Shared Flashcard Set

Details

FAR Advanced Accounting
Consolidations and Foreign Currency Transactions
7
Accounting
Professional
02/01/2010

Additional Accounting Flashcards

 


 

Cards

Term
What is the difference between a transaction and a translation adjustment?
Definition
Transaction involves two UNRELATED companies; translation is WITHIN a corporation, eg parent/sub
Term
What makes recording foreign currency investments different than recording foreign currency import/export transactions?
Definition
For import/export, you report gains and losses as they occur, from recording date to B/S date to settlement date. But for investments, you have to separate out the gain or loss from the investment itself from the change in the currency exchange rates
Term
what is involved in figuring out gains or losses on foreign currency investment transactions?
Definition
Figure out the WHOLE change T1 Inv value x T1 exchange less T2 Inv Value x T2 exchange. Then you have to separate it. (DOublecheck); You take the difference in value (eg a 10K gain and muliply it by the T1 exchange rate to get the component related to investment gain or loss, then you take the WHOLE AMT eg 160K and multiple it by the DIFFERENCE in exchange rates to get the exchange rate gain or loss. One can be a gain and the other a loss. Net the two and they should equal the total change.
Term
For purposes of determining functional currency and whether the local currency could be used, what is a "highly inflationary economy"?
Definition
a highly inflationary (hyperinflationary) economy is one that has experienced a cumulative inflation of 100% or more over the past 3 years
Term
What is the difference between translation and remeasurement?
Definition
Translation is from the functional currency to the rePORTing currency; remeasurement is from the reCORDing currency to the functional currency
Term
If the functional currency is not the same as the recording currency (eg a British co keeps its books in pounds but does its business on the continent in Euros), the process it uses to convert for its books is
Definition
remeasurement
Term
Which one of the two is possible: translation and then remeasurement, or remeasurement and then translation?
Definition
Remeasurement and then translation
Supporting users have an ad free experience!