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Sessions XIV

Sessions XIV. FX Accounting. Session XIV Objectives. Foreign Currency Translation Foreign Currency Remeasurement. FX Accounting Exposure Gains & Losses. Translation Re-measurement Governed by SFAS 52. FX Translations. Current Rate Method (Modified Current Rate Method) Temporal Method

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Sessions XIV

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  1. Sessions XIV FX Accounting

  2. Session XIV Objectives • Foreign Currency Translation • Foreign Currency Remeasurement INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2012

  3. FX Accounting Exposure Gains & Losses • Translation • Re-measurement • Governed by SFAS 52 INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2012

  4. FX Translations • Current Rate Method (Modified Current Rate Method) • Temporal Method • Only approaches approved under US GAAP INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2012

  5. Functional Currency:Critical Element • Cash Flow Indicators • Sales Price Indicators • Sales Market Indicators • Expense Indicators • Financing Indicators • Inter-company Indicators INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2012

  6. Current Rate Method • Local currency is the functional currency • Method • Assets and liabilities translated at current rate • Capital accounts translated at historical rate • Dividends translated at current rate upon declaration • Revenue and expense translated at weighted average rate • Balancing amount recorded in OCI INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2012

  7. Temporal Method • Home currency is functional currency • Method • Cash, A/R, A/P, accruals and debt re-measured at current rate • Other assets and liabilities re-measured at historical rates, primarily inventory and PPE. • Capital accounts re-measured at historical rate • Revenue and expense other than items dependent on non-monetary items re-measured at weighted average rate • Balancing amount recorded in income statement INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2012

  8. Translation and Remeasurement • When local currency is functional currency, it is TRANSLATED into the home currency • When the local currency is not the functional currency, it is RE-MEASURED into the functional currency, which is usually the home currency INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2012

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