Hi, I was working on the 2010 Mock exam afternoon session problem 29. I was wondering whether there is a typo or i am just doing it the wrong way. There is a line item on the answer sheet, it is called “Increase in retained earnings”. We are using the current rate method. If you open your CFA book on page 177, it states that we have to use historical rates for retained earnings and not average rate as the answer sheet says it. I am talking about the 660 line item. I really appreciate all the comments. Thanks
To me, on Pg 177 , it reads that to compute retained arnings we compute translated income , and add that to the previous balance sheet retained earnings. For current rate method , revenues and expenses are at average rate , not historical rate . Asnwer sheet is correct
Hi, Can you tell me why do we have to use average rate for this “increase in retained earnings” line item? I am not getting it. Thanks
under current rate -> all items on the Income statement are at Average rate -> since the increase in retained earnings is the net income -> entirely derived from the Income statement - it is the “average rate” that would apply there, as well.