Foreign Currency Accounting Flashcards
What are transactions with a foreign entity denominated in a foreign currency?
Foreign currency transactions
What is the conversion of financial statements of a foreign entity into financial statements expressed in the domestic currency?
Foreign currency translation
What is the exchange rate at the current date, or for immediate delivery of currency, often referred to as the spot rate?
Currency exchange rate
What is the exchange rate existing now for exchanging two currencies at a specific future date?
Forward exchange rate
What is another name for forward exchange rate?
Bet
What is the rate in effect at the date of issuance of stock or acquisition of assets?
Historical exchange rate
What is historical exchange rate used for?
Equity
What rate is calculated to take into account the exchange rate fluctuations for the period?
Weighted average rate
What is the weighted average rate used for?
Income statement
What is the currency of the entity ultimately reporting financial results of the foreign entity?
Reporting currency
What is the currency of the of the primary economic environment in which the entity operates, usually the local currency or the reporting currency?
Functional currency
What is restatement of financial statements denominated in the functional currency to the reporting currency using appropriate rates of exchange?
Foreign currency translation
Is foreign currency translation functional or dysfunctional?
Functional
What is the restatement of foreign financial statements from the foreign currency to the reporting currency using appropriate rates of exchange?
Foreign currency remeasurement
Is foreign currency remeasurement functional or dysfunctional?
Dysfunctional
What are the 2 situations for foreign currency remeasurement?
The reporting currency is the functional currency and the financial statements must be restated in the entity’s functional currency prior to translating currency
What are the steps in restating foreign financial statements?
Prepare in accordance with GAAP/IFRS, Determine the functional currency and appropriate exchange rates, and remeasure and/or translate the financial statements
What is the remeasurement method also known as?
Temporal method
What rate is used for monetary items on the balance sheet during the remeasurement method and is it fixeed or fluctuate?
Current/year end rate, fixed
What rate does non monetary items on the balance sheet use during the remeasurement method and is it fixed or fluctuate?
Historical rate, fluctuate
What rate does non balance sheet related items on the income statement use during the remeasurement method?
Weighted average rate
What is the translation method also known as?
Current rate method
What are all income statement items rate during translation method?
Weighted average rate
Does remeasurement or translation amounts go in other comprehensive income?
Translation
What rate is used for all assets and liabilities in the translation method?
Current exchange rate
