Foreign Currency Translation

Question 1

How do transactions denominated in a currency other than a company’s functional currency affect the income statement?

Answer 1

Fluctuations in that currency cause a G/L that must be recognized on the income statement as Income from Continuing Operations.

Question 2

For the balance sheet, which date’s translation rate is used to report assets & liabilities?

Answer 2

The current translation rate as of the balance sheet date is used to report assets & liabilities

Question 3

Which date’s currency translation rate is used for the reporting of revenue and expense transactions in a foreign currency?

Answer 3

Use the weighted average exchange rate for the current year.

Question 4

If the functional currency is the reporting currency, which exchange rate is used on the foreign currency financial statements?

Answer 4

Foreign Currency Financial Statements are remeasured into the Reporting Currency (Dollar) using the weighted avg exchange rate.

Question 5

Where are re-measurement G/L due to foreign currency translation reported?

Answer 5

On the income statement as Other Income