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Currency Denomination of Intercompany Debt and Multinational Taxes

  • Thomas J. O'Brien
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    For multinational companies (MNCs) with foreign subsidiaries, the currency denomination of intercompany debt can have important effects on both taxes and financial statements. This paper analyzes the choice between an intercompany loan denominated in the home currency and one denominated in the subsidiary's functional currency. Using U.S. rules for financial accounting and taxes, the author demonstrates the expected impact of the loan's currency denomination on the expected level and variability of an MNCs overall taxes in the case where it has excess foreign tax credits. Copyright Copyright (c) 2009 Morgan Stanley.

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    Article provided by Morgan Stanley in its journal Journal of Applied Corporate Finance.

    Volume (Year): 21 (2009)
    Issue (Month): 3 ()
    Pages: 86-94

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    Handle: RePEc:bla:jacrfn:v:21:y:2009:i:3:p:86-94
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