Case C8-5Question (a) onlya. What major problem might arise with intercompany debt between a domestic parentand a foreign subsidiary or between subsidiaries in different countries? How has Hershey Foods dealt with this problem? The major problem between a domestic parent and a foreign subsidiary is foreign currency exchange rates which affect U.S. dollar with country of the subsidiary or between subsidiaries. When U.S. dollar is weakening, the purchases or cost of goods and loans payable orreceivable will increase. This is risk of international business. The accounting for derivatives andhedging activities have three standards of these situation which are FASB Statement No. 133 “Accounting for Derivative Instruments and Hedging Activities”, Statement No. 138 “Accounting for Certain Derivative Instruments and certain Hedging Activities.” and, Statement No. 149 “Amendment of Statement 133 on Derivative Instruments and Hedging
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