Price Levels-Foreign Exchange Flashcards
Hedge of a Net Investment in a foreign entity. (L)
Gains or losses are reported in comprehensive income as part of the translation adjustment.
The measuring units that can be used to measure either attribute are? (L)
Nominal dollars or Constant dollars
Main IFRS difference in Foreign Exchange (L)
Foreign currency and derivatives IFRS requires that an entity report its measurement currency. This US does not have this rule.
Dollars that are not adjusted to reflect changes in purchasing power. (L)
Nominal Dollars
ASC 255 (L)
Entails disclosing certain amounts which would appear in current cost/constant dollar financial statements.
An Asset or Liability is “denominated” in foreign currency (L)
When asset and liability amounts are fixed in terms of a foreign currency regardless of exchange rate changes.
Functional Currency is Neither Local Currency nor Reporting Currency (L)
If the functional currency is a foreign currency other than the local currency, then the foreign currency statements are first remeasured in the functional currency before they are translated to U.S. dollars using the current rate method.
_________is the only relevant measure for derivative instruments. (L)
Fair value
Cash Flow Hedge of a forecasted transaction denominated in foreign currency. (ASC 815) (L)
Gains and losses are recognized in comprehensive income
Attributes of assets that accountants might measure are? (L)
Historical cost or Current cost
Functional Currency is the Reporting Currency. (L)
Entity whose operations are integrated with those of the parent, whose buying and selling activities are primarily in the parent’s country and/or the parent’s currency, and whose cash flows are available for remittance to the parent.
The cost that would be incurred at the present time. (L)
Current cost
Monetary items (L)
Sums of money whose amount is fixed or determinable without reference to future prices of specific goods or services.
An Asset or Liability is “measured” in foreign currency (L)
To quantify an attribute of an item in a unit of measure other than the reporting currency.
Functional Currency (L)
Currency of the primary economic environment in which the entity operates.
True or false? In ASC 815 Derivative instruments that meet the definition of assets and liabilities should be reported in the financial statements. (L)
True. Derivative instruments that meet the definition of assets and liabilities should be reported in the financial statements.
Fair Value Hedge of a firm commitment. (ASC 815) (L)
Gains and losses are recognized currently.
ASC 815 requires U.S. companies with foreign subsidiaries whose functional currency is the local currency to translate the subsidiary’s financial statements into U.S. dollars using the current-rate method. (L)
This method produces a translation adjustment for the period that is reported as other comprehensive income.
Historical exchange price experienced in an actual transaction. (L)
Historical cost
Historical Cost/Constant Dollars (L)
Current period CPI-U/
= conversion factor
Base period CPI-U
Consumer Price Index-Urban (CPI-U)
The period whose nominal dollars are being restated is called the base period
The period into whose dollars’ purchasing power the nominal dollars are being restated is the current period.
Accounting For Foreign Currency—ASC 815 (L)
Encompasses both expressing in dollars transactions denominated in a foreign currency, and expressing in dollars the foreign-currency-based financial statements of a subsidiary.
Speculation of foreign Currency (L)
Gain and losses are recognized currently based on foreign exchange rates.
Foreign Currency Transactions (L)
A change in the exchange rate between the foreign currency and the dollar results in a gain or loss that is recognized in determining the dollar net income for the period in which the rate changes.
Dollars that are restated to reflect changes in purchasing power. (L)
Constant Dollars
Fair Value Hedge of an exposed asset or liability. (ASC 815) (L)
Gains and losses are recognized currently.
