Who’s up on the eastcoast? I’ll be up as late as I can stand it. My daughter’s birthday is tomorrow and I’m not missing a minute of it – especially not to study. Well, I’ll probably jump on board tomorrow night… Which of the following statements regarding the functional currency is FALSE? The functional currency: A) is remeasured into the reporting currency under the temporal method. B) is determined by management. C) is the currency of the primary economic environment in which the foreign subsidiary generates and expends cash.
I’d say ©… This is the definition of the Local Currency…
12 am on the dot here… thought about throwing in the towel a couple hours ago but we’ll be done with this in three weeks and I want to be able to say I gave it my all!! My birthday is this week too… sadly I will be spending it probably going over derivatives for the nth time! I think the answer is A - you can’t determine whether to use temporal or all current without knowing whether the function currency is the same as the parent’s or not.
C
A, local to functional = temporal Functional to reporting = all current.
happy early birthday, aimee. I don’t understand how the management decides on the funct. curr? Your answer: B was incorrect. The correct answer was A) is remeasured into the reporting currency under the temporal method. The basis for using the all current method is when Functional Currency is NOT the same as Parent’s Presentation (reporting) Currency. The basis for using the temporal method is when Functional Currency = Parent’s Presentation Currency. The local currency is remeasured into the functional currency under the temporal method. The functional currency is translated into the reporting currency using the all-current method.
i’m also gonna say A) is remeasured into the reporting currency under the temporal method. whoops too late
The management determines what is the primary economical environment, which determines the functional currency. For example, you can have a U.S. company with its subsidiary in operating Canada and sells most of its products to Mexico. In this case, the management can elect to set the Sub’s functional currency to Peso. And the translation for the Sub would first require re-measuring (temporal) from C$ (local) to Peso(functional), then translate (all-current) Peso to $(reporting)
^Okay. I didn’t realize it was a subjective matter. Thanks.