tailieunhanh - Lecture International accounting (3/e): Chapter 8 - Timothy Doupnik, Hector Perera

Chapter 8 - Translation of foreign currency financial statements. The following will be discussed in this chapter: Conceptual issues of foreign currency financial statements translation; methods of financial statement translation; temporal and current rate methods illustrated; . GAAP, IFRS, and other standards related to translation; hedging balance sheet exposure. | Chapter Topics Conceptual issues of foreign currency financial statements translation. Methods of financial statement translation. Temporal and current rate methods illustrated . GAAP, IFRS, and other standards related to translation Hedging balance sheet exposure. Learning Objectives Describe the conceptual issues involved in translating foreign currency financial statements. Explain balance sheet exposure and how it differs from transaction exposure. Describe the concepts underlying the current rate and temporal rate methods of translation. Apply the current rate and temporal methods of translation and compare the results of the two methods. Describe the requirements of applicable International Financial Reporting Standards (IFRS) and . generally accepted accounted principles (GAAP). Discuss hedging of balance sheet exposure. Foreign country operations usually prepare financial statements using local currency as the monetary unit. These financial statements must be translated into home country currency. These operations also typically use local GAAP. Financial statements must be translated into home country GAAP. Learning Objective 1 Primary conceptual issues Each financial statement item must be translated using the appropriate exchange rate. Choices include the current exchange rate, average exchange rate, and the historical exchange rate. Current exchange rate is as of the balance sheet date, while historical exchange rate is as of the date of the transaction. The resulting translation adjustment can be recognized in current income or included in an equity account on the balance sheet. Learning Objective 1 Assets and liabilities translated at the current exchange rate are exposed to risk of a translation adjustment. When foreign currency appreciates, a net asset exposure results in a positive translation adjustment. When foreign currency appreciates, a net liability exposure results in a negative translation adjustment. Assets and liabilities translated | Chapter Topics Conceptual issues of foreign currency financial statements translation. Methods of financial statement translation. Temporal and current rate methods illustrated . GAAP, IFRS, and other standards related to translation Hedging balance sheet exposure. Learning Objectives Describe the conceptual issues involved in translating foreign currency financial statements. Explain balance sheet exposure and how it differs from transaction exposure. Describe the concepts underlying the current rate and temporal rate methods of translation. Apply the current rate and temporal methods of translation and compare the results of the two methods. Describe the requirements of applicable International Financial Reporting Standards (IFRS) and . generally accepted accounted principles (GAAP). Discuss hedging of balance sheet exposure. Foreign country operations usually prepare financial statements using local currency as the monetary unit. These financial statements must be translated