Does anyone have a better way to explain when you should use the temporal or all-current method for exchange rate conversions? I seem to get confused as to which one I should use and that obviously will mess up everything that follows. Thank you in advance for your help.
When the foreign subsidiary exhibits a great deal of autonomy in decision making and the local currency is the functional currency for the subsidiary use the the current rate method of translation When the foreign subsidiary’s functional currency is the same as the parents reporting currency and they do not exercise a great deal of autonomy in every day operational decisions use the temporal method of translation/ re-measurement.
If Functional Currency of subsidiary = Parent’s Presentation currency then use Temporal. Otherwise use Current. It’s that easy!