Response to the following questions:
1.) Identify several environmental factors that may explain why accounting principles differ among countries?
2.) Identify the unique accounting issues associated with consolidating a foreign subsidiary with the operations of it's U.S. Parent company?
3.) If the U.S. dollar was expected to strengthen relative to a foreign currency (FC), What effect might this have on a U.S. exporter?
4.) A U.S. company purchases inventory from a foreign vendor, and purchases are denominated in the foreign currency (FC). The U.S. dollar is expected to weaken against the FC. Explain how a forward contract might be employed as a hedge against exchange rate risk.
5.) Explain how a U.S. company's commitment to purchase inventory with settlement in foreign currency (FC) might become less attractive over time and how adverse effects on earnings could be reduced.
6.) A foriegn company maintains its books and records in its domestic currency. Identify several factors that might suggest that the domestic currency is not the entity's functional currency.
7.) Explain how a German subsidiary's year-end balance in retained earnings is expressed in dollars assuming that the euro is the functional currency.