How do I calculate the Total Translation Loss

CFA Level II
#1

From Reading 26: Analysis of Multinational Operations, on page 173. How is the total translation loss calculated?

#2

For both methods you calculated translation loss : Translation Gain/Loss = Hold Effect + Flow Effect Hold Effect : Beg Exposure * (End Exchange Rate - Beg Exchange Rate) Flow Effect : Change in Exposure * (End Exchange Rate - Average Exchange Rate) Exchange rates should be in RC/FC, when converting FC into RC for Temporal Methord Exchange rates should be in RC/LC, when converting FC into LC for All Current Methord RC - Reporting Currency FC - Functional Currency LC - Local Currency Exposure for Temporal Method: Net Monetary Assets = (Cash+Cash Equivalents+AR)-(AP+Current Debt) Exposure for All Current Method: Net Assets or Shareholder’s Equity sorry…don’t have the books in front of me or would’ve put the numbers from that page into the above!

#3

Can’t seem to figure this out. What would the translation gain/loss be in the following: Assume that Scud Co. is a Swiss subsidiary of the U.S. firm Patriot, Inc. On December 31, 2001 the /SF exchange rate was 0.77. (Each Swiss Franc buys 77 cents). One year later the Swiss Franc had appreciated to 0.85 /SF. Scud Co. pays no dividends. The average exchange rate for the year was 0.80 $/SF. Scud pays no taxes. Assume that inventory is accounted for using the LIFO inventory assumption and was bought and sold evenly throughout the year. Income Statement (in SF thousands) December 31, 2002 In SF Sales 7,000 COGS (6,800) Depreciation (100) Translation Gain/Loss – Net Income 100 Assume that the functional currency is the U.S. dollar when answering the following questions. Q Net income would be: A) $96. B) $305. C) $101.

#4

can you provide a snapshot of the balance sheet?

#5

I don’t think there is one… is that needed? I found this question in another post and copied it here because I couldn’t figure out for the life of me how to come up with the translation gain/loss.

#6

5600 - 5440 - 77 +/- TGLPLUG = NI (Ans). I think the complete balance sheet is missing here, no?

#7

I’m sure I saw this question in Q-bank. It definitely had a balance sheet data as well.

#8

Phew, thanks. Was going nuts trying to figure out how to come up with a TGLPLUG for this.

#9

guy who posted the same question said: > I didn’t post the full question as it was just about the rate they used for COGS see here: http://www.analystforum.com/phorums/read.php?12,923576