10 - Consolidation of Foreign Subsidiaries Two challenges:...

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Foreign Currency Terms Exchange rate Price of one currency stated in terms of another currency Translation Converting the cost of an item stated in one currency into another currency Import/Export Ratio Relationship of a country’s imports to exports Strong Currency Exchange rate of currency is rising relative to other nations Weak Currency Exchange rate of currency is falling relative to other nations Accounting for Foreign Currency Transactions Export Sales in which payments will be made in a foreign currency Import Purchases that will be paid in a foreign currency Changes in exchange rates between sale or purchase and payment will result in a foreign currency gain or loss
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Unformatted text preview: Consolidation of Foreign Subsidiaries Two challenges: (1) Foreign accounting practices differ from American GAAP (2) Subsidiary statements may be in foreign currency and need translation Results in a foreign currency translation adjustment International Standards Most accounting methods are consistent throughout the world Differences do exist for: Inventory LIFO method of inventory not used in the U.K. Goodwill In Germany and Japan, the account is amortized; not in the U.S. Research & Development costs Capitalized in Japan; expensed in the U.S....
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This note was uploaded on 06/14/2011 for the course ACCOUNTING 23020 taught by Professor Na during the Spring '11 term at Kent State.

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