Anyone can help regarding the foriegn exchange translation problems in FRA

lets say there is a firm A (parent in US) acquired B (in China) in July, firm B earned 1mm USD of net income at the end of year. And translation from USD to CNY is needed: Should I take the annual average exchange rate or take the average for July thru Dec?

Thanks a lot if anyone can help!

First, there’s no reason that you would be translating from USD to CNY: you’ll be translating from CNY to USD (or from CNY to something else (the functional currency, if it’s neither CNY nor USD), then from that something else to USD).

Second, I believe that for the average rate for the year you’ll use the average rate for only the portion of the year that Firm A owned Firm B.

Note, however, that this sort of question will not arise on the real exam.

Appreciate it !

My pleasure.