Your decision to launch a branch in Germany proves to be very insightful. Your product is so succesfful in the European Union that the branch is insufficient to handle the business. Therefore, you decide to purchase a German manufcturing firm and launch a subsidiary.
a. In which currency is the foreign subsidiary likely to keep its book? Which GAAP(s) will it use?
b. If the subsidiary proves to be very successful, what will you do with its "excess profits" and resulting cash inflows? Where will you invest the stockpile of cash?
If you hoard in in Europe, and do not repatriate it to the USA, what implications does your decision have for future US tax liability?
c. What will you do to legally minimize your world-wide txes payable?
d. When evaluating the performance of the subsidiary's management, which financial results will you use, financials prepared according to German GAAP, or those converted into US GAAP and translated into US dollars?
What are the implications of each approach?