Ch. 29 - Foreign Operations Flashcards
The functional currency of an entity is:
the currency it uses in day-to-day operations
Things to consider in determining the functional currency
- currency influencing sales prices
- currency of the country whose competitive forces impact sales prices
- currency mainly influencing input costs
The presentation currency of an entity is:
The currency that the financial results are shown in
Two types of foreign operations:
- integrated operations
2. self-sustaining operations
Integrated operations:
the functional currency is the same
Self-sustaining operations:
the functional currency is different
Integrated operations - Income statement items
translated at the date prevailing on the transaction date
Integrated operations - monetary BS items
translated at the closing rate
Integrated operations - non-monetary BS items
measured at historical cost
Integrated operations - how to calculate ending retained earnings
opening RE translated at PY amount
+ NI from translated IS
- Dividends translated at rate on declaration date
self-sustaining operations - income statement items
translated at the rate prevailing on the transaction date
self-sustaining operations - monetary and non-monetary assets/liabilities
measured at closing rate, except for assets carried at FV which are recorded at rate from most recent revaluation
self-sustaining operations - shares
translated at historical cost from issue date
self-sustaining operations - retained earnings
opening RE from PY translation
+ NI from translated IS
- Dividends translated at declaration date
