CFAI V2 SS24 Q23 P.203

This question is about translation using temporal method for ending inventory. If the subsidiary is using FIFO, shouldn’t the more recent exchange rate be used when translating ending inventory? It follows that (A) should also be an acceptable answer (500 * 0.671 = 336). Any thought on this? Thanks!

Ending Inventory is what is left behind. Your latest inventory is left behind. So the CURRENT exchange rate should be used - as that is the Historical Cost of Inventory. Historical Cost of COGS would be the Historic rate - because that is what got used in the COGS… ================================================= FIFO->COGS=Historic, Ending Inventory=CURRENT. ================================================= Look at the order of flow to determine what rate should be used. In LIFO - Your Old inventory is left behind, latest inventory is used in COGS. ================================================= So LIFO->COGS=CURRENT, Ending Inventory=Historic. =================================================

So CFAI is not entirely correct on the answer? Since the inventory in (A) is translated using the current rate and the subsidiary uses FIFO.

they are correct. FIFO -> Ending Inventory -> is CURRENT…

Sorry for the confusion. CFAI’s answer is actually (B). (A) is my choice for the answer.

Let me look at the question once I get home (do not have the FSA text with me…) and I will respond later to this…

the question clearly states Weighted average rate when the inventory was acquired=.654 so that overrides the flow assumption. and hence ending inventory would be 327 fixed assets: 1000*.568 + 640 * .606 = 955.84 ==> 956 accounts receivable = 230 * .671 = 154.33 so answer is B… 956 in fixed assets.

I see. So even if the question states it uses FIFO assumption (see first paragraph of the problem), as long as weighted rate for inventory acquisition is given, we should use the weighted rate?

If the inventory is bought and sold evenly throughout the year, then FIFO remeasurement for COGS and inventory would be average weighted because that would be the “historical rate”

Got it, thanks!