Eun & Resnick 4e
CHAPTER 10 Management of Translation Exposure
Translation Methods
Current/Noncurrent Method
Monetary/Nonmonetary Method
Temporal Method
Current Rate Method
Financial Accounting Standards Board Statement 8
茶月饼Financial Accounting Standards Board Statement 52
The Mechanics of the FASB 52 Translation Process
Highly Inflationary Economies
CASE APPLICATION: Consolidation of Accounts according to FASB 52: The Centralia Corporation
Management of Translation Exposure
Translation Exposure versus Transaction Exposure
Hedging Translation Exposure
Balance Sheet Hedge
Derivatives Hedge
Translation Exposure versus Operating Exposure
Empirical Analysis of the Change from FASB 8 to FASB 52
切多音字组词Summary
MINI CASE: Sundance Sporting Goods, Inc.
Translation Methods
1 Translation exposure refers to:
a) accounting exposure
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b) the effect that an unanticipated change in exchange rates will have on the consolidated financial reports of an MNC
c) the change in the value of a foreign subsidiaries asts and liabilities denominated in a foreign currency, as a result of exchange rate change fluctuations, when viewed from the perspective of the parent firm
d) all of the above
Answer: d)
2 The recognized methods for consolidating the financial reports of an MNC are:
a) short/long term method, current/future method, flexible/inflexible method, and economic/noneconomic method
b) current/noncurrent method, monetary/nonmonetary method, short/long term method, and current/future method
c) current/noncurrent method, monetary/nonmonetary method, temporal method, and current rate method
d) temporal method, current rate method, flexible/inflexible method, and economic/noneconomic method
Answer: c)
3
How many method of foreign currency translation have been ud in recent years? (U.S. GAAP.)
家庭红烧牛肉的简单做法a) One
b) Two
c) Three
d) Four
Answer: d)
4 The difference between accounting exposure and translation exposure
a) Translation is about going from one language to another, accounting is just about the numbers.
b) Accounting exposure and translation exposure are the same thing.
c) Hedging one always involves increasing the other
d) Hedging one might involve increasing the other
Answer: b)
5 When exchange rates change
a) The value of a foreign subsidiary’s foreign currency denominated asts and liabilities change to new numbers still denominated in the foreign currency.
b) The value of a foreign subsidiary’s foreign currency denominated asts and liabilities change when redenominated into the home currency.
c) Hedging should be done after the change.
d) None of the above
Answer: b)
Current/Noncurrent Method
6 The generally accepted method for consolidating the financial reports of an MNC from the 1930s to 1975 was:
a) Current/noncurrent method
b) Monetary/nonmonetary method
c) Temporal method
d) Current rate method
Answer: a)
7 When using the current/noncurrent method, current asts are defined as
a) Inventory that is currently salable
b) Asts with a maturity of one year or less
c) Asts with a maturity of 90 days or less
双子双鱼d) None of the above
Answer: b)
8 When using the current/noncurrent method,
a) Most income statement items are translated at the average exchange rate for the accounting period.
b) Revenue and expen items that are associated with noncurrent asts or liabilities are translated at the historical rate that applies to the applicable balance sheet items.
c) Depreciation expen is translated at the historical rate that applies to the applicable depreciable ast items.
天仓是什么意思d) All of the above
Answer: d)
9
The underlying principle of the current/noncurrent method is
a) Asts and liabilities should be translated bad on their maturity
b) Monetary balance sheet accounts should be translated at the spot rate; nonmonetary a
南瓜饼是怎么做的ccounts are translated at the historical rate in effect when the account was first recorded
c) Monetary accounts are translated at the current exchange rate; other accounts are translated at the current exchange rate if they are carried on the books at current value; items carried at historical cost are translated at historic exchange rates.
d) All balance sheet accounts are translated at the current exchange rate, except stockholder equity
Answer: a)
10 Under the current/noncurrent method
a) A foreign subsidiary with current asts in excess of current liabilities will cau a translation gain (loss) if the local currency appreciates (depreciates).
清缓存b) A foreign subsidiary with current asts in excess of current liabilities will cau a translation loss (gain) if the local currency appreciates (depreciates).
