Balance sheet exposure under temporal

CFA Level II
#1

to translation effect, under current rate, it is TA - TL, but I’m not sure about under temporal.

#2

I think it is the same case as all current cause they reported it in the subsidiary currency and didnt translate it. Can anyone confirm?

#3

Balance sheet exposure under temporal is almost always liabilities. Because Fixed Assets (PPE) are translated using historic rate and only current assets are translated using current rate. But, all the debt is translated at current rate. Equity, however, is translated at when it was issued.

#4

I’m looking for is it TA - TL or something else…if so, what exactly.

#5

exposure under temporal method = monetary asset - monetary liability

#6

The formulas are (Current Rate Method) = Total AssetsLocal – Total LiabilitiesLocal (Temporal Rate Method) = Monetary AssetsLocal – Monetary LiabilitiesLocal Sorry for weird formatting, copied from word

#7

Thanks all that helps.

#8

*Another thing to know and keep in mind is that CTA in Current Rate is recorded in EQUITY and CTA in Temporal in on I/S