Advanced ACC Chapter 10
Under both the current and temporal method, the parent currency amount of RE at the end of year is determined by translating the a. CY's NU and dividends in FC separately and combining these with beg. RE b. end. RE in FC at the current rate c. dividends and ending RE in FC at the avg. rate
A
In translating FC FS into parent company currency using the current method, a trans. adjustment can be calculated as a balancing amount. This balancing amount is a. the current year's trans. adjustment b. the current year's remeasurement G/L c. the cumulative trans. adjustment
C
When the amount of assets translated at the current rate is lower than the amount of liabilities translated at the current rate a. a net liability BS exposure exists b. a net asset transaction exposure exists c. a net asset BS exposure exists d. a net liability transaction exposure exists
A
Sales revenue recognized evenly throughout the year by a foreign subsidiary should be translated under the current rate method using the ___ rate a. EOY b. avg c. BOY
B
The FC financial statements of a foreign entity located in a highly inflationary economy a. may be translated using the current rate or temporal method, depending on the functional currency b. must be translated using the temporal method c. must be translated using the current rate method
B
The translation adjustment arising under the current method becomes a realized (cash) gain or loss when a. the parent sends parent company currency to the foreign subsidiary that is used to pay all of its liabilities b. a foreign subsidiary is sold and the sales proceeds are converted into parent company currency c. a foreign subsidiary's assets and liabilities are translated at the current exchange rate
B
Under the temporal method, depreciation expense and accumulated depreciation on property, plant, and equipment are translated a. using the avg. rate b. using the historical rate when the PP&E was acquired c. using the current rate on the BS date
B
Translation using the temporal method with remeasurement G/L recognized in NI is appropriate for those foreign entities a. that have a FC as their functional currency b. that have US dollar as their functional currency c. that are located in highly inflationary economies
BC
The net asset BS exposure of a foreign entity can be hedged using a a. FC note receivable b. FC FWD contract c. FC option d. FC note payable
BCD
In determining the remeasurement G/L that results when the temporal method of translation is used the beginning net monetary asset or liability is translated using the _____ exchange rate.
BOY
Some of the ratios calculated from a foreign entity's FC FS will have the same value in parent company currency when the foreign FS are translated using a. either the current or temporal b. temporal method c. current method
C
The functional currency of a foreign entity is the currency in which the entity is located. A gain on FWD contract designated as a hedge of the net investment in this foreign entity is reported a. in NI in the consol. IS b. as an asset on the consol. BS c. in AOCI on the consol. BS
C
The methods used in valuing assets on the FC FS of a foreign entity are maintained in the translated parent company currency FS when a. either the current or temporal method is used to translate the foreign FS b. the current method is used to translate the foreign FS c. the temporal method is used to translate the foreign FS
C
Translation adjustments are not realized in ____
Cash
Under the current method, the BS items translated at the current rate are a. current A and current L b. all A and current L c. all A/L d. all A/L/SE
c
One of the consolidation worksheet entries used to eliminate the investment in subsidiary account must a. eliminate the amount of cumulative trans. adjustment that is included in the investment account. b. add the amount of cumulative trans. adjustment that has not been included in the investment account. c. eliminate the cumulative trans. adjustment related to the excess of fair value over book value.
A
Under the temporal method, foreign entities generally will a. have a net liability BS exposure b. have a net asset BS exposure c. not have BS exposure
A
Assuming that all expenses are incurred evenly throughout the year, those expense translated using a different exchange rate under the current rate method than under the temporal method include a. depreciation expense b. advertising expense c. COGS d. insurance expense
AC
Conceptually, trans. adjustments that result from applying either the current or temporal method could be a. excluded from consolidated FS b. included in consol. OCI as def. trans. G/L c. included in consol. NI as a trans. G/L
BC
Under the temporal method, expenses are translated using a. historical b. avg c. avg and historical d. current
C
When the temp method is appropriate, the resulting translation adjustment must be a. reported in AOCI on the BS b. reported as an A/L on the BS c. recognized as a G/L in NI
C
Under the current rate method of translation a. all liabilities are translated at the current exchange rate b. monetary liabilities are translated at the current exchange rate and nonmonetary liabilities are translated at historical rates c. all liabilities other than def income taxes are translated at the current rate d. current liabilities are translated at the current exchange rate and noncurrent liabilities are translated at historical rates
A
A depreciation in the value of a FC will result in a negative translation adjustment when a foreign subsidiary has a net ____ BS exposure
Asset
The current rate method of translation assumes that a foreign subsidiary is a. a net asset that is exposed to foreign exchange risk b. an investment that is not exposed to foreign exchange risk c. a net liability that is exposed to foreign exchange risk.
A
The trans. adjustment that results from applying the temporal method a. can be realized in cash only is the foreign entity's liabilities are paid using parent company currency b. is realized in cash immediately, just as if the current method is used to translate FS c. can be realized in cash if the foreign entity is sold and the cash proceeds are converted to parent company currency
A
The indicators provided 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. whether the foreign entity's cash flows directly affect the parent's cash flows d. the volatility of the currency in which the foreign entity is located
ABC
The accounts of a foreign subsidiary are translated into the parent's currency using a combination of A. Spot and FWD rates B. Current and future exchange rates C. Current and historical exchange rates
C
In assessing the indicators provided by the FASB for determing the functional currency of a foreign entity, the FASB a. requires the sales price indicator to be more heavily weighted than sales market indicator b. provides no guidance with regard to how the indicators should be weighed c. requires the cash flow indicator to be more heavily weighted than the financing indicator
B
Translating a FC asset at the current exchange rate when the FC has appreciated gives rise to a _____ translation adjustment
Positive
The US dollar is the _____ currency for a US based company
Reporting
In applying the equity method to account for the investment in aforeign subsidiary, the current year's positive trans. adjustment calculated by reference to changes in net assets and an appreciation in the FC is a. recognized as a debit to the Cumulative Translation Adjustment account on the parent's company's books b. recognized as a debit to the Cumulative Translation Adjustment account on the subsidiary's company's books c. recognized as a credit to the Cumulative Translation Adjustment account on the parent's company's books d. recognized as a credit to the Cumulative Translation Adjustment account on the subsidiary's company's books
C
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 RE c. the beginning balance and changes in net assets
C
Determining the functional currency of a foreign subsidiary a. is up to the judgement of mgmt b. is a matter of fact but may require mgmt judgement in evaluating the facts c. is a matter of fact that requires no judgement on the part of mgmt
B
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 US dollar b. the euro c. a FC
A
A US based company must use the current method to translate the FS of a foreign subsidiary whose functional currency is a. a FC b. US dollar c. euro
A
Under the current rate method of translation a. expenses incurred evenly throughout the year are translated at the avg. exchange rate b. revenues generated evenly throughout the year are translated at the avg. exchange rate c. expenses incurred evenly throughout the year are translated at the current exchange rate d. revenues generated evenly throughout the year are translated at the current exchange rate
AB
Locations in the FS where companies typically present an analysis of the change in cumulative translation adjustment includes a. statement of comprehensive income b. SE section of BS c. notes to FS
AC
There is no need to keep record of the acquisition date exchange rates related to a. assets translated at the current exchange rate under the temporal method b. assets translated at historical exchange rates under the temporal method c. assets translated under the current rate method
AC
BS accounts translated using the same exchange rate under both the current rate and temporal methods include a. cash and receivables b. intangible assets c. long-term debt d. APIC
ACD
When the current rate method of translation is appropriate, the resulting translation adjustment must be reported in _____ on the BS
AOCI
A company reports a negative cumulative trans. adjustment of $200 at the beginning of the year and a positive cumulative trans. adjustment of $100 at the end of the year. All of the company's foreign operations have a foreign currency as their functional currency. In aggrgate, the foreign currencies in which the company primarily operates must have a. remained at the same value throughout the current year b. increased in value in the current year c. decreased in value in the current year
B
Under the temporal method, a gain on sale of land in FC is translated into parent currency by multiplying the cash proceeds from the sale in FC by the exchange rate in effect on the date of sale and a. adding the product of multiplying the cost of the land in FC by the exchange rate in effect when the land was acquired b. subtracting the product of multiplying the cost of the land in FC by the exchange rate in effect when the land was acquired c. subtracting the product of multiplying the cost of the land in FC by the exchange rate in effect on the date of sale
B
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 an asset on the BS b. recognized as a gain in NI c. treated as a def. gain in AOCI on the BS
B
A basic objective of the temporal method is to a. reflect in the translated FS that a foreign operation is a net asset that is exposed to foreign exchange risk b. reflect in the translated FS the net realized G/L that results from a change in the value of the FC c. produce a set of translated FS as if the foreign operation had used the parent company's currency in its daily operations
C
The primary currency of a foreign entity's environment is its ____ currency.
Functional
When the temporal method is used, the FS items of a foreign entity are said to be ______ into parent company currency
Remeasured
In consolidating a foreign subsidiary, the excess fair value over book value must be translated into the parent's currency and a. a trans. adjustment must be recognized in the consol. worksheet b. the excess fair value must be recognized on the parent's books c. the excess fair value must be recognized on the sub's books
A
In translating the FS of a foreign entity located in a hyperinflationary economy, IFRS requires a. the foreign FS to be restated for inflation and then all restated balances are translated at the current rate b. use of the temporal method, with G/L reported in NI c. use of the current rate or temporal, depending on the entity's functional currency d. use of the current method, with adjustments deferred in SE
A
Similar to US GAAP, IFRS requires the gain or loss on a financial instrument used to hedge a net investment in foreign operation to be a. reported in AOCI along with the translation adjustment being hedged. b. recognized as a realized gain or loss in NI along with the translation adjustment being hedged. c. recognized as an asset or as a liability on the BS
A
When the temp method is used, inventory carried at FC cost on the foreign entity's BS under the lower of cost or net realizable value rule a. could be carried at net realizable value in parent currency on the parent's consol. BS b. will always be carried at cost in parent currency on the parent's consol. BS c. could be carried at cost in parent currency on the parent's consol. BS d. will always be carried at net realizable value in parent currency on the parent's consol. BS
AC
Under the temporal method of translation, BS accounts translated at historical exchange rates include a. CS and APIC b. accounts and notes payable c. cash and receivables d. equipment, buildings, and land
AD
Translating a FC BS account at the current rate gives rise to a. economic exposure to foreign exchange risk b. BS exposure to foreign exchange risk c. transaction exposure to foreign exchange risk
B
Under the temp method, a foreign entity a. always has a net asset BS exposure b. can have s a net asset or net liability BS exposure c. always has a net liability BS exposure
B
Under the temp. method, expenses related to assets that are translated at historical rates (such as depreciation expense) are translated using a. current rate b. historical rate c. avg. rate
B
Under the temporal method, COGS in FC is translated into parent company currency by a. decomposing COGS in FC into components and then multiplying each component by the avg. rate b. decomposing COGS in FC into components and then multiplying each component by its appropriate historical rate c. multiplying COGS in FC by the EOY rate d. multiplying COGS in FC by the avg. rate
B
A US based company has a foreign subsidiary that has the Mexican peso as its functional currency. The Mexican subsidiary recognizes in its Mexican peso IS a foreign exchange gain on a Colombian peso account receivable. In preparing its consol. IS, the US parent company should translate the Mexican subsidiary's foreign exchange gain into US dollars using the a. avg. rate between the Colombian peso and US dollar b. current rate between the Mexican peso and US dollar c. avg. rate between the Mexican peso and US dollar d. current rate between the Colombian peso and US dollar
C
Under the temporal method of translation, BS accounts translated at the current exchange rate include a. CS and APIC b. equipment, buildings, and land c. accounts and notes payable d. cash and receivables
CD
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
The net asset BS exposure related to a French subsidiary can be hedged with a a. euro NR b. US dollar NP c. US dollar NR d. euro NP
D
FC BS accounts that are translated at the current exchange rate are ___ to translation adjustment
Exposed
A net liability BS exposure coupled with an appreciation in the value of a foreign currency will result in a ____ translation adjustment
Negative
The current year's translation adjustment related to a foreign subsidiary is recognized as an adjustment to the Investment in Foreign Subsidiary account on the ______ company's books.
Parent
