Multinational Operations

Question 1

What is exposure to Foreign Exchange Risk or Transaction Exposure?

Answer 1

the value of the foreign currency might change relative to the Local currency .

Question 2

If I have a net asset balance sheet exposure and the foreign currency strengthens

Answer 2

I have a positive adjustment

Question 3

If I have a net asset balance sheet exposure and the foreign currency weakens

Answer 3

I have a negative adjustment

Question 4

If I have a net liability balance sheet exposure and the foreign currency strengthens

Answer 4

I have a negative adjustment

Question 5

If I have a net liability balance sheet exposure and the foreign currency strengthens

Answer 5

I have a positive adjustment

Question 6

What kind of balance sheet exposure do we have if we use current rate?

Answer 6

Typically net asset balance sheet exposure

Question 7

If functional currency is same as parent which method do we use?

Answer 7

Temporal method

Question 8

If functional currency is different as parent which method do we use?

Answer 8

Current rate method

Question 9

Foreign currency = functional currency

Answer 9

Current rate method

Question 10

presentation currency = Functional currency

Answer 10

Temporal method

Question 11

What is the process of translation using current rate.

Answer 11

1. identify the functional currency.
2. Translate for currency on functional statement into functional currency.
3. use current spot rate to translate for functional currency balance to parent presentation currency.

Question 12

By definition, for accounting purposes, a foreign currency is any currency other than a company’s …

Answer 12

Functional currency