Conversion of Foreign F/S Flashcards
Recording currency is…
The currency in which the foreign books and intitial F/S are prepared.
Reporting currency is the currency in which the _____, often consolidated, statements are prepared.
Final
Functional currecny is the currency of the ______ ______ ______ in which an entity operates and generates cash flow.
Primary economic environment
Functioanl currency = the local currency when: Foreign ops are self contained and intergrated within the country they are located. TF
True
Function currency cannont = local currency if…
The local economy is in hyperinflation for more than a 3 year period, use reporting currency
Functional currency = reporting currency when..
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.
The final currency presented is the reporting currency. TF
True
The first step in the translation conversion process is..
to insure the foreign FS are prepared according to US GAAP
During translation, assets and liabilities (balance sheet accounts) are converted using the ____ rate at the balance sheet date.
Spot, Current
During translation, Paid in Capital accounts are converted using the _____ rate in existence when the paid in item arose.
Historic
Retained earnings is converted during translation. TF
False, it is computed Beg RE + Translated NI - Divs Declared @ spot rate = Ending RE
The amounts needed to balance the debits and credits is the ______ _____ (plug), and it is presented in OCI.
Translation Adjustment
The translation process is used when the functional currency is the reporting currency. TF
False. Recording currency (local/foreign currency)
During translation, income statement accounts are converted using which rate?
Weighted Average
During translation, dividends are converted on the date in which they are paid using the historical rate. TF
True
