Chapter 13 Translation of Financial Statements of Foreign Affiliates - 2nd
Chapter 13 Translation of Financial Statements of Foreign Affiliates - 2nd
Translation of Financial
Statements of Foreign Affiliates
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Foreign Affiliates:
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LO 8 The functional currency is the U.S. dollar.
Translation Method
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LO 8 The functional currency is the U.S. dollar.
Translation of Foreign Currency Financial Statements
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Translation Method – current rate method
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LO 8 The functional currency is the U.S. dollar.
Translation Method - current rate method
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LO 8 The functional currency is the U.S. dollar.
Translation Method - current rate method
Temporal method.
Monetary assets and liabilities such as cash,
receivables, and payables are translated at the current
exchange rate.
Assets and liabilities carried at historical cost are
translated at historical exchange rates.
Assets and liabilities carried at current values (such as
inventory carried at market when applying the lower of
cost or market rule) are translated at the current
exchange rate.
Thus, the temporal method places emphasis on whether
an account is measured in terms of historical cost or
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current values. LO 8 The functional currency is the U.S. dollar.
Translation – Temporal Method
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LO 8 The functional currency is the U.S. dollar.
Translation – Temporal Method
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LO 8 The functional currency is the U.S. dollar.
Translation – Temporal Method
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LO 8 The functional currency is the U.S. dollar.
Translation – Temporal Method
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LO 8 The functional currency is the U.S. dollar.
Translation – Temporal Method
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LO 8 The functional currency is the U.S. dollar.
Translation – Temporal Method
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LO 8 The functional currency is the U.S. dollar.
Translation – Temporal Method
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LO 8 The functional currency is the U.S. dollar.
Translation – Temporal Method
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LO 8 The functional currency is the U.S. dollar.
Translation – Temporal Method
Analysis
gain or
loss:
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LO 8 The functional currency is the U.S. dollar.
Translation – Comparison the Two Methods
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LO 8 The functional currency is the U.S. dollar.
Translation – Temporal Method
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LO 7 The functional currency is the local currency.
Translation – Temporal Method
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LO 7 The functional currency is the local currency.
Translation – Temporal Method
Required:
Balance Sheet
Cash and receivables 55,000
55,000 0.5321 29,266
Net property, plant, equipment 37,000
37,000 0.5987 22,152
Total
Total assets
assets 92,000
92,000 51,418
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LO 7 The functional currency is the local currency.
Financial Statement Disclosure
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LO 10 Required disclosure.
Financial Statement Disclosure
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LO 10 Required disclosure.
Date of Acquisition
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Date of Acquisition
On January 2, SFr Company reported common stock of 960,000
francs, additional paid-in capital of 300,000 francs, and retained
earnings of 480,000 francs for a net asset balance of 1,740,000
francs. The difference between implied and book value in francs
and dollars is allocated to land and buildings.
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After Acquisition
P Company accounts for its investment by the cost method. In this
case, SFr Company declared and paid a 300,000 franc dividend on
September 1 when the direct exchange rate was $.16. The book
entry to record the dividend receipt is:
Cash 38,400
Dividend income 38,400
(300,000 francs x $.16 = $48,000 x .80 = $38,400)
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After Acquisition
Workpaper entries assuming current rate method.
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After Acquisition
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After Acquisition
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Consolidation Assuming Temporal Method
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Remeasurement and Translation of Transactions
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Elimination of Intercompany Profit
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Liquidation of a Foreign Investment
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ADVANCE ACCOUNTING II - SYLLABUS
SESION TOPIC
I & II Chapter 10 (Book 1) : Insolvency – Liquidation &
Reorganization
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Copyright
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contained herein.
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