Equity method and exposure

CFA Level II FRA
#1

Why is it that, under the equity method, our change in exposure to the local currency of our subsidiary is the change in equity year over year and that’s it? Is it simply because common stock is the only BS item translated at the historical rate whereas all else is translated at the current? But aren’t we still exposed to the local currency if we are translating balance sheet items at the current rate?

Conversely,what is our exposure under the temporal method? (our change in exposure year over given given the appropriate financial statements…)

#2

If you translate at the current rate, the value of your assets and liabilities are moving along with the exchange rate movements.

Exposure relates to what is not moving with the current rate thus creating unrealized gains and losses.

Paid in capital is translated under the historical rate because it is a non monetary item. Only monetary assets are translated at the current rate.

#3

“Exposure relates to what is not moving with the current rate thus creating unrealized gains and losses”

…ahhh- so helpful- thank you!!