Control in Function of Foreign Subsidiary Performance Evaluation

The dominant role of the multinational companies (MNCs) in international trade in the late 20th and early 21st century indicates the importance of their management control systems consideration. Management control instruments enable monitoring efficiency not only of MNC as a whole, but also of its subsidiaries. The accounting plays primary roles in the process of management control such as budgeting and creating performance evaluation system. The budget allows determination of foreign subsidiaries and their managers responsible for the identified deviations. The budgeting at MNCs is based on the translation of accounting data denominated in foreign currencies into the parent company currency. In that context, important issue that MNCs address is the choice of appropriate currency. MNCs need to answer the following question: whether budgeting and evaluation of foreign subsidiary’s actual result should be done in parent currency or local one.