ch 8 Adv Fin Accting

the accounts of a foreign subsidiary are translated into the parent's currency using a combination of__________________________

current and historical exchange rates

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

negative

in consolidating a foreign subsidiary, the current translation adjustment on the excess of fair value over book value related to that foreign subsidiary must be ....

recognized through an adjusting entry on the consolidation worksheet

under the current rate method of translation, revenues and expenses generally are translated at .......

the average of the period exchange rate

under the temporal method, depreciation expense and accumulated depreciation on property, plant, and equipment are translated ....

using the historical exchange rate when the property, plant, and equipment was acquired

there is no need to keep record of the acquisition date exchange rates related to ...

- assets translated under the current rate method - assets translated at the current exchange rate under the temporal method

under the temporal method of translation, balance sheet accounts translated at the current exchange rate include.....

- cash and receivables - accounts and notes payable

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 ...

- cost of goods sold - depreciation expense

assets translated using a different exchange rate under the current rate method than under the temporal method include...

- intangible assets - property, plant and equipment

locations in the financial statements where companies typically present an analysis of the change in cumulative translation adjustment includes .......

- the notes to financial statements - the statement of comprehensive income

under both the current rate and temporal methods of translation earnings of a foreign entity are translated into parent company currency by multiplying ending retained earnings in foreign currency by the average-for-the-period exchange rate. True or False

False translation of retained earnings requires separate translation of foreign currency net income and dividends and then combining these with beginning retained earnings in parent currency.

the current year's translation related to a foreign subsidiary is recognized as an adjustment to the investment in foreign subsidiary account on the parent company's books. T or F

True

in consolidating a foreign subsidiary, the excess of fair value over book value must be translated into the parent's currency and ....

a translation adjustment related to the excess must be recognized in the consolidation worksheet

under the current rate method of translation, the balance sheet items translated at the current exchange rate are ....

all assets and all liabilities

a U S based company has a foreign subsidiary that has the Mexican peso as its functional currency. The Mexican subsidiary recognizes in its Mexican peso income statement a foreign exchange gain on a Colombian peso account receivable. In preparing its consolidated income statement, the U S parent company should translate the Mexican subsidiary's foreign exchange gain into U S dollars using the ....

average for the year exchange rate between the Mexican peso and U S dollar

when the amount of assets translated at the current exchange rate is lower than the amount of liabilities translated at the current exchange rate .........

a net liability balance sheet exposure exists

consistent with the basic objective of the temporal method, land held on the balance sheet of a foreign subsidiary should be translated into the parent company's currency so that the translated amount ...

reflects the amount of parent company currency that would have been paid to acquire the land

the translation adjustment arising under the current rate method becomes a realized (cash) gain or loss when ......

a foreign subsidiary is sold and the sales proceeds are converted into parent company currency

under both the current rate and temporal methods of translation the parent currency amount of retained earnings at the end of the year is determined by translating the ....

current year's net income and dividends in foreign currency separately and combining these with beginning retained earnings

under the temporal method of translation, assets carried on the foreign entity's balance sheet at historical cost are translated using...

historical exchange rates

the accounting system must keep track of the acquisition date exchange rates related to those assets that are translated at ....

historical exchange rates under the temporal method

in applying the equity method, the current year's negative translation adjustment calculated by reference to changes in net assets and a depreciation in the foreign currency....

is recognized as a credit to the investment in foreign subsidiary account

comparability of financial statements across companies within an industry is made more difficult by.....

some companies identifying local currencies as functional currency and other companies identifying the U S dollar as functional currency

under the temporal method, expenses related to assets that are translated at historical exchange rates (such as depreciation expense) are translated using.....

historical exchange rates.

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 ....

the beginning balance and changes in net assets

in determining remeasurement gains and losses under the temporal method, the focus is on determining the impact that exchange rate changes have on the .....

beginning balance and changes in net monetary assets and liabilities

each of the ratios calculated from a foreign entity's foreign currency financial statements will have a different value in parent company currency when the foreign financial statements are translated using.....

the temporal method

the translation adjustment that results from the use of the temporal method is a realized (cash) gain or loss that is caused by changes in exchange rates True or False

False

under the temporal method of translation, a foreign entity ........

can have a net asset or a net liability balance sheet exposure

the translation adjustment that results from applying the temporal method......

can be realized in cash only if the foreign entity's liabilities are paid using parent company currency

under the temporal method, cost of goods sold (cogs) in foreign currency (fc) is translated into parent company currency by ...

decomposing cogs in fc into components and then multiplying each of these components by its appropriate historical exchange rate

a company reports a negative translation adjustment in year 1 and an even larger negative translation adjustment in year 2. In aggregate, the foreign currencies in which the company primarily operates must have ......

depreciated in year 2 by a larger amount than they depreciated in year 1

when the temporal method of translation is used, inventory carried at foreign currency cost on the foreign entity's balance sheet under the lower of cost or net realizable value rule .....

- could be carried at net realizable value in parent currency on the parent's consolidated balance sheet. - could be carried at cost in parent currency on the parent's consolidated balance sheet

conceptually, translation adjustments that result from applying either the current rate method or the temporal method could be .....

- included in consolidated other comprehensive income as a deferred translation gain or loss - included in consolidated net income as a translation gain or loss

under the current rate method of translation, the balance sheet items translated at the current exchange rate are ......

all assets and all liabilities

under the current rate method of translation......

all assets are translated at the current exchange rate

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

to determine whether a country has a hyperinflationary economy, IFRS ...

does not provide a specific threshold but instead provides a list of indicators indicative of hyperinflation

one of the consolidation worksheet entries used to eliminate the investment in subsidiary account must ......

eliminate the amount of cumulative translation adjustment that is included in the investment account

foreign currency balance sheet accounts that are translated at the current exchange rate are _____________to translation adjustment.

exposed

translating a foreign currency asset at the current exchange rate when the foreign currency has appreciated gives rise to a ___________translation adjustment.

positive

a basic objective of the temporal method of translation is to ....

produce a set of translated financial statements as if the foreign operation had used the parent company's currency in its daily operations

under the temporal method, a gain on the sale of land in foreign currency (fc) is translated into parent company currency by multiplying the cash proceeds from the sale in fc by the exchange rate in effect on the date of sale and ...

subtracting the product of multiplying the cost of the land in fc by the exchange rate in effect when the land was acquired

a net asset balance sheet exposure exists when......

the amount of assets translated at the current exchange rate is higher than the amount of liabilities translated at the current exchange rate.

under the temporal method, expenses are translated using....

the average for the year and historical exchange rates

the methods used in valuing assets on the foreign currency financial statements of a foreign entity are maintained in the translated parent company currency financial statements when ......

the temporal method is used to translate the foreign financial statements

net cash from operations reported in the translated statement of cash flows will be the same regardless of whether a foreign entity's financial statements have been translated using the current rate method or remeasured using the temporal method. True or False

true the amount of cash inflows and cash outflows are unaffected by the translation method used

net cash from operations reported in the translated statement of cash flows.....

will be the same regardless of whether the current rate method or temporal method is used