Fin 2 - Foreign Currency Acct'g
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Remesaurement Method (Dysfunctional)
- 1. Restate B/S Items:
- Monetary items = year end rate (fixed)
- Non-Monetary = Historical rate (fluxatte)
- 2. Restate I/S Items:
- Non-B/S related items = weighted avg
- b/s items = Historial rate
- 3. Gain<loss> plug to Net Income to get the req amt needed to adj R/E in order to make the b/s balance
Presentation of Fin Stmts in a highly inflationary economy GAAP & IFRS
- req remeasurement method
- 1. first restated for effects of inflation
- 2. converted from the foreign currency to the reporting currency using the yr end rate for ALL elements of both B/S and I/S
Translations Method (Functional)
- 1. if the fin stmts are in the subs functional $ the fin stmts are translated to the reporting currency starting w/the I/S
- 2. Income Statement:
- ALL I/S items = weighted avg
- transfer Net Income to R/E
- 3. B/S:
- Assets&Liabilities: Year end Spot Rate
- common stock/equity: Historical
- r/e : roll forward
- 4. Gains<Loss> to other Comprehensive Income. Diff between debits and credits in the translated trial balance.
Where are conversion adj for Translation method shown?
Shown in OCI, contra to Equity in B/S (accum. translations)
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