Question

what analysis a company should do before going into an offshore subsidiary

Answer 1

Following analysis has to be done by the company before going into an offshore subsidiary-

A. Rate of currency exchange will be fluctuating when there would be a subsidiary in another country so company needs to account for the currency fluctuations

B. Recording of the transactions in the books of subsidiary should also be a matter of concern because the values at which these transactions are to be recorded will weather be domestic currency value or foreign currency value.

C.various kind of macro risk are also to be considered like inflation and interest rate along with political stability in another country

D.legal consideration for incorporation of subsidiary books of accounts into the parents books of accounts should also be ascertained.

E. Nature of the business of subsidiary should not be highly diversified because it would be difficult to manage from a parents perspective when the company is situated offshore.