F2 Foreign Currency Accounting

Question 1

Functional Currency

Answer 1

the reporting currency is the currency of the entity ultimately reporting financial results of the foreign entity

Question 2

Foreign Exchange Transactions

Answer 2

when foreign exchange transactions result from an extension of a parent company’s operations the gain or losses are reflected on the company’s income statement in the section of Income from continuing operations

Question 3

Cummulative Foreign Exchange Loss

Answer 3

-Should be reported as a component of AOCI , a loss would be a debit to AOCI

Question 4

Balance Sheet Accounts

Answer 4

• balance sheet accounts are generally accounted for using current exchange rate ;
  except for
  1) hyperinflationary economy
  2) a foreign entity that does not contain its accounts in a foreign functional currency

The balance sheet accounts that are carried at costs (most non-monetary accounts) are measured at historical rate

Question 5

Income statement

Answer 5

use average rate

Question 6

Conversion Remeasurement

Answer 6

showed in income

Question 7

Conversion Adjustments

Answer 7

show in AOCI

Question 8

Historical rates

Answer 8

common stock and APIC are using historical exchange rates

capital accounts are translated using historical exchange rates