Advanced Exam 10: book review

Balance sheet accounts translated using the same exchange rate under both the current rate and temporal methods include A. additional paid in capital B. cash and receivables C. intangible assets long-term debt

A, B, & D

The indicators by the FASB for determining the functional currency of a foreign entity include A. whether sales prices are directly affected by short-term fluctuations in the exchange rate B. the currency in which the foreign entity obtains its financing C. the volatility of the currency in which the foreign entity is located D. whether the foreign entity's cash flows directly affect the parent's cash flows

A, B, & D

The net asset balance sheet exposure of a foreign entity can be hedged using a A. foreign currency note payable B foreign currency option C. foreign currency note receivable D. foreign currency forward contract

A, B, & D

The indicators provided by the FASN for determining the functional currency of a foreign entity include A. Whether the foreign entity;s cash flows directly affect the parent's cash flows B. the volatility of the currency in which the foreign entity is located C. whether sales prices are directly affected by short-term fluctuations in the exchange rate D. the currency in which the foreign entity obtains its financing.

A, C, & D

A U.S-based company must use the temporal method to translate the financial statements of a foreign subsidiary whose functional currency is A. the euro B. the U.S dollar C. a foreign currency

B

A U.S.- based company must use the current rate method to translate the financial statements of a foreign subsidiary whose functional currency is A. the U.S dollar B. a foreign currency C. The euro

B

The ____exchange rate is the exchange rate that exists at the balance sheet date

current

A net liability balance sheet exposure coupled with an appreciation in the value of a foreign currency will result in a ____ translation adjustment.

negative

When the temporal method is used, the financial statement items of a foreign entity are said to be_____ into parent company currency

remeasured

Sales revenue recognized evenly throughout the year by a foreign subsidiary should be translated under the current rate method using the A. beginning of year exchange rate B. average-for-the-period exchange rate C. end of year exchange rate

B

Current U.S. GAAP recognizes that some foreign entities A. are relatively self-contained and integrated with the local economy and therefore primarily conduct business using parent company currency B. are relatively self-contained and integrated with the local economy and therefore primarily conduct business using foreign currency C. are closely integrated with their parent company and therefore primarily conduct business using parent company currency D. are closely integrated with their parent company and therefore primarily conduct business using foreign currency.

B & C

Conceptually, translation adjustments that result from applying either the current rate method or the temporal method could be A. included in consolidated net income as a translation gain or loss B. included in consolidated other comprehensive income as a deferred translation gain or loss C. excluded from the consolidated financial statements

A & B

Under the current rate method of translation A. revenue generated evenly throughout the year are translated at the average-for-the-year exchange rate B. expenses incurred evenly throughout the year are translated at the current exchange rate C. revenues generated evenly throughout the year are translated at the current exchange rate D. expenses incurred evenly throughout the year are translated at the average-for-the-year exchange rate

A & D

Under the temporal method of translation, a foreign entity A. always has a net liability balance sheet exposure B. always has a net asset balance sheet exposure C. can have a net asset or a net liability balance sheet exposure

C

When an asset carried at historical cost on a foreign currency balance sheet is remeasured into parent company currency using the temporal method the resulting parent currency balance for the asset A. represents neither the historical cost not the fair value of the asset in parent currency B. represents the fair value of the asset in parent company C. represents the historical cost of the asset in parent company

C

Current U.S GAAP recognizes that A. all foreign entities are relatively self-contained and are integrated with the local economy B. all foreign entities are closely integrated with their parent company C. some foreign entities are relatively self-contained and are integrated with the local economy D. some foreign entities are closely integrated with their parent company

C & D

A depreciation in the value of a foreign currency will result in a negative translation adjustment when a foreign subsidiary has a net_____balance sheet exposure

asset

When the gain on the financial instrument used to hedge a net investment in foreign operation exceeds the translation adjustment being hedged, the difference is A. recognized as a gain in net income B. recognized as an asset on the balance sheet C. treated as a deferred gain in accumulated other comprehensive income on the balance sheet

A

Translating a foreign currency balance sheet account at the current exchange rate gives rose to A. balance sheet exposure to foreign exchange risk B. transaction exposure to foreign exchange risk C. economic exposure to foreign exchange risk

A

Under the current rate method of translation, the balance sheet items translated at the current exchange rate are A. all assets and all liabilities B. all assets and current liabilities C. all assets, all liabilities, and all stockholders' equity D. current assets and current liabilities

A

Under the temporal method of translation, assets carried on the foreign entity's balance sheet at a current or future value are translated using A. the current exchange rate B. historical exchange rates C. the average-for-the-period exchange rates

A

Translating an asset on a foreign subsidiary's balance sheet at the current exchange rate results in A. a positive translation adjustment when the foreign currency has appreciated B. a negative translation adjustment when the foreign currency has depreciated C. a positive translation adjustment when the foreign currency has depreciated D. a negative translation adjustment when the foreign currency has appreciated

A & B

Translation using the temporal method with remeasurement gains and losses recognized in net income is appropriate for those foreign entities. A. that are located in highly inflationary economies B. that have the U.S dollar as their functional currency C. that have a foreign currency as their functional currency

A & B

Determining the functional currency of a foreign entity might require management to exercise considerable judgment in considering relevant facts A. true B false

B

In calculating the translation adjustment when the current rate method is used, the focus is on determining the impact that exchange rate changes have on A. the beginning balance and changes in assets B. the beginning balance and changes in net assets C. the beginning balance and changes in retained earnings

B

In determining the translation adjustment when the current rate method is used, dividends declared by the foreign entity in the current year are translated using the A. end-of-the-year (i,e.., current) exchange rate B. exchange rate on the date the dividends are declared C. average-for-the-year exchange rate

B

Assuming that all expenses are incurred evenly throughout the year, those expenses translated using a different exchange rate under the current rate method than under the temporal method include A. advertising expense B. cost of goods sold C. depreciation expense D. insurance expense

B & C

There is no need to keep record of the acquisition date exchange rated related to A. assets translated at historical exchange rates under the temporal method B. assets translated at the current exchange rate under the temporal method C. assets translated under the current rate method

B & C

Current U.S. GAAP recognizes that A. All foreign entities primarily conduct their operations in parent company currency B. some foreign entities primarily conduct their operations in parent company currency C. All foreign entities primarily conduct their operations in foreign currency D. Some foreign entities primarily conduct their operations in foreign currency.

B & D

A net asset balance sheet exposure will generate a positive translation adjustment when the foreign currency A. decreases (depreciated) in value B. does not change in value C. increase (appreciated) in value

C

Exposure to translation adjustment exists for those foreign currency balances that are translated at A. the historical exchange rate B. both the current and historical exchange rates C. the current exchange rate

C

Under the current rate method of translation A. Current liabilities are translated at the current exchange rate and noncurrent liabilities are translated at historical rates B.monetary liabilities are translated at the exchange rate and nonmonetary liabilities are translated at historical rates C. All liabilities are translated at the current exchange rate. D. All liabilities other than deferred income taxes are translated at the current exchange rate

C.

Under the temporal method, expenses are translated using A. the current exchange rate only B. historical exchange rates only C. the average-for-the-year exchange rate only D. the average-for-the-year and historical exchange rates

D

A U.S-based company has a foreign subsidiary. The functional currency of the foreign subsidiary can be either the U.S dollar or a _____ currency.

Foreign

Consistent with the underlying assumption of the current rate method that the net investment in a foreign operation is exposed to foreign exchange risk, all assets and liabilities of the foreign operation are translated into parent company currency using the _______ exchange rate

current

Foreign currency balance sheet accounts that are translated at the current exchange rate are____ to translation adjustment

exposed

The primary currency of a foreign entity's operating environment is its_____currency

functional

The_______ exchange rate is the exchange rate that existed when a transaction occurred sometime in the past

historical

In determining the remeasurement gain or loss that results when the temporal method of translation is used the beginning net_______ asset or liability position is translated using the beginning-of-the-year exchange rate.

monetary

The U.S. dollar is the____ currency for a U.S. based company

reporting

Under the temporal method of translation, balance sheet accounts translated at the current exchange rate include A. cash and receivables B. accounts and notes payable C. common stock and additional paid in capital D. equipment, buildings, and land

A & B

Under the temporal method of translation, balance sheet accounts translated at historical exchange rates include A. equipment, buildings, and land B. cash and receivables C. accounts and notes payable D. common stock and additional paid-in capital

A & D

The functional currency of a foreign is defined as the A. currency of the country in which the foreign entity is located B. primary currency of the foreign entity's operating environment C. currency of the country in which the parent company is located

B

Under the temporal method, expenses related to assets that are translated at historical exchange rates (such as depreciation expense) are translated using A. the average-for-the-year exchange rate B. historical exchange rates C. the current exchange rate

B