Translation adjustment is the method used to convert the local currency into the parents’ functional currency when the local currency is the foreign entity’s functional currency. The current rate is used to translate the financial statements that are the exchange rate on the balance sheet date. The average rate is used to translate revenue and expenses as it is assumed that it occurs uniformly over the period. Any gain or loss on account of translation adjustment is recognized in the comprehensive income statement. The logic behind the parent company recognizing its share of the translation adjustment arising from the translation of its foreign subsidiary.

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Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 12, Problem 12.17Q

To determine

Introduction: Translation adjustment is the method used to convert the local currency into the parents’ functional currency when the local currency is the foreign entity’s functional currency. The current rate is used to translate the financial statements that are the exchange rate on the balance sheet date. The average rate is used to translate revenue and expenses as it is assumed that it occurs uniformly over the period. Any gain or loss on account of translation adjustment is recognized in the comprehensive income statement.

The logic behind the parent company recognizing its share of the translation adjustment arising from the translation of its foreign subsidiary.

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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?

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Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 12, Problem 12.17Q

To determine

Introduction: Translation adjustment is the method used to convert the local currency into the parents’ functional currency when the local currency is the foreign entity’s functional currency. The current rate is used to translate the financial statements that are the exchange rate on the balance sheet date. The average rate is used to translate revenue and expenses as it is assumed that it occurs uniformly over the period. Any gain or loss on account of translation adjustment is recognized in the comprehensive income statement.

The logic behind the parent company recognizing its share of the translation adjustment arising from the translation of its foreign subsidiary.

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Answer 3

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Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 12, Problem 12.17Q

To determine

Introduction: Translation adjustment is the method used to convert the local currency into the parents’ functional currency when the local currency is the foreign entity’s functional currency. The current rate is used to translate the financial statements that are the exchange rate on the balance sheet date. The average rate is used to translate revenue and expenses as it is assumed that it occurs uniformly over the period. Any gain or loss on account of translation adjustment is recognized in the comprehensive income statement.

The logic behind the parent company recognizing its share of the translation adjustment arising from the translation of its foreign subsidiary.

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Check out a sample textbook solution

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Answer 4

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 12, Problem 12.17Q

To determine