Which method of translating a foreign subsidiary’s financial statements is correct?

How do you translate foreign financial statements?

When translating the financial statements of an entity for consolidation purposes into the reporting currency of a business, translate the financial statements using the following rules: Assets and liabilities. Translate using the current exchange rate at the balance sheet date for assets and liabilities.

Which method is usually required for translating a foreign subsidiary’s financial statements into the parent’s reporting currency?

The correct answer is C. The translation adjustment is a function of the foreign subsidiary’s net assets. The foreign currency translation done at the current rate methods revalues the assets and liabilities in the reported currency.

What are the two methods used to translate financial statements?

There are two main methods of currency translation accounting: the current method, for when the subsidiary and parent use the same functional currency; and the temporal method for when they do not.

What is monetary method?

The monetary method is a widely used approach to measure the size of the shadow economy. It is based on the hypothesis that cash is used to make transactions that agents want to keep hidden from official records.

THIS IS INTERESTING:  Best answer: How do I replace my expired green card?

What is temporal method?

The temporal method (also known as the historical method) converts the currency of a foreign subsidiary into the currency of the parent company. This technique of foreign currency translation is used when the local currency of the subsidiary is not the same as the currency of the parent company.

When translating a foreign entity’s financial statements using the temporal method foreign exchange differences are Recognised in?

entity, its financial statements shall be translated using the temporal method. Any exchange differences arising from translation of foreign currency monetary items shall be recognised in the same manner as specified in paragraph 50.

Which transactions should be translated in foreign currency?

Revenues, expenses, gains and losses are translated at the exchange rate in effect when these items were recognised. In practice, an appropriately weighted average rate may be used.

What is a subsidiary’s functional currency?

What is a subsidiary’s functional currency? The currency in which the entity primarily generates and expends cash. … This is true for the translation process using the current rate method: A translation adjustment is created by the change in the relative value of a sub’s net assets caused by exchange rate fluctuations.

When translating into the functional currency monetary liabilities are translated using the?

For example, monetary items are translated into the functional currency using the closing rate, and non-monetary items that are measured on a historical cost basis are translated using the exchange rate at the date of the transaction that resulted in their recognition. 35.

What method of translation is used for re measurement?

Another name of translation is the current rate method, while for remeasurement it is the temporal method.

THIS IS INTERESTING:  Is the UK allowing student visas?