Term
| What is the difference between a transaction and a translation adjustment? |
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Definition
| Transaction involves two UNRELATED companies; translation is WITHIN a corporation, eg parent/sub |
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Term
| What makes recording foreign currency investments different than recording foreign currency import/export transactions? |
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Definition
| For import/export, you report gains and losses as they occur, from recording date to B/S date to settlement date. But for investments, you have to separate out the gain or loss from the investment itself from the change in the currency exchange rates |
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Term
| what is involved in figuring out gains or losses on foreign currency investment transactions? |
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Definition
| Figure out the WHOLE change T1 Inv value x T1 exchange less T2 Inv Value x T2 exchange. Then you have to separate it. (DOublecheck); You take the difference in value (eg a 10K gain and muliply it by the T1 exchange rate to get the component related to investment gain or loss, then you take the WHOLE AMT eg 160K and multiple it by the DIFFERENCE in exchange rates to get the exchange rate gain or loss. One can be a gain and the other a loss. Net the two and they should equal the total change. |
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Term
| For purposes of determining functional currency and whether the local currency could be used, what is a "highly inflationary economy"? |
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Definition
| a highly inflationary (hyperinflationary) economy is one that has experienced a cumulative inflation of 100% or more over the past 3 years |
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Term
| What is the difference between translation and remeasurement? |
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Definition
| Translation is from the functional currency to the rePORTing currency; remeasurement is from the reCORDing currency to the functional currency |
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Term
| If the functional currency is not the same as the recording currency (eg a British co keeps its books in pounds but does its business on the continent in Euros), the process it uses to convert for its books is |
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Definition
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Term
| Which one of the two is possible: translation and then remeasurement, or remeasurement and then translation? |
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Definition
| Remeasurement and then translation |
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