Local currency appreciating (temporal and current method

CFA Level II
#1

Hi All

Not long now!

Per tables in Schweser, I have notes such as Local Currency appreciating and the effect of the Temporal and Current rate on various ratios i.e. Local Currency appreciating, Temporal rate, gross profit margin increases.

Temporal rate = functional and presentation currencies differ i.e. US firm presenting in USD, subsidiary in Australia with a functional currency of AUD. In this instance, what is the Local Currency? The AUD or the USD? Thank you!! [Edit, should read Current rate =]

#2

When the functional and presentation currencies differ you should be using the current rate method…

If the functional currency is that of the subsidiary, it’s probably also the local currency (unless they have their own international subsidiaries)

#3

Sorry mixed that up…

Current rate = functional and presentation currencies differ i.e. US firm presenting in USD, subsidiary in Australia with a functional currency of AUD. In this instance, what is the Local Currency? The AUD or the USD? Thank you!!

#4

AUD

#5

Thank you