chapter 8
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6. In the translated financial statements, which method of translation maintains the underlying valuation methods used in the foreign currency financial statements?
a.
Current rate method; income statement translated at average exchange rate for the year.
b.
Current rate method; income statement translated at exchange rate at the balance sheet date.
c.
Temporal method.
d.
Monetary/nonmonetary method.
7.
In accordance with U.S. generally accepted accounting principles (GAAP), which translation combination would be appropriate for a foreign operation whose functional
currency is the U.S. dollar?
Method
Treatment of Translation Adjustment
6.
Temporal
Separate component of stockholders’ equity
b.
Temporal
Gain or loss in income statement
c.
Current rate
Separate component of stockholders’ equity
d.
Current rate
Gain or loss in income statement
9.
The functional currency of Garland Inc.’s Japanese subsidiary is the Japanese yen. Garland borrowed Japanese yen as a partial hedge of its investment in the subsidiary. How should the transaction gain on the foreign currency borrowing be reported in Garland’s consolidated financial statements in accordance with IFRS?
a.
The transaction gain is reported as an adjustment to interest expense in the income statement.
b.
The transaction gain is reported as an extraordinary item in the income statement.
c.
The transaction gain is offset against the negative translation adjustment related to the Japanese subsidiary in the stockholders’ equity section of the balance sheet.
d.
The transaction gain is offset against the negative translation adjustment related to the Japanese subsidiary on the income statement.
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Related Questions
Describe guidelines for determining when foreign currency financial statements are to be translated using the current rate method and when they are to be remeasured using the temporal method.
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Which accounts are remeasured (versus translated) using current exchange rates? Select one: a. All current assets and liabilities b. All assets and liabilities All revenues and expenses d. Cash, receivables, and most liabilities e. All noncurrent assets and liabilities C.
arrow_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_forward
Question:
When accounting for foreign exchange transactions, which of the following statements accurately describes the use of the "Temporal Method" under the International Financial Reporting Standards (IFRS)?
A) The Temporal Method is used to account for foreign exchange gains and losses on monetary assets and liabilities at the historical exchange rate.
B) The Temporal Method is used to account for foreign exchange gains and losses on monetary assets and liabilities at the current exchange rate.
C) The Temporal Method is used to account for foreign exchange gains and losses on non-monetary assets and liabilities at the historical exchange rate.
D) The Temporal Method is used to account for foreign exchange gains and losses on non-monetary assets and liabilities at the current exchange rate.
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31. How should exchange gains or losses resulting from foreign currency transactions be accounted for?a. Included as component of income from continuing operations for the period in which the ratechanges.b. Included as component of other comprehensive income for the period in which the rate changes.c. Included in the statement of financial position as a deferred item.d. Included in net earnings for gains, but deferred for losses.
32. When the information about two entities engaged in the same industry has been prepared and presented in similarmanner, the information exhibits the enhancing qualitative characteristics ofa. Relevanceb. Consistencyc. Faithful representationd. Comparability
33. What are the attributes that make the information provided in the financial statements useful to the readers?a. Qualitative characteristics of financial informationb. Quantitative characteristics of financial informationc. Elements of financial statementsd. Objectives of financial reporting
34.…
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what are implications for analysis of financial statements that result from the accounting for foreign currency translation?
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When translating the financial statements of an entity from its
functional currency to its selected presentation currency, which of the
following translation measurement is incorrect?
Assets and liabilities are translated at the closing rate at the date of
Statement of Financial Position.
Income and expenses are translated at (1) exchange rates at the date of the
transaction or (2) average rate for the period for practicality.
Share capital accounts are translated at the date of the transaction resulting
to that equity items.
Retained earnings are translated using the average rate during the period.
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Briefly summarize the accounting issues arising from foreign currency denominated transactions
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At what rates should the following balance sheet accounts in foreign statements be translated (using the current rate method) into U.S. dollars? Choose the correct.
Equipment Accumulated Depreciation-Equipmenta. Current Current b. Current Average for yearc. Historical Current d. Historical Historical
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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
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The translation (remeasurement) adjustment reported in a translation when the functional currency is not the foreign currency is included
a.
as a separate component of other comprehensive income
b.
in the current liability section of the balance sheet as deferred revenue
c.
in the calculation of net income
d.
none of the above
arrow_forward
When are foreign currency transaction gains or losses required to be recognized in the financial statements, how are they
to be disclosed and where in the financial statements?
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(c) Explain the rule for translating the Financial Statements of Foreign Operations from Functional Currency to Presentation Currency
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A) 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.
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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.
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