when they translate (all current) common stock (LC 230) from fye 2000, they use the y/e, or historical? rate of LC 1.06=1$ and we end up with $217 but then it remains $217 for fye 2001 and 2002. I’ve checked the actual text and can’t find where it says common stock is supposed to be carried forever at the rate in effect when it was acquired, is that actually the case? They don’t seem to be carrying fixed assets at the rate in effect when acquired forever. Thanks to anyone who has some insight.
Share capital is always reported at historical cost and exchange rate no matter which method is used in translating F/S. The cost to acquire and the exchange rate on the date of acquisition are used to translate sub’s capital for all consolidations. You never use an exchange rate (for anything) prior to the date of acquisition. For example, the sub usually owns capital assets prior to acquisition, but don’t use the exchange rate on the purchase date to translate f/s (temporal method). You use the exchange rate at the time of acquisition. Apply this rate to the sub’s (pre-acquisition) capital assets and to their corresponding amortization expenses ( temporal method). As you know, if an asset is acquired by the sub after the acquisition date, then you would use the exchange rate on the date of purchase when translating using the temporal method.
Sorry - just noticed in Schweser notes (page 252 -BK 2) that a blending technique is used to derive an exchange rate for fixed assets (and their depreciation) acquired throughout the year (probably because it is too hard to keep track of the historical rates for each purchase). But, the rule still holds, you never use an exchange rate prior to the date of acquisition.