Chapter 11 Homework - ACCT 4455 Chp 11 Chapter 11: HOMEWORK...

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ACCT 4455 Chp 11 Chapter 11: HOMEWORK Review Questions: 5. On the transaction date, foreign currency denominated assets and liabilities are measured in Canadian dollars by translating the foreign currency amount at the spot rate. Nonmonetary assets remain at that amount on subsequent balance sheet dates even though the currency rate has changed. (An exception would apply in the situation where the assets are valued at market when the lower of cost and market rule is applied, in which case the current rate at the date of the balance sheet would be used.) Monetary assets and liabilities are translated at the current rate as at the date of subsequent balance sheets. This results in the recording of unrealized gains or losses when the exchange rate has changed. 6. The exchange rate should be applied to produce a translated amount consistent with the way we normally measure assets and liabilities under Canadian GAAP. If an item is to be valued at historical cost, we should apply the historical rate to the historical value in foreign currency to derive the historical cost in Canadian dollars. If an item is to be valued at current value, we should apply the current rate to the current value in foreign currency to derive the current value in Canadian dollars. 7. The spot rate is the exchange rate in effect at a particular point in time. The current rate is the exchange rate in effect at the end of the current reporting period. 8. A fair value hedge uses a hedging instrument to hedge the change in fair value of the hedged item. The exchange gains or losses are reported in income in the period they occur for both the hedged item and the hedging item. A cash flow hedge uses a
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This note was uploaded on 04/28/2010 for the course ENTR entr 3130 taught by Professor Duane during the Spring '10 term at American College of Computer & Information Sciences.

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Chapter 11 Homework - ACCT 4455 Chp 11 Chapter 11: HOMEWORK...

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