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International test 2
josefy
72
Criminology
Graduate
01/24/2012

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Term
economic exposure
Definition
the effect of changes in foreign currency values on a firm's future sales and future costs
Term
translation
Definition
the process of restating financial information from one currency to another
Term
a foregin currency asset of liability is said to be exposed to currency risk if a change in the rate at which currencies are exchagned causes the parent currency equivalent to change
Definition
Term
conversion
Definition
the physical exchange of one currency for another
Term
translation
Definition
simply a change in monetary expression,
Term
foregin exchange rate
Definition
the price of a unit of one currency expressed in terms of another
Term
direct spot quote
Definition
the exchange rate specifies the number of domestic currency units needed to acquire a unit of foregin currency
Term
indirect spot quote
Definition
the price of a unit of the domestic currency in terms of the foregin curerncy
Term
transaction in the forward market
Definition
agreements to exchange a specificed amount of noe currency for another at a future date
Term
ask quote
Definition
the rate that the dealer would sell you foregin currency
Term
bid quote
Definition
what the foregin exxchange dealer would pay you for foregign currency
Term
swap transaction
Definition
involves the simulatneous spot purchase and forward sale, or spot sale and forward purchase, of a currency; often used to take advantage of higher interest rates in a foregin country while simultanouely protecting themselves from ovements in foregn exchange rate
Term
attriubte
Definition
the quantifiable characteristic of an item that is measured for accounting purpuoses
Term
current rate
Definition
the exchange rate in effect at the relevant finanical statement date
Term
discount
Definition
when the forward exchange rate is below the current spot rate
Term
exposed net asset position
Definition
the excess of assets that are measured or denominstae din foregin currency and translated at the current rate over liabiltiies that are measured or denominated in foregin currency and translated at the current rate
Term
foregin currency
Definition
a currency oter than the currency of the country being referred to; a currency oterh than the reproting currency of the enterprise being referred to
Term
forward exchange contract
Definition
an agreement to exchange currencies of different countries at a specified rate (forward rate) at a specified future date
Term
functional currency
Definition
the primary currency in which an entity does busienss and generates and spends cash; usually the currency of the country where the entity is located and teh currency in which the books of record are maintained
Term
histroical rate
Definition
the foregin exchange rate that prevailed when a foregin currency asset or liabity was first acquired or incurred
Term
monetary items
Definition
obligations to pay or rights to recieve a fixed number of currency units int he future
Term
reporting currency
Definition
the currency in which an enterprie preapres its financial staements
Term
spot rate
Definition
the exchange rate for immediate echagne of currencies
Term
translation adjumstnes
Definition
result from the process of translating financial statements from the entity's functional currency into the reporting currency
Term
current rate
historical rate
average rate
Definition
three exchange rates that can be sued to translate foregin currency blaances to domestic currency
Term
current rate
Definition
the echagne rate prevailing as of the finaical statement date
Term
historical rate
Definition
the prevailing exchange rate when a foregin currency asset is first acquired or a foregin currency liabiilty first incurred
Term
average rate
Definition
a simple or weighted average of either current or historical exchange rates
Term
use of historical exchange rates shields finanical statements from foregin currency tranlsation gains or losses
Definition
Term
gains or losses on settled transactions
Definition
arise whenver the exchange rate sued to book the original transaction differs from the rate used at settledment
Term
gains or lossess on unsettled transactions
Definition
arise whenver financial statemnts are prepared before a transaction is settled
Term
single transaction perspective
Definition
exchnage adjusmtnes are trated as an adjustment to the orignial transaction accoutns on the premise that a transaction and its settlement are a single event
Term
two transaction perspective
Definition
collection of the receivable is consdiered a separate event from the sale that gave rise to it
Term
those that use a single translation rate to restate foregin blances to their domestic currency equivalents and those that use multiple rates
Definition
two trypes of translation methods
Term
current non current method
Definition
a foregin subsidiary's current assetes and current liabilites are translated into the paretn company's reporting currency at the current rate; noncurrent a&l are translated at thistorical rates
Term
temporal method
Definition
currency tranlsation doesn't change the attribute of an item being measured; only changes the unit of measure
Term
genreal price level change
Definition
occurs when, on average, the prices of all goods and services in an economy cchange
Term
specific price change
Definition
refers to a change in the price of a specific good or service caused by changes in demand and suppply
Term
current cost adjustments
Definition
adjustming asset values for changes in specific prcies
Term
disposable wealth
Definition
the amount of a firm's net assets that could be withdrawn without reducing its beginnign elvel of net assets
Term
gearing adjustment
Definition
the benefit to shareholders' purchasing power gain from debt financing and signals that the firm need not recognize the additional replacement cost of oeprating assets to the extent they are financed by debt; "leverage"
Term
general pruchasing power equivalents
Definition
currency amounts that have been adjusted for changes in the gernal level of prices; historical cost constant currency
Term
holding gain
Definition
increase in the current cost of a nonmentary asset
Term
hyperinflation
Definition
an excessive rate of inflation, as wehn the general level of prices in an economy increase by > 25% per annum
Term
inflation
Definition
increase n the general level of prices of all goods and services in an economy
Term
monetary asset
Definition
a claim to a fixed amount of currency in the future, like cash or AR
Term
monetary gains
Definition
ncreases in genral purchasing power that occur when monetary liabilities are held during a period of inflation
Term
monetary liability
Definition
an obligation to pay a fixed amount of currency in the future, such as an account payable or debt that bears a fixed rate of itnerest
Term
monetary losses
Definition
decreases in general purchasing power that occur when moentary assets are held during a period of inflation
Term
monetary working capital adjustment
Definition
the effect of specific price changes on the total amount of working capital used by the business in its operation
Term
nominal amounts
Definition
currency amounts that have not been adjustment for changing prices
Term
non monetary asset
Definition
an asset that doesn't represent a fixed claim to cash such as inventory or plant and equipment
Term
non monetary liability
Definition
a debt that doesn't require the payment of a fixed sum of cash in the future, such as a customer advance; here the obligation is to provide the customer a good or service whose value may change because of inflation
Term
parity adjustment
Definition
an adjustment that reflects the difference in inflation between the parent and host countries
Term
permanent assets
Definition
a Brazilian term for fi assets, buildings investments, deferred changes and their respective depreciation, and depletion or amortization amounts
Term
price index
Definition
a cost ratio where the numerator is the cost of a representative "basket" of goods and services in the current year and the denominator is the cost of the same basket of goods and services in a benchmark year
Term
purchasing power
Definition
the general ability of a monetary unit to command goods and services
Term
real profit
Definition
net income that has been adjusted for changing prices
Term
replacement cost
Definition
the current cost of replacing the service potential of an asset in the normal course of business
Term
restate-translate method
Definition
used when a parent company consoidates the accounts of a foreign subsidiary located in an inflationary environment; the subsidiary's accounts are first restated for local inflation and then translated to the parent currency
Term
specific price change
Definition
the change in the price of a specific commoity, such as inventory or equipment
Term
translate-restate method
Definition
a consoliation method that first translates a foreign subsidiary's accounts to parent currency and then restates the translated amounts for parent-country inflation
Term
understated asset values result in understated expenses and overstated income
Definition
Term
historical cost constant purchasing power model
Definition
accounting for the financial statement effects of general price level changes
Term
current-cost model
Definition
accounting for the financial statement effects of specific price changes
Term
price index numbers
Definition
used to translate sums of money paid in past periods to their end of period purchasing power equivalents
Term
price level adjusted current cost model
Definition
employs both general and specific price indexes to account for changing prices
Term
1973
Definition
when was the IASC created?
Term
reconciliation
Definition
foreign firms can prepare financial statements using home country accounting standards, but also must provide a reconciliation between critical counting measures of the home country and the country where the financial statements are being filed
Term
IASB
EU
IOSCO
IFAC
UN ISAR
OECD working group
Definition
six organizations that have been key players in setting international accounting standards
Term
IASB
Definition
international private sector representative
Term
deration of exchanges
Definition
promotes the professional business development of financial markets
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