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20 Cards in this Set
- Front
- Back
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Acccounting Reserves
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Accounts created in a firm's financial reports to record foreseeable future expenses that might affect its operations
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Two -transaction approach
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an approach used by U.S. firms to account on their income statements for transaction denominated in foreign currencies
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Translation
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The process of Transforming a subsidiary's reported operations demominated in a foreign currency into the parent's home currency
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Consolidated financial statements
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reports the comined operations of a parent and its subsidiaries in single set of accounting statements denominated in a single currency
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Cost Method
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Technique used to consolidate accounting records of subsidairies in which the parent company's ownership stake is less than 10 percent
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Equity Method
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Technique used to consolidate accounting records of subsidiaries in which parent's ownership stake is between 10 and 50 percent
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Consolidation Method
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Techniques used to consolidate accounting records of subsidiaries in which the parent company's onwership stake is more than 50 percent
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Functional Currency
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currency of the principal econmic environment in which a subsidiary operates
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Current Rate Method
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approach used to consolidate the financial statements of a foreign subsidiary when the subsidiary's functional currency is the subsidiary's home currency
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Temporal Method
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approach used to consolidate the financial statements of a foreign subsidiary whose functional currency is the U.S. dollar
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Cumulative Translation Adjustment
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account created to balance any difference between a subsidiary's assets and its liabilities and stockholder's equity when the current rate method is used to value its balance sheet
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Transfer Pricing
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Prices that one branch or subsidiary of a parent firm charges for goods, services, or property sold to a second branch or subsidiary of same parent firm
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Arm's Length Test
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Test imposed by the Internal Revenue Service to determine the appropriateness of transfer prices; reflects the price that one independent company would charge a second for a good or service
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Tax Havens
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Countries that charge low, often zero, taxes on corporate incomes and that offer an attractive business climate
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Foreign Sales Corporation
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subsidiary of a U.S. MNC that enjoys substantial income tax savings from profits earned from exporting activities
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Deferral Rule
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rule permitting U.S. companies to defer paying U.S. income taxes on profits earned by their foreign
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Controlled Foreign Corporation
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Foriegn corporation in which certain U.S. shareholders (each of which must own at least 10 percent of the foreign corporation's stock) cumulatively own at least 50 percent of the foreign corporation's stock
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Active Income
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Income generated by active business operations such as production, marketing, and distribution
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Subpart F income (passive income)
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Income earned from financial transactions, such as dividends, interest, and royalties; also called passive income
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Advance Pricing Agreement
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An agreement between an international business and the U.S. Internal Revenue Service establishing in advance the tranfer prices the company will charge for intracorporate transactions
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