary - in the consolidated financial statements of the parent company.

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Definitions:

Agency by Ratification

This occurs when a principal approves and accepts the actions of someone who acted without authority, thereby giving those actions legitimacy and creating an agency relationship retrospectively.

Doctrine

A belief or set of beliefs held and taught by an organization, especially a religious or political one.

Agency Relationship

A legal relationship in which one party, the agent, is authorized to act on behalf of another party, the principal, in conducting business transactions.