Equation for: Temporal method: Flow Effect Holding effect Thanks.
flow effect: change in exposure x (ending rate - avg rate) holding effect: beginning exposure x (ending rate - beginning rate) in temporal: “exposure” is net monetary asset/liability
Let’s see if i can remember this… Flow effect = change in exposure (end xchange rate - avg xchange rate) Holding effect = beg exposure (end xchange rate- beg xchange rate Also for temperoal the exposure is not just EQ (allcurrent) it is = (cash +AR)-(AP+current debt+LTd) Someone confirm! I’m pretty sure this is right…i hope.
Don’t forget the exposure needs to be calculated in LC and the exchange rate needs to be as $/FC (assuming the parent is U.S. based).
And both of these make up the translation gain/loss.