6.05- Foreign Investees Flashcards
When a company has an investment is a foreign currency, what must it do in order to have correct financial statements?
Translate the foreign investment into the currency on the financial statement.
What are the two types of foreign currency translations?
- Remeasurement
- Translation
If the functional currency is the foreign currency, which translation method is used?
Translation
If the functional currency is the financial statement currency, which translation method is used?
Remeasurement
What is an example in which three different types of currency are being used.
- A subsidiary maintains its books in one currency
- It’s functional currency is another currency
- The parent company, where is the subsidiary will be recognized is in a third currency
What is the result of three different types of currency being used?
The entity will remeasure from the local currency to the functional currency, then translate the functional currency to the reporting currency.
What is TRANSACTIONAL CURRENCY?
The currency of a particular country
What is FUNCTIONAL CURRENCY?
The currency that has the greatest economic impact on a company
What is REPORTING CURRENCY?
The currency in which financial statements are reported
How are ASSETS and LIABILITIES translated from functional to reporting currency?
Translated at the CURRENT EXCHANGE RATE
How is INCOME STATEMENT ITEMS translated from functional to reporting currency?
Translated at the exchange rates EFFECTIVE ON THE DATE THOSE ITEMS WERE RECOGNIZED
If sales are uniform throughout the year, what translation method is used?
WEIGHTED AVERAGE
If there is a gain on EQUIPMENT, what is translated?
The rate in effect on the DATE THE GAIN WAS REALIZED
What is a TRANSLATION ADJUSTMENT?
An entry that balances foreign currency translations.
Where are TRANSLATION ADJUSTMENTS reported?
(denT)
OCI
