Definitions - SIMS Flashcards
What is current market?
What is current market?
What are earnings?
a performance measure concerned primarily with cash-to-cash cycles.
What is the appropriate valuation method for LT receivables or Bonds payable due in 10 years?
Present value of future cash flows
What is the appropriate valuation method for equipment or ST payables?
Historical cost
What is the appropriate valuation method for warranty obligations and accounts receivable?
Net realizable value or settlement rate
What is replacement cost?
The amount of cash, or its equivalent, that would have been paid if the same of an equivalent asset were acquired currently.
What are gains
Gains are increases in equity (net assets) from incidental or peripheral transactions affecting an entity.
what is realization?
when revenues and gains are realized when products (goods and services), are exchanged for cash or claims to cash.
A U.S. parent company has a wholly owned subsidiary in Mexico. The subsidiary’s operations are an extension of and dependent on its US parent. The subsidiary maintains tits records and prepares its financial statements in Pesos. Determine the functional currency (recording or reporting) and the conversion (translation, remeasurement, or both)?
Reporting currency - USD because this Mexican operation is just an extension of and dependent on the US parent.
Remeasurement - conversion is done by this because it requires prescribed set of exchange rates that is different from the rates used in translation
A U.S. parent company has an 80% owned subsidiary in Germany. The subsidiary’s operations are relatively self-contained and integrated within Germany. The subsidiary maintains its records and prepares its financial statements in Euros. Determine the functional currency (recording or reporting) and the conversion (translation, remeasurement, or both)?
Recording Currency - Since the Germany subsidiary seems to NOT be dependent on the parent.
Translation
A U.S. parent company has a wholly owned subsidiary in Israel. The subsidiary’s operations are relatively self contained and integrated within Israel. The subsidiary maintains its records and prepares its financial statements in Shekels, Israel’s currency. Israel’s economy is highly inflationary.
Reporting - because even though it is self contained and integrated (independent) the economy is highly inflationary the Shekels cannot be the functional currency.
Remeasurement
