Translation of Foreign Currency Financial Statemetns

Question 1

What is in AOCI?

Answer 1

Cumulative translation adjustment, Unrealized foreign exchange gains and losses, gains and losses on cash flow hedges, unrealized gains and losses on available-for-sale marketable securities, and adjustments for pension accounting

Question 2

Computation of translation adjustment

Answer 2

A) Net asset balance at beginning of year exchange rate, Change in Net Assets at their exchange rates on date of transaction
B) Net asset balance at end of year at current exchange rate.

The difference between A and B is the translation adjustment, reported in AOCI.

Question 3

Where is cumulative translation adjustment held? When does it leave here and where does it go?

Answer 3

In AOCI only until the forieng operation is sold or liquidated. Upon disposition, the cumulative translation adjustment related to the particular entity is removed from AOCI and included as part of the gain or loss on the sale of the investment. The accumulated unrealized foreign exchange gain or loss has been deferred in AOCI becomes realized upon disposition.

Question 4

Where is cumulative translation adjustment held? When does it leave here and where does it go?

Answer 4

In AOCI only until the forieng operation is sold or liquidated. Upon disposition, the cumulative translation adjustment related to the particular entity is removed from AOCI and included as part of the gain or loss on the sale of the investment. The accumulated unrealized foreign exchange gain or loss has been deferred in AOCI becomes realized upon disposition.