Flashcards in Conversion of Foreign F/S Deck (27)
Recording currency is...
The currency in which the foreign books and intitial F/S are prepared.
Reporting currency is the currency in which the _____, often consolidated, statements are prepared.
Functional currecny is the currency of the ______ ______ ______ in which an entity operates and generates cash flow.
Primary economic environment
Functioanl currency = the local currency when: Foreign ops are self contained and intergrated within the country they are located. TF
Function currency cannont = local currency if...
The local economy is in hyperinflation for more than a 3 year period, use reporting currency
Functional currency = reporting currency when..
Foreign ops are a direct and integral component or extension of a U.S. entity's ops. Or the local currency is in hyperinflation for > 3 years.
The final currency presented is the reporting currency. TF
The first step in the translation conversion process is..
to insure the foreign FS are prepared according to US GAAP
During translation, assets and liabilities (balance sheet accounts) are converted using the ____ rate at the balance sheet date.
During translation, Paid in Capital accounts are converted using the _____ rate in existence when the paid in item arose.
Retained earnings is converted during translation. TF
False, it is computed Beg RE + Translated NI - Divs Declared @ spot rate = Ending RE
The amounts needed to balance the debits and credits is the ______ _____ (plug), and it is presented in OCI.
The translation process is used when the functional currency is the reporting currency. TF
False. Recording currency (local/foreign currency)
During translation, income statement accounts are converted using which rate?
During translation, dividends are converted on the date in which they are paid using the historical rate. TF
During translation, stockholder's equity accounts are converted using the average rate? TF
False, Historical rate
Re-measurement is used when the functional currency is the reporting currency. TF
True, US Dollar
During re-measurement, monetary items are remeasured using what rate?
The current exchange (spot) rate, OR the weighted average rate if the definite acquisition date cannot be determined.
During re-measurement, non-monetary items are remeasured using what rate?
The historical exchange rate that existed when the item arose
During re-measurement, revenues and expenses that occurred evenly throughout the year are remeasured using the weighted average rate. TF
During re-measurement, the adjustment needed at the end is recognized in OCI. TF
False, recognized in Income from Continuing Ops and flows through to RE
During re-measurement, depreciation is a monetary item. TF
False, it is not considered as a monetary item, therefore is measured using the historical exchange rate
Re-measurement THEN translation, occurs only when...
The functional currency = another (different, other than local) foreign currency
Gains and losses from TRANSLATION appear in OCI and in OCI only. TF
Gains and losses from RE-MEASUREMENT appear in the income statement and the income statment only. TF
The process of converting the FS measured in the recording currency into FS measured in the functional currency is called...