One last point… On page 250 you can see that common stock is translated at the historical rate, this periods RE is calculated from the IS (in the form of NI), and the CTA is the number that makes ALL of equity equal to the current rate. It is what makes the BS equation balance: A(current rate)=L(current rate)+E(current rate after plug). That has to be it avnx.
please i need assistance, 2012 book 2 page 139… how did they arrive at the adjustment for retained earnings, schweser
It literally says it on the page… what part are you unclear on? beginning RE + NI = 383.3
Simple way to remember - for current rate you need to have a CTA adjustment. Start with IS, find NI, determine Ending RE (which is beginning RE + NI (just calculated) - Dividends (if any). Now that you have RE in the balance sheet, take Assets - Liabilities - Equity accounts (RE + CS) - the figure you are left with is the plus
With temporal rate, an IS item is needed. Translate the Balance Sheet. Ending RE will be a plug figure to make assets = liab + equity. Now you have ending RE. Next, translate IS. After translating IS, you will have an income figure known as “Income before translation G/L”. However, you have an ending RE figure that you’ve already calculated. So, beginning RE + NI - Dividends = RE. But, this equation will be out of balance. Net Income needs to be adjusted to make the RE equation balance, so whatever figure is needed to be added/subtracted to "Income before Translation G/L " is the gain or loss on the IS