11/21 Chapter 12 & 11

Question 1

11-8

Answer 1

a. 475000*.176 = 83600-73600=10000 gain
21000000*.0081=170100-175300=5200 gain
A/R Egyptian Pounds 10000
   Gain on FCT                     10000
A/P Yen 11500
   Gain on FCT  11500
b. 475000*.18=85500-83600=1900
 A/R EL      1900
     Foreign Currency Trans Gain 1900
Collection
Cash                  164000
Foreign Currency 85500
        A/R EL                85500
        A/R $                 164000
c. .0078*21000000=163800-170800=7000
e. Dec 31 2006 5200 gain
    Dec 31 2007 6300 gain 
      Overall gain 11500
f gain on EL 11900
  gain on Yen11500

Question 2

Ch 12

Answer 2

learn

Question 3

International Financial Reporting Standards

Answer 3

we are moving towards converging IFRS and GAAP

Question 4

Effective cash flow hedges

Answer 4

go through OCI

Question 5

current rate

Answer 5

spot rate date of the balance sheet

Question 6

historical rate

Answer 6

rate on the date the assets was required

Question 7

average rate for the period

Answer 7

we should add all of the months and get an average to get an accurate average

Question 8

functional currency

Answer 8

primary currency of the company, when changed you do it prospectively.

Question 9

factors indicating functional currency

Answer 9

look at pg 618

Question 10

expense indicators

Answer 10

if we are manufacturing things in a foreign currency, more than likely it is our functional currency, unless we bring all of the other things from other countries

Question 11

highly inflationary economies

Answer 11

if the currency is unstable then the functional currency is in US dollars

Question 12

Remeasure

Answer 12

we have to remeasure our books to make it in US Dollars, most people don’t do this they keep it in the functional currency then if they need to report to the foreign gov then they translate back to the foreign currency

Question 13

Translate

Answer 13

when going from a reporting to functional we have to remeasure the reporting currency to get to the functional currency. then we translate to the US dollar

Question 14

current rate

Answer 14

used to convert local currency asset and liability accounts into US dollars

Question 15

historical rate

Answer 15

used to convert equity accounts into US dollars

Question 16

average rate

Answer 16

revenues and expenses are translated using the average rate for the reporting period

Question 17

any translation adjustment is a component of

Answer 17

Comprehensive Income

Question 18

temporal method

Answer 18

remeasurement

Question 19

current method

Answer 19

translation

Question 20

LC = FC

Answer 20

translate to US dollars

Question 21

if LC not = FC

Answer 21

remeasure to FC

Question 22

if FC = US

Answer 22

no work

Question 23

if FC not = US dollars

Answer 23

translate

Question 24

12-5 translation

Answer 24

assets and liab at the current rate
revenue and exp at the avg rate
equity items at their historical
dividends use the rate at which they were declared
translation adjustment helps it balance it goes through OCi

Question 25

remeasurement

Answer 25

monetary - current
nonmonetary -historical rate
rev and exp -avg rate for items related to monetary items, historical rates for inc statement items related to nonmonetary items
any imbalance flows through the income statement as a remeasurement gain or loss
RE 1/1 mixed 
net income avg
dividends historical
RE 12/31

Question 26

translation

Answer 26

we like it

Question 27

go through the exercise on slide 27 translation

Answer 27

do it

Question 28

remeasurement

Answer 28

on test he will ask general questions on remeasurement, you have to know how to translate