Domestic parent and foreign subsidiary

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Reference no: EM1345325

Intercompany debt, both long-term and short-term arises, frequently. In some cases, intecorporate borrowings may arise because one affiliate can borrow at a cheaper rate that others, and lending to other affiliates may reduce the overall cost of borrowing. In other cases, intercompany receivables/ payables arise because of intercompany sales of goods or services or other types of intercompany transactions.

Problem:

a) What major problem might arise with intercompany debt between a domestic parent and a foreign subsidiary or between subsidiaries in different countries? How has Hershey Foods dealt with this problem?

b) Did Hershey Foods's intercompany loans arise because of direct loans or because if intercompany sales of goods and services on credit?

Reference no: EM1345325

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