Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
15th Edition
ISBN: 9780134476315
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
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Chapter 19.5, Problem 19.14RQ
Summary Introduction
To discuss: The steps to be followed while adjusting a subsidiary's accounts relative to the third parties when that local currency of the subsidiary's is predicted to appreciate in value in relation to the currency of the parent MNC.
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Transaction versus Economic Exposure
Compare and contrast transaction exposure and economic exposure. Why would an MNC consider examining only its “net” cash flows in each currency when assessing its transaction exposure?
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…
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.
Chapter 19 Solutions
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
Ch. 19.1 - Prob. 19.1RQCh. 19.1 - Prob. 19.2RQCh. 19.1 - Prob. 19.3RQCh. 19.1 - Prob. 19.4RQCh. 19.2 - Under FASB No. 52, what are the translation rules...Ch. 19.3 - Prob. 19.6RQCh. 19.3 - Explain how differing inflation rates between two...Ch. 19.3 - Discuss macro and micro political risk. What is...Ch. 19.4 - Prob. 19.9RQCh. 19.4 - Prob. 19.10RQ
Ch. 19.4 - Prob. 19.11RQCh. 19.4 - Prob. 19.12RQCh. 19.5 - Prob. 19.13RQCh. 19.5 - Prob. 19.14RQCh. 19.5 - Prob. 19.15RQCh. 19.6 - Prob. 19.16RQCh. 19 - Prob. 19.1WUECh. 19 - Prob. 19.2WUECh. 19 - Prob. 19.3WUECh. 19 - Prob. 19.4WUECh. 19 - Prob. 19.5WUECh. 19 - Prob. 19.1PCh. 19 - Prob. 19.2PCh. 19 - Prob. 19.3PCh. 19 - ETHICS PROBLEM Is there a conflict between...
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- which 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_forwardWhen 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.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_forward
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