35312 GLOBAL FINANCE
Eugene E. Comiskey
Charles W. Mulford
MANAGERIAL AND FINANCIAL REPORTING ISSUES AT
SUCCESSIVE STAGES IN THE FIRM’S LIFE CYCLE
Fashionhouse Furniture started as a small southern retailer of furniture pur-
chased mainly in bordering southeastern states. With a growing level of both
competition and aff luence in its major market areas, Fashionhouse decided
that its future lay in a niche strategy involving specialization in a high quality
line of Scandinavian furniture. Its suppliers were mainly located in Denmark,
and they followed the practice of billing Fashionhouse in the Danish krone.
Title would typically pass to Fashionhouse when the goods were dropped on
the dock in Copenhagen. Payment for the goods was required within periods
ranging from 30 to 90 days. As its business expanded and prospered, Fashion-
house became convinced that it needed to exercise greater control over its
furniture supply. This control was accomplished through the purchase of its
principal Danish supplier. Because this supplier also had a network of retail
units in Denmark, the manufacturing operations in Denmark supplied both
the local Danish market as well as the U.S. requirements of Fashionhouse.
More recently, Fashionhouse has been searching for ways to increase
manufacturing efficiency and lower product costs. It is contemplating a reloca-
tion of part of its manufacturing activity to a country with an ample and
low-cost supply of labor. However, Fashionhouse has noted that many such
countries experience very high levels of inf lation and other potentially disrup-
tive economic and political conditions. It has also become aware that in some of