Foreign Currency Accounting

Question 1

How to record gain/loss from remeasurement of an entity that is not using functional currency?

Answer 1

Gain/loss incurred from remeasuring a local currency to functional current is recorded as part of continuing operations on parent’s book

Question 2

what is the remeasurement method?

Answer 2

• it converts financial statements of a subsidiary from local currency to functional currency. Gain/loss will be reported on IS.
• Historical rate is used only for assets carry at “cost”

Question 3

what is the translation method?

Answer 3

• it converts financial statements of a subsidiary from functional currency to reporting currency. Gain/loss will be reported under OCI.
• Weighted average rate will be used to translate IS accounts
• Historical rate will be used to translate capital accounts
• Current/year end exchange rate will be used to translate assets and liabilities accounts