Foreign Currency Translation

Question 0

Remeasurement

Answer 0

If functional currency is that of the US Parent company

1. Balances reflecting prices from past transactions (PPE, prepaid expenses, inventories carried at cost) - remeasured at historical rates
2. Balance s reflecting prices from current transactions (cash, trading securities, inventories) - remeasured at current rate
3. Revenues and most Expenses - remeasured at weighted average rate for the period
4. Revenues and Expenses reflecting allocations of historical balances (depreciation) - measured at historical rate used for underlying balance sheet item
5. Remeasurement gain or loss reported on the consolidated income statement as other income

Question 1

Current Rate Method

Answer 1

If functional currency is that of the foreign entity:

1. All assets and liabilities - current rate as of balance sheet date
2. Owner’s Equity - historical cost
3. Revenues and Expenses - weighted average rate for the period
4. Translation adjustment is reported as accumulated OCI on parent’s balance sheet