Chapter 12 KB - Chapter 12 Translation and Consolidation of...

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Chapter 12 1 Chapter 12 Translation and Consolidation of the Financial Statements of Foreign Operations
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Chapter 12 2 Learning Objectives How do you consolidate statements of foreign operations which are produced in a foreign currency? Outline the differences between the different translation methods To differentiate between an integrated and a self- sustaining foreign operation, and describe the translating method and unit of measure that is used in the translation of each type
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Chapter 12 3 Learning Objectives To prepare translated financial statements for each type of foreign operation (self-sustaining and integrated) To use translated financial statements to prepare consolidated financial statements Where sub is 100% owned and there is no purchase discrepancy Where sub is < 100% owned and there is a purchase discrepancy to be amortized
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Chapter 12 4 Introduction Two major accounting questions are posed by the translation of foreign currency financial statements: What exchange rates are appropriate? How should the resulting exchange gains and loses be reflected in the financial statements?
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Chapter 12 5 Translation of Financial Statements Translation is the conversion of a set of financial statements, originally prepared in one currency, to another currency (often so that a subsidiary may be consolidated with the parent) Textbook describes methods used prior to Section 1650 was issued. Read for general interest only.
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Chapter 12 6 What type of foreign operation is it? First step is to determine the type of foreign operation: Self-sustaining foreign operation Integrated foreign operation Two types of statement translation (to be defined later) Current method Temporal method
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Chapter 12 7 Types of foreign operations Integrated foreign operation - is one which is financially or operationally inter-dependent with the reporting enterprise such that the exposure to exchange rate changes is similar to the exposure which would exist had the
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This note was uploaded on 05/08/2010 for the course ACCOUNTING 343 taught by Professor Andrewatt during the Spring '10 term at Webster.

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Chapter 12 KB - Chapter 12 Translation and Consolidation of...

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