Case- XYZ ltd an IT company is not an MNC based in the USA.
ABC ltd an IT company is an MNC based in Germany.
The Germany company wants takeover the USA company.When the
ABC ltd scans XYZ ltd company's financial statements it
shows profit (no fraud or infringement was made in accounts
of XYZ ltd).But the finance department of ABC ltd says the
XYZ ltd financial statements show various losses.
Question- Cite four reasons why XYZ ltd shows loss, while it
has made profit?
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Answer Posted / badri
I got the answer close may not exact. The above answer had a
little ambiguity.
Answers are -
1. Interest rate- The interest rate of the USA may differ
that of the interest rate of Germany.
2. Conversion of currency - The fluctuation of currency.
While converting the USD to Germany currency that would show
loss. As USD value is less than Germany currency.
3. Cash flow impact :- While the investing row of cash flow
statement may differ both the organization.
4. Accounting standards- The application of accounting
standards might differ country to country.
I believe due to these things the XYZ ltd shows loss.
| Is This Answer Correct ? | 42 Yes | 0 No |
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