2011 week 10 FOREIGN CURRENCY TRANSACTIONS

Integrated look for cash flows of the reporting

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Unformatted text preview: ould be used 67 Self-Sustaining vs. Integrated Look for: • cash flows of the reporting enterprise (RE) insulated or directly affected by the foreign operation (FO) • sales prices for the FO’s are determined more by local competition or world-wide competition • sales market of the FO outside the RE’ country? • labour, materials and other costs of the FO’s products are obtained locally • financing of day-to-day operations of the FO • degree of intercompany transactions 68 2 © CMA Ontario, 2011 6 of 20 CMA Accelerated Program - 2011/2012 Lecture Student Weekly File - Week 10 Financial Accounting - Module 2 Translation Methodology when the functional currency = the presentation currency (temporal method) • use when the functional currency = presentation currency • revenues and expenses are translated at their historical rates • calculate gain/loss on holding net monetary items • monetary items : current rate • non-monetary items: historical rate • share capital: historical rate • retained earnings: accumulation of translated net income – dividends are translated when the dividend is declared 69 3 © CMA Ontario, 2011 7 of 20 CMA Accelerated Program - 2011/2012 Lecture Student Weekly File - Week 10 Problem 18 – Foreign Currency Translation The income statement for 20x6 and comparative Statement of Financial Positions for Hilary Co., expressed in Swiss Francs (SF), as follows: SF Sales revenue Cost of goods sold: Opening inventory Purchases Ending inventory Depreciation Other operating expenses Interest expense 3,000,000 200,000 1,000,000 -400,000 Net income 800,000 SF 20x5 Cash Accounts receivable Inventory Land Equipment (net) 800,000 300,000 900,000 200 000 2,200,000 2,000,000 200,000 400,000 400,000 500,000 1,700,000 3,000,000 3,200,000 400,000 1,800,000 500,000 300,000 500,000 1,800,000 500,000 400,000 3,000,000 Accounts payable Bonds payable Common shares Retained earnings 500,000 300,000 200,000 20x6 3,200,000 Hilary Co. is 100% owne...
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This note was uploaded on 01/07/2014 for the course ACCOUNTING 346 taught by Professor William during the Fall '12 term at DeVry Chicago.

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