FRA

Page 161, Multinational Operations. Question Number 20. Why doesn’t the first point result in a gain? I mean they say that assets exceed the liabilities, and the foreign currency is depreciating. So this means that we have net asset position and the foreign currency is depreciating, doesn’t this amount to a gain? What am I missing here?

I don’t have the question on me but if you’re using the current method (foreign currency) and the foreign currency is depreciating it would be a loss, not a gain.

For Current Method ,

If company has net assets position,

  • currency depreciation , result in translation _ loss _
  • currency appreciation , result in translation gain

If company has net liabilities position,

  • currency depreciation , result in translation gain
  • currency appreciation , result in translation loss

yes, I think this is right. Can anyone else confirm this?

that’s correct