Chapter 12 - Solution Manual

Translation using current exchange rate 45 3all

Info icon This preview shows pages 11–13. Sign up to view the full content.

View Full Document Right Arrow Icon
> > Translation Using Current Exchange Rate 45-3All elements of financial statements shall be translated by using a current exchange rate as follows: a. For assets and liabilities, the exchange rate at the balance sheet date shall be used. b. For revenues, expenses, gains, and losses, the exchange rate at the dates on which those elements are recognized shall be used. This guidance also applies to accounting allocations (for example, depreciation, cost of sales, and amortization of deferred revenues and expenses) and requires translation at the current exchange rates applicable to the dates those allocations are included in revenues and expenses (that is, not the rates on the dates the related items originated). 45-4For purposes of translation of financial statements referred to in this Subtopic, the current exchange rate is the rate as of the end of the period covered by the financial statements or as of the dates of recognition in those statements in the case of revenues, expenses, gains, and losses. > > Reporting Translation Adjustments 45-12 If an entity's functional currency is a foreign currency, translation adjustments result from the process of translating that entity's financial statements into the reporting currency. Translation adjustments shall not be included in determining net income but shall be reported in other comprehensive income. Consequently, translation adjustments are accumulated and reported in a separate component of equity. Reported as such, translation adjustments do not affect pretax accounting income and most such adjustments also do not affect taxable income. Adjustments that do not affect either accounting income or taxable income do not create temporary differences. However, reporting those adjustments as a component of equity does have the effect of increasing or decreasing equity, that is, increasing or decreasing an enterprise's net assets. Potential future tax effects related to those adjustments would partially offset the increase or decrease in net assets FASB ASC 740-20-45 stipulates: > Allocation of Income Tax Expense or Benefit for the Year 45-1 This guidance addresses the requirements to allocate total income tax expense or benefit. Subtopic 740-10 defines the requirements for computing total income tax expense or benefit for an entity. As defined by those requirements, total income tax expense or benefit includes current and deferred income taxes. After determining total income tax expense or benefit under those requirements, the intraperiod tax allocation guidance is used to allocate total income tax expense or benefit to different components of comprehensive income and shareholders' equity. 45-2 Income tax expense or benefit for the year shall be allocated among: a. Continuing operations b. Discontinued operations c. Extraordinary items d. Other comprehensive income e. Items charged or credited directly to shareholders' equity.
Image of page 11

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
265 FASB ASC 740-20-55 provides an example: > > Example 4: Allocation to Other Comprehensive Income 55-18
Image of page 12
Image of page 13
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern