Foreign Operations

Question 1

What are the basic principles of remeasurement?

Answer 1

Monetary assets/liabilities - spot rate
Non monetary assets/liabilities - historical rate
Income statement items - rate used in B/S
Recognize adjustment in I/S

Question 2

What are the basic principles of translation?

Answer 2

Assets/Liabilities - spot rate
Income statement items - Revenues @ average rate, Gains @ rate day of gain
Recognize adjustment in OCI

Question 3

What is measurement process for highly inflationary economies?

Answer 3

Assume LC does not equal FC

Remeasure to US currency

Question 4

How are currencies converted?

Answer 4

Foreign currency/US dollar = 1/exchange rate

US dollar/Foreign currency = 1 x exchange rate

Question 5

What is included in non monetary assets/liabilities?

Answer 5

Marketable securities and inventory carried at cost
Prepaid expenses
PPE and A/D
Intangibles
Deferred income
Preferred stock at issuance price and C/S