# sample exam question wrong?

actual return is negative

so 86+147 + 41 = pernsion expense of 274 or w.e

Because normally you would subtract the return, but since its a negative number, you are adding it in this equation.

Actual Return on plan assets is negative so you need to add it to the expense. So it is actually 86 + 147 - (-41) = 274.

affect of change in operational income is multiplied by previous year average rate? Why does the answer multiply by the current year average rate??? ---- “Analysis of Multinational Operations,” Gerald I. White, Ashwinpaul C. Sondhi, and Dov Fried 2008 Modular Level II, Vol. 2, pp. 188-191 Study Session 6-26-d, f analyze and evaluate the effects of the all-current and temporal methods on the parent company’s balance sheet and income statement; calculate the translation effects of the all-current and temporal methods of foreign currency translation “The operational effect is estimated by multiplying the change in the income statement component (in local currency) by the previous period’s average exchange rate” (p. 189). Multiplying Kerwin’s operating income in dollars by the average rate produces operating income in millions of krona. For example: 2007 Operating Income (krona) = \$ Operating Income x 2007 Average Rate = \$3,850 x 6.800 = \$26,180. Instructions: Click the Continue

You use 2007 average rate for 2007 income. So 6.8 * 3850.

sv102307 Wrote: ------------------------------------------------------- > Actual Return on plan assets is negative so you > need to add it to the expense. So it is actually > 86 + 147 - (-41) = 274. Thanks. I need to review 3rd grade math!!!

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sv102307 Wrote: ------------------------------------------------------- > You use 2007 average rate for 2007 income. So 6.8 > * 3850. If that is the case the answer is inconsistent. “The operational effect is estimated by multiplying the change in the income statement component (in local currency) by the previous period’s average exchange rate” (p. 189). The answer was B. Use 2006 average rate!!!

I am a little confused now. Did they use 2006 or 2007 Average rate. My understanding is that you would use the average for the period you are doing the income stmt for. If they used 2007 rate, i assume when they say previous period they mean 2007 (because you are presumably in 2008 when you do the income stmt)

Just to add … I checked pg 189 and it says - Generally revenues and most expense categories are translated at the average rate for the period regardless of the choice of functionak currency. Dont see why they say previous period in the answer key

opeartional effect = ignoring fx, the change in revs in usd… so, hold fx consntant and see how they performed better as a business