Multinational Accounting What role does the unit of measurement assumptionplay in multinational accounting?a) It requires translation of foreign operations intoreporting currencyb) It only applies to domestic transactionsc) It prohibits foreign currency transactionsd) It requires all transactions in gold standard

Explanation of Unit of Measurement Assumption: The unit of measurement assumption is a fundamental…

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International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter10: Measuring Exposure To Exchange Rate Fluctuations

Section: Chapter Questions

Problem 3QA

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1. Which of the following statements is incorrect? * A. A foreign operation (e.g., a branch) that is essentially an extension of the entity (e.g., the home office) would have the same functional currency as that of the entity. B. An entity can only have one functional currency but it can have as many presentation currencies as it wishes. C. Subsequent to initial recognition, both monetary and non-monetary items arising from a foreign currency transaction are translated at the closing rate. D. A foreign currency transaction is initially recognized at the spot exchange rate at the date of the transaction. 2. According to PAS 21, exchange differences arising from the translation of monetary items arising from foreign currency transactions are recognized in * A. Directly in equity B. Any of these C. Other comprehensive income D. Profit or loss
Examples of external reporting issues include the following except: Select one: O a. Should accounts of foreign operations be translated to parent currency when consolidated statements are prepared? O b. Which exchange rates should be employed when translating from one currency to another? c. Should foreign managers be evaluated in terms of parent currency or the local currency of the country in which the manager operates? O d. Does translation from one set of measurement rules to another change the information content of the original message?
Please answer it if is TRUE or FALSE.
22.Examples of external reporting issues include the following except:Select one:a. Should accounts of foreign operations be translated to parent currency when consolidated statements are prepared?b. Which exchange rates should be employed when translating from one currency to another?c. Does translation from one set of measurement rules to another change the information content of the original message?d. Should foreign managers be evaluated in terms of parent currency or the local currency of the country in which the manager operates?
Which of the following suggests that the foreign entity's functional currency is the parent's currency? a. Intercompany transaction volume is low. b. Debt is serviced through local operations. c. There is an active and primarily local market. d. Sale prices are influenced by international factors.
What term is used to describe the process of reducing foreign exchange risk? Choose the correct. A)international accounting B)exposure C)hedging D)harmonization
F. Accounting
Question What causes balance sheet (or translation) exposure to foreign exchange risk? How does balance sheet exposure compare with transaction exposure? In translating a foreign subsidiary's financial statements, what exchange rate should be used for the subsidiary's revenues and expenses? How can a parent corporation determine the functional currency for a foreign subsidiary that conducts business in more than one country? What concept underlies the temporal method of translation? What concept underlies the current rate method of translation? How does balance sheet exposure differ under these two methods? What are the major procedural differences in applying the current rate and temporal methods of translation?
A). Why do we need to translate the financial statement of foreign operations? B). Explain the concepts of local currency, functional currency and presentation, orrency with example. K C). How is the profit or loss from translating foreign operations' financial statements from local currency to functional currency treated? D) How are the profit and loss from translating foreign ope ions' financial statements from functional currency to presentation currency treated?
Which of the following considerations would not be relevant in determining the entity's functional currency? The currency that influences the costs of entity O The currency that is most internationally acceptable for trading The currency in which receipts from operating activities are retained O The currency in which finance or fund is generated
Explain why the following statement is true or false: “Direct intervention for currency valuation involves limiting the ability to exchange domestic currency for foreign currency.”
Question 6 Which of the following statements is FALSE with respect to the accounting for a change in the functional currency? The effect of a change in functional currency is accounted for prospectively Once the functional currency is determined, it can be changed even if there is no change to the underlying transactions, events and conditions Once the functional currency is determined, it can be changed only if there is a change to the underlying transactions, events and conditions When there is a change in an entity's functional currency, exchange differences arising from the translation previously recognized in other comprehensive income are not immediately reclassified from equity to profit or loss

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What role does the unit of measurement assumption play in multinational accounting? a) It requires translation of foreign operations into reporting currency b) It only applies to domestic transactions c) It prohibits foreign currency transactions d) It requires all transactions in gold standard