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date when fair value was determined.The same except foritems that relate to non monetary e.g. dep’n COGS use rate applies to the non monetary itemIncome statement Foreign currency Gain/LossAASB121.41Share capital at acq+ Pre-acq reserves: Date of acq.Post-acq movements insharecapital/reserves: at the time that movement recognisedConsistent with the historical cost modelAgainst : messy to prepare if not translating from a trial balance/ does not retain financialrelationships that existed in the financial statement of the foreign shusidiary/ in consistent with the effects of exchange rate movements of foreign operations from the perspec tive of the parent/more volatility in earningsCurrent rate method(when functional currency of the subsidiary is nottheAUD) AASB 121.39Translate using the closing rate (exchange rate at the end of the reporting period)Translate at the exchange rate at the time of the transaction (average rate if multiple transactions)Other comprehensive income 121.39cForeign currency translation reserveRelatively simple to understand/preserve balance sheet ratios of foreign sub/net assets is a more sensible defi of exposure risk of parent Against: historical cost* current rate=? Hard to interpret/no conceptual founddation/distorts relationship beween IS andBSCash flowfrom operationProfitbeforetaxincreaseincreaseRetailer’s end of year sale;reduce debt with free cash flowdecreasedecreasePay for additional ad exp prior toyear enddecrease-Encourage employees to takeannual leave prior to year endincrease-Defer payments to suppliers-increaseSale of non-current assets whichhave a market value greater thanbook value
Week 11 associate - equity accounting - significant influenceDr dividendrevenue Cr investment in ...(reversal of div received from the current profits of ..avoid double counting) Dr investment in ... Cr share of profitof associate(share of associate’s post-acq current period profit) Drshare of profit of associate Cr investment in ...(fair value change/ yrs * (1- tax rate)* %) (current perioddep’n adjfor depreciable equipment fair value change at acquisition date as share of associat’s profit isbased on contributed assets) Dr investment in ... Cr ORE((ORE this yr –last yr)* %) (...share of associate’s post-acquisition OREmovements. If parent, equity accounting are part of consolidation journals and all prior year adj to OREmust be done each year) Dr ORE Cr investment in ...(ORE dep’n adjfor equipment fair value issue) (previous periods dep’n adjfor depreciable equipment fair value change at acq date)inter entity transaction: closing inventory: Dr share of profit of associate Cr investment in...(eliminate unrealised profit so share of profit of associate reflects the interests of unrelated investors inassociates AASB128.22) 公公公 (sale price – cost price ) * (1- tax rate) * rate of on hand * share opening inventory: Dr opening retained earnings Cr share of profit of associate Dr investment in ... Cr revaluation surplus(tranfer of associate’s post-acq movement in revaluationsurplus) reversal of revaluation: