Conversion of Foreign F/S

Question 1

Recording currency is…

Answer 1

The currency in which the foreign books and intitial F/S are prepared.

Question 2

Reporting currency is the currency in which the _____, often consolidated, statements are prepared.

Answer 2

Final

Question 3

Functional currecny is the currency of the ______ ______ ______ in which an entity operates and generates cash flow.

Answer 3

Primary economic environment

Question 4

Functioanl currency = the local currency when: Foreign ops are self contained and intergrated within the country they are located. TF

Answer 4

True

Question 5

Function currency cannont = local currency if…

Answer 5

The local economy is in hyperinflation for more than a 3 year period, use reporting currency

Question 6

Functional currency = reporting currency when..

Answer 6

Foreign ops are a direct and integral component or extension of a U.S. entity’s ops. Or the local currency is in hyperinflation for > 3 years.

Question 7

The final currency presented is the reporting currency. TF

Answer 7

True

Question 8

The first step in the translation conversion process is..

Answer 8

to insure the foreign FS are prepared according to US GAAP

Question 9

During translation, assets and liabilities (balance sheet accounts) are converted using the ____ rate at the balance sheet date.

Answer 9

Spot, Current

Question 10

During translation, Paid in Capital accounts are converted using the _____ rate in existence when the paid in item arose.

Answer 10

Historic

Question 11

Retained earnings is converted during translation. TF

Answer 11

False, it is computed Beg RE + Translated NI - Divs Declared @ spot rate = Ending RE

Question 12

The amounts needed to balance the debits and credits is the ______ _____ (plug), and it is presented in OCI.

Answer 12

Translation Adjustment

Question 13

The translation process is used when the functional currency is the reporting currency. TF

Answer 13

False. Recording currency (local/foreign currency)

Question 14

During translation, income statement accounts are converted using which rate?

Answer 14

Weighted Average

Question 15

During translation, dividends are converted on the date in which they are paid using the historical rate. TF

Answer 15

True

Question 16

During translation, stockholder’s equity accounts are converted using the average rate? TF

Answer 16

False, Historical rate

Question 17

Re-measurement is used when the functional currency is the reporting currency. TF

Answer 17

True, US Dollar

Question 18

During re-measurement, monetary items are remeasured using what rate?

Answer 18

The current exchange (spot) rate, OR the weighted average rate if the definite acquisition date cannot be determined.

Question 19

During re-measurement, non-monetary items are remeasured using what rate?

Answer 19

The historical exchange rate that existed when the item arose

Question 20

During re-measurement, revenues and expenses that occurred evenly throughout the year are remeasured using the weighted average rate. TF

Answer 20

True

Question 21

During re-measurement, the adjustment needed at the end is recognized in OCI. TF

Answer 21

False, recognized in Income from Continuing Ops and flows through to RE

Question 22

During re-measurement, depreciation is a monetary item. TF

Answer 22

False, it is not considered as a monetary item, therefore is measured using the historical exchange rate

Question 23

Re-measurement THEN translation, occurs only when…

Answer 23

The functional currency = another (different, other than local) foreign currency

Question 24

Gains and losses from TRANSLATION appear in OCI and in OCI only. TF

Answer 24

True

Question 25

Gains and losses from RE-MEASUREMENT appear in the income statement and the income statment only. TF

Answer 25

True

Question 26

The process of converting the FS measured in the recording currency into FS measured in the functional currency is called...

Answer 26

Remeasurement

Question 27

The process of converting the FS measured in the functional currency into FS measured in the reporting currency is called...

Answer 27

Translation