Advanced Financial Accounting
11th Edition
ISBN: 9780078025877
Author: Theodore E. Christensen, David M Cottrell, Cassy JH Budd Advanced Financial Accounting
Publisher: McGraw-Hill Education
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Question
Chapter 12, Problem 12.2.5E
To determine
Introduction: Translation is the method used to convert financial results of the business of subsidiary company into the functional currency of parent company.
Re-measurement: It is process to measure the financial results of any other currency into functional currency.
To choose:The correct option.
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If the functional currency is determined to not be the foreign entity's local currency, translation is done using
a.
the current rate method
b.
the functional method
c.
the remeasurement method
d.
the derivative method
The effects of changes in foreign exchange rates states that where an entity has foreign operations, such as overseas subsidiaries, branches, joint ventures or associates, it should determine the functional currency of that foreign operation. MFRS 121 The Effects of Changes in Foreign Exchange Rates deals with this issue.
Required:Explain the factors which should be taken into consideration in determining whether or not the functional currency of a foreign operation is the same as that of its parent.
Choose the correct. In accounting for foreign currency transactions, which of the following approaches is used in the United States?a. One-transaction perspective; accrue foreign exchange gains and losses.b. One-transaction perspective; defer foreign exchange gains and losses.c. Two-transaction perspective; defer foreign exchange gains and losses.d. Two-transaction perspective; accrue foreign exchange gains and losses.
Chapter 12 Solutions
Advanced Financial Accounting
Ch. 12 - Prob. 12.1QCh. 12 - Prob. 12.2QCh. 12 - Prob. 12.3QCh. 12 - How widely used are IFRS? Can IFRS be used for...Ch. 12 - Prob. 12.5QCh. 12 - Prob. 12.6QCh. 12 - Prob. 12.7QCh. 12 - Prob. 12.8QCh. 12 - Prob. 12.9QCh. 12 - Prob. 12.10Q
Ch. 12 - Prob. 12.11QCh. 12 - Prob. 12.12QCh. 12 - Prob. 12.13QCh. 12 - Prob. 12.14QCh. 12 - Prob. 12.15QCh. 12 - Prob. 12.16QCh. 12 - Prob. 12.17QCh. 12 - Prob. 12.18QCh. 12 - Prob. 12.19QCh. 12 - Prob. 12.20QCh. 12 - Prob. 12.4CCh. 12 - Prob. 12.5CCh. 12 - Prob. 12.6CCh. 12 - Prob. 12.7CCh. 12 - Prob. 12.1.1ECh. 12 - Prob. 12.1.2ECh. 12 - Prob. 12.1.3ECh. 12 - Prob. 12.1.4ECh. 12 - Prob. 12.1.5ECh. 12 - Prob. 12.1.6ECh. 12 - Prob. 12.1.7ECh. 12 - Prob. 12.2.1ECh. 12 - Prob. 12.2.2ECh. 12 - Prob. 12.2.3ECh. 12 - Prob. 12.2.4ECh. 12 - Prob. 12.2.5ECh. 12 - Prob. 12.2.6ECh. 12 - Prob. 12.3ECh. 12 - Prob. 12.4.1ECh. 12 - Prob. 12.4.2ECh. 12 - Prob. 12.4.3ECh. 12 - Prob. 12.4.4ECh. 12 - Prob. 12.4.5ECh. 12 - Prob. 12.4.6ECh. 12 - Prob. 12.4.7ECh. 12 - Prob. 12.5ECh. 12 - Prob. 12.6ECh. 12 - Prob. 12.7ECh. 12 - Prob. 12.8ECh. 12 - Translation with Strengthening U.S. Dollar Refer...Ch. 12 - Remeasurement with Strengthening U.S. Dollar Refer...Ch. 12 - Prob. 12.11ECh. 12 - Prob. 12.12ECh. 12 - Prob. 12.13ECh. 12 - Prob. 12.14ECh. 12 - Prob. 12.15ECh. 12 - Prob. 12.16PCh. 12 - Prob. 12.17PCh. 12 - Prob. 12.18PCh. 12 - Proof of Translation Adjustment Refer to the...Ch. 12 - Prob. 12.20PCh. 12 - Prob. 12.21PCh. 12 - Remeasurement and Proof of Remeasurement Gain or...Ch. 12 - Prob. 12.23PCh. 12 - Prob. 12.24PCh. 12 - Prob. 12.25PCh. 12 - Prob. 12.26PCh. 12 - Prob. 12.27PCh. 12 - Prob. 12.28PCh. 12 - Prob. 12.29PCh. 12 - Prob. 12.30PCh. 12 - Prob. 12.31PCh. 12 - Prob. 12.32PCh. 12 - Prob. 12.33P
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Similar questions
- In SFAS No. 52 (see FASB ASC 830), the FASB adopted standards for financial reporting of foreign currency exchanges. This release adopts the functional currency approach to foreign currency translation. Required: A. Discuss the functional currency approach to foreign currency translation. B. Discuss the terms translation and remeasurement as they relate to foreign currency translation.arrow_forwardA). 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?arrow_forwardwhich shall be recognized for each item when foreign currency gain or loss that arises from translation of foreign currency denominated transaction to functional currency? a. inventiry b. interest expense c. accounts receivable d. unearned revenuearrow_forward
- In presenting foreign currency denominated transactions to the functional currency of the entity, which of the following statements is correct? a. When nonmonetary items are translated from foreign currency to functional currency in the financial statements, foreign currency gain of loss will be recognized. b. Monetary items shall be initially recognized and measured at the exchange rate prevailing at the end of the reporting period. c. Foreign currency gain or loss arising from translation of the foreign currency denominated items to functional currency shall be presented in other comprehensive income with reclassification adjustment to profit or loss if realized. d. Foreign currency denominated income statement accounts shall be translated using the exchange rate at the date of transaction.arrow_forwardA) Explain the concepts of Local Currency, Functional Currency and Presentation Currency with suitable examples. B) Explain the rule for translating the Financial Statements of Foreign Operations from Local Currency to Functional Currency. C) Explain the rule for translating the Financial Statements of Foreign Operations from Functional Currency to Presentation Currency.arrow_forwardA direct exchange quotation is one in which the exchange rate is quoted O a. For the immediate delivery of currencies exchanged O b. For the future delivery of currencies exchanged O c. In terms of how many units of the domestic currency can be converted into one unit of foreign currency O d. In terms of how many units of the foreign currency can be converted into one unit of domestic currencyarrow_forward
- Statement 1 - A foreign currency transaction is initially recognized by translating the foreign currency amount into the functional currency using the spot exchange rate at the date of the transaction. Statement 2- An entity is required to present its financial statements using its presentation currency (i.e.,Philippine pesos). However, whenever needed, the entity may translate its financial statements into any functional currency. Select the correct response: Both statements are incorrect Only statement 1 is correct Only statement 2 is correct Both statements are correctarrow_forward45 In presenting foreign currency denominated transactions to the functional currency of the entity, which of the following statements is correct? Group of answer choices When nonmonetary items are translated from foreign currency to functional currency in the financial statements, foreign currency gain of loss will be recognized. Monetary items shall be initially recognized and measured at the exchange rate prevailing at the end of the reporting period. Foreign currency denominated income statement accounts shall be translated using the exchange rate at the date of transaction. Foreign currency gain or loss arising from translation of the foreign currency denominated items to functional currency shall be presented in other comprehensive income with reclassification adjustment to profit or loss if realized.arrow_forwardExplain the concepts of Local Currency, Functional Currency and Presentation Currency with suitable examples Explain the rule for translating the Financial Statements of Foreign Operations from Local Currency to Functional Currencyarrow_forward
- In accounting for foreign currency transactions, which of the following approaches is used in the United States?a. One-transaction perspective; accrue foreign exchange gains and losses.b. One-transaction perspective; defer foreign exchange gains and losses.c. Two-transaction perspective; defer foreign exchange gains and losses.d. Two-transaction perspective; accrue foreign exchange gains and losses.arrow_forwardDescribe the functional currency concept and briefly describe how a foreign entity’s functional currency Is determined.arrow_forward1. 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 lossarrow_forward
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