Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Question
Chapter 10, Problem 1P
To determine
Identify the appropriate answer for the given statement from the given choices.
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15. What is a subsidiary’s functional currency? A. The parent’s reporting currency. B. The currency in which transactions are denominated. C. The currency in which the entity primarily generates and expends cash. D. Always the currency of the country in which the company has its headquarters.
1. For reporting purposes, currencies are defined as
Operating, International and presentation
Domestic and international
Foreign, functional and presentation
International and functional
2. The functional currency is
Currency in which the entity reports earnings.
The currency in which the entity primarily operates.
The currency in which the entity presents the financial statements.
The currency in which the entity primarily conducts banking activities
3. Which consideration would not be relevant in determining the entity's functional currency?
The currency in which receipts from operating activities are retained.
The currency in which finance or fund is generated
The currency that influences the cost of the entity.
The currency that the most internationally acceptable for trading
4. Under IFRS, how is presentation currency defined?
The currency in which the financial statements are presented.
The currency that uses the current rate
The currency of…
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1. If the foreign subsidiary of a US Corporation uses the currency of the region as its functional currency, which of the following methods would they use and where would gains and losses be reported?
A. Remeasurement, Temporal method. Income statement.
B. Translation, Current Rate method. Comprehensive income.
C. Remeasurement, Temporal method. Comprehensive income.
D. Translation, Current Rate method. Income statement
2. If the foreign subsidiary of a US Corp uses US currency as its functional currency, which of the following methods would they use?
Where would gains and losses be presented?
A. Translation, Current Rate method. Comprehensive Income
B. Translation, Current Rate method. Income statement
C. Remeasurement, Temporal method. Comprehensive income.
D. Remeasurement, Temporal Method. Income Statement
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Similar questions
- In preparing consolidated financial statements of a U.S. parent company and a foreign subsidiary, the foreign subsidiary's functional currency is the currency: in which the subsidiary maintains its accounting records O a. b. in which the subsidiary primarily generates and spends cash O c. of the country the parent is located O d. of the country the subsidiary is locatedarrow_forwardGains from remeasuring a foreign subsidiary's financial statements from the local currency, which is not the functional currency, into the parent company's currency should be reported as a : O a. part of continuing operations O b. other comprehensive income item O c. deferred credit O d. extraordinary item (net of tax)arrow_forwardQuestion 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?arrow_forward
- Gains from remeasuring a foreign subsidiary’s financial statements from the local currency, which is NOT the functional currency, into the parent company’s currency should be reported as a(n): extraordinary item (net of tax). part of continuing operations. deferred credit. other comprehensive income item.arrow_forwardWhich cash flows are important for an overseas investment: those generated by the subsidiary in the country in which it operates or those sent to the parent firm in dollars?arrow_forwardHow does a parent company determine the appropriate method for translating the financial statements of a foreign subsidiary?arrow_forward
- The functional currency is Currency in which the entity reports earnings. The currency in which the entity primarily operates. Matched quizlet The currency in which the entity presents the financial statements. The currency in which the entity primarily conducts banking activitiesarrow_forwardWhich 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 generatedarrow_forwardF. Accountingarrow_forward
- Functional currency is the currency that influences sales price, labour, material and other costs of a company’s goods and services. (a) Explain factors that should also be considered to determine the functional currency of a foreign operation. (b) Explain what will happen if a business transaction is denominated in foreign currency but reported in functional currency.arrow_forwardTranslation exposure results when an MNC translates each subsidiary's financial data to its home currency for consolidated financial statements. Group of answer choices True Falsearrow_forward14. An entity’s functional currency is a. the currency of the primary economic environment in which the entity operates. b. the currency in which the entity uses in presenting its financial statements. c. the currency required by regulatory agencies to be used in financial statements filed by the entity. d. all of these.arrow_forward
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