Indirect coordinating mechanisms typically include sales quotas, budgets, and other financial tools, and feedback reports, which give information about the sales and financial performance of the subsidiary for the last quarter or year.
Domestic companies invariably rely on budgets and financial statement analyses, but for foreign subsidiaries, financial statements and performance evaluations are complicated by financial variables in MNC reports, such as exchange rates, inflation levels, transfer prices, and accounting standards.
To reconcile accounting statements, MNCs usually require three different sets of financial statements from subsidiaries. One set must meet the national accounting standards and procedures prescribed by law in the host country - this set also aids management in comparing subsidiaries in the same country. A second set must be prepared according to the accounting principles and standards required by the home country. This set allows some comparison with other MNC subsidiaries. The third set of statements translates the second set of statements (with certain adjustments) into the currency of the home country for consolidation purposes, in accordance with Financial Accounting Standards Board (FASB) Ruling Number 52 of 1982. A foreign subsidiary's financial statements must be consolidated line-by-line with those of the parent company according to the International Accounting Standard Number 3, adopted in the United States.
Researchers have noted comparative differences between the use of direct versus indirect controls among companies headquartered in different countries. One study by Egelhoff examined the practices of 50 U.S., U.K., and European lvINCs over their foreign subsidiaries. It compared the use of two mechanisms - the assignment
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