Read the following case study and address each of the following parts in detail. For each part, be sure to include the following requirements:
Define the major problem.
Use appropriate references supporting the problem definition (avoid using Wikipedia).
Analyze the situation and explain the mechanisms that are causing the problem (use appropriate theories to show how the problem was identified and present examples found in the case study that support your argument).
Present a solution and develop a structured plan of action. Who is to do what, when? Your solution should follow logically from analysis—address the problem. What are the expected outcomes (both positive and negative) of the solution? What aspects of the problem remain unresolved by your solution?
Case: ABC Corp. International Company, a manufacturer of medical device, assembles a particular product line at a wholly owned facility in Singapore. The product is designed at XYZ’s headquarters in the United States, but the different components used in the assembly process are manufactured throughout Asia and shipped to Singapore for final assembly. Some of the components are manufactured in multiple locations, so the customer can actually designate where ABC Corp. should source the components. The final product is assembled in Singapore and then shipped via FedEx Freight to customers in European Union and throughout Asia. ABC Corp. Singapore does not purchase any major components from the United States, but it invoices all of the components from Asian suppliers in U.S. dollars. Moreover, it sells the product to Asian customers in U.S. dollars. However, all of its major expenses in Singapore are paid in Singapore currency. Most of the key executive marketing decisions are made by the U.S. marketing headquarter staff, although the Singapore staff acts as a liaison with FedEx Freight personnel and deals with the local employees, most of whom come from the European Union on short-term work visas.
Part I: ABC Corp. prefers to translate the results of its Singapore subsidiary into dollars using the current rate method.
What is the advantage to ABC Corp. of using the current rate method?
As their auditor, what do you think of their decision?
If their decision is wrong and they should be using the temporal method, is it possible for them to change?