tailieunhanh - Lecture Principles of Accounting: A focus on analysis and interpretation (8th edition): Chapter 18 - Hillman, Kochanek, Barsky

Chapter 18 - International accounting and financial reporting issues. This chapter presents the following content: Issues in accounting for international operations, differing accounting standards, financial reporting issues & international transactions,. | International Accounting and Financial Reporting Issues Issues in Accounting for International Operations Accounting standards differ around world Exchange rates between countries change frequently Differing Accounting Standards Countries like US have private standard setting bodies Countries with strongly socialized economies like Germany, government agencies sets standards International Accounting Standards Committee’s goal to reduce differences in accounting methods Financial Reporting Issues & International Transactions Accounting for foreign currency exchange transactions Translation of foreign subsidiary financial statements from foreign currency to reporting currency Foreign Currency Exchange Transactions When sales transaction denominated in a foreign currency, cash received will be the foreign currency Change in exchange rates between date of sale and date of collection will cause foreign currency exchange gain or loss Foreign Currency Exchange Transactions Date of sale . | International Accounting and Financial Reporting Issues Issues in Accounting for International Operations Accounting standards differ around world Exchange rates between countries change frequently Differing Accounting Standards Countries like US have private standard setting bodies Countries with strongly socialized economies like Germany, government agencies sets standards International Accounting Standards Committee’s goal to reduce differences in accounting methods Financial Reporting Issues & International Transactions Accounting for foreign currency exchange transactions Translation of foreign subsidiary financial statements from foreign currency to reporting currency Foreign Currency Exchange Transactions When sales transaction denominated in a foreign currency, cash received will be the foreign currency Change in exchange rates between date of sale and date of collection will cause foreign currency exchange gain or loss Foreign Currency Exchange Transactions Date of sale Convert foreign currency to dollar equivalent Record as receivable Date of collection Convert foreign currency to dollar equivalent Record foreign currency exchange gain or loss for difference Translation of Foreign Currency Statements Functional currency is currency of the primary economic environment in which the foreign entity generates revenues and expends cash Different translation methods depending on whether functional currency is Local currency of subsidiary Reporting currency of parent Translation of Foreign Currency Statements When functional currency is local currency of subsidiary Follow current rate method of translation Use current exchange rate for assets and liabilities Use average for period for revenues and expenses Translation of Foreign Currency Statements When functional currency is reporting currency of parent Use current/historical method Translate monetary assets and liabilities at current rate Translate other assets, liabilities, and owners’ equity at historical .