Reinvoicing Center

DEFINITION of 'Reinvoicing Center'

A subsidiary or department of a multinational corporation where all intrafirm transactions are centralized and foreign currency related receivables and liabilities are netted. The means of hedging the entire multinational firm's foreign currency exposures are also determined by the reinvoicing center.

BREAKING DOWN 'Reinvoicing Center'

Employing a reinvoicing center will likely limit the firm's risk to transaction exposure. For example, suppose that U.S.-based XYZ Corp. has subsidiaries in France and Canada. The French subsidiary owes the Canadian subsidiary debt in Canadian dollars for an intrafirm purchase of processed goods.

The U.S. arm of XYZ recently received a payment in Canadian dollars and owes a debt in euros. Instead of having each portion of the company engage in its own foreign exchange transaction, a reinvoicing center allows the different inflows and outflows of money, and make the process more efficient and stable. The invoice center can also determine a preset foreign exchange rate for hedging purposes.

In this case, the most optimal solution would be to have the French subsidiary exchange its euros to the U.S. office for its Canadian dollars.

RELATED TERMS
  1. Subsidiary

    A company whose voting stock is more than 50% controlled by another ...
  2. Parallel Loan

    A type of foreign exchange loan agreement that was a precursor ...
  3. Subsidiary Bank

    A type of foreign bank that is incorporated in the host country ...
  4. Economic Exposure

    A type of foreign exchange exposure caused by the effect of unexpected ...
  5. Section 988

    A financial transaction involving a capital loss or gain on an ...
  6. Foreign Exchange

    The exchange of one currency for another, or the conversion of ...
Related Articles
  1. Investing

    What's a Subsidiary?

    A subsidiary is a corporation owned 50% or more by another corporation. The owning corporation is usually called the parent or holding company. A company that is 100% owned and controlled by ...
  2. Forex Strategies

    The Money Market Hedge: How It Works

    Investopedia explains how to hedge foreign exchange risk using the money market, the financial market in which highly liquid and short-term instruments like Treasury bills, bankers’ acceptances ...
  3. Economics

    What is a Wholly Owned Subsidiary?

    A company whose common stock is 100% owned by another company, called the parent company.
  4. Forex Education

    What is an Indirect Quote?

    An indirect quote expresses the amount of foreign currency required to buy or sell one unit of the domestic currency in the foreign exchange markets.
  5. Professionals

    FOREIGN CURRENCY OPTIONS

    The value of one country’s currency relative to another’s is constantly changing and is known as the exchange rate. Large commercial banks exchange currencies for their own accounts ...
  6. Options & Futures

    How U.S. Firms Benefit When The Dollar Falls

    When the greenback is weak, smart investors will invest in multinational companies to benefit.
  7. Investing Basics

    Explaining Foreign Exchange Risk

    Foreign exchange risk is the chance that an investment’s value will decrease due to changes in currency exchange rates.
  8. Investing

    What's a Multinational Corporation?

    A multinational corporation is just that – a corporation that operates in multiple nations, with a home office that coordinates global management. Being a multinational corporation is a complicated ...
  9. Professionals

    Currency Forward Contracts

    CFA Level 1 - Currency Forward Contracts. Discusses the uses and key points of currency forward contracts. Provides an example of how corporations use currency forwards to hedge risk.
  10. Forex Strategies

    Minimize Exchange Rate Risk With Currency ETFs

    Since foreign exchange rates can impact portfolio returns, investors should hedge this risk whenever possible. Currency ETFs are ideal for such a purpose.
RELATED FAQS
  1. Are domestic and foreign subsidiaries included on a company's financial statements?

    A subsidiary is a company that is controlled by another 'parent' company. The subsidiary acts and operates like its own entity ... Read Answer >>
  2. Are there any practical differences between a wholly owned subsidiary and a regular ...

    Explore the real, practical differences between a wholly owned subsidiary and a regular subsidiary. Local conditions determine ... Read Answer >>
  3. How can I invest in a foreign exchange market?

    The foreign exchange market, also called the currency market or forex (FX), is the world's largest financial market, accounting ... Read Answer >>
  4. What is the difference between a subsidiary and a wholly owned subsidiary?

    Understand the primary differences between a subsidiary company and a wholly owned subsidiary, and their relationship to ... Read Answer >>
  5. How many nations must a company trade in to be considered a multinational corporation?

    Learn about the conditions a company has to meet to be considered multinational, and find out when investing in multinational ... Read Answer >>
  6. What does it mean to invest in money center banks?

    Invest in foreign and domestic banks when you invest in money center banks. You'll find these financial centers in many major ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center