Exposure for under the temporal method is monetary assets and liabilities. Easy enough but would we ever run into a situation with nonmonetary liabilities like advance rent payments? How would these be handled? edit: I think the real question is, can deferred revenue have foreign exchange gains or losses?
on one hand they can have g/l since these contacts are known amounts of cash and are thus monetary on the other hand: you aren’t going to sell these contracts, but rather deliver service (ie rent) for them , so you cannot really loose money directly how about futures and forwards? im guessing they would be monetary and with g/l ?
my instinct would be to say that they’d be translated like monetary at current rate, but that’s a complete guess. i hope the exam doesn’t go for the more odd items on the B/S and I/S. Keep it simple CFA, keep it basic please! Under temporal- cash, AR, AP, short and LT debt- translate at current rate non-monetary assets at historical rate- inventory, fixed assets so you get COGS and depreciation by applying historical rates to inventory and fixed asset purchases. revenues and expenses translated at average rate translation gains/losses show up on income statement using temporal anyone feel free to add to that for a good little flashcard! question for those of you who have taken L2 already- were questions in this section pretty straightforward and math oriented? ex- company blah has a subsidiary blah, they’re well integrated… give me the translation g/l or holding or flow effect, etc… give me ratios, etc? or were they more CFA 2 parters using less calculator and more this ratio increases/decreases or more abstract questions? any advice as how to best study for this section would be great. i just plowed through all of the schweser end of chapter questions on it- took a while, but thought the challenge questions helped a lot in terms of getting through the basic calculations. going to do the CFA end of chapter questions this weekend to help make it stick. it just seems like a lot to remember- appreciating/depreciating currencies on ratios, whether there’s a translation gain/loss depending on whether beginning exposure was +/-, etc… anyone have some easy tricks to commit them to memory? yes, i know i need to LEARN them not memorize them, but any help appreciated if you have some simple tricks/rules to remembering all of this.
This might offer some guidance: From: http://books.google.com/books?id=FY9UAqNA1QoC&pg=PT512&lpg=PT512&dq="nonmonetary+liability"+sfas+52&source=web&ots=_xVoNnT7NU&sig=Nv3ddMylR499cHbgHFaf-Y4Vltc Paraphrasing: regarding sale of future revenue, if is classified as deferred income, effects of exchange rates not subject to recognition under FAS 52.
http://www.fasb.org/pdf/fas52.pdf pg 22-24 shows a more detailed list of some non-monetary items to be remeasured using historical rates and why. my instinct, like usual when dealing in accounting, wrong-o! from a skim on some of the futures/fwds stuff, seems like it depends on if it’s for hedging or speculation. Hopefully the test won’t get that involved, doubt I’m going to take that much time to learn how those are treated.
there are no non-monetary liabilities to be found in reading 26, so im guessing it wont be on the exam
sweet! I’m using schweser mainly and just doing CFA end of chapter questions, so thx for the head up. schweser i think only mentioned inventory and fixed assets like land or a machine… that was it.
bannisja np, I am using CFAI and schweser and i also remember schweser mentioning something about not having anything besides monetary L, how far are you in the studies?
I was listening to the 2007 Schweser audio CDs and they specifically mention that the CFA makes no reference to nonmonetary liabilities.
viktorov, i’m right here… in FSA. have done a read through quant and FI also, haven’t done too many qbank questions, just end of chapter q’s so far. Prob will do a read though SS7 this week so at least a basic read through FSA almost done. Might do a few qbank questions and then move into the equity readings for the rest of Jan and prob into Feb. that’s as far ahead as i can think right now. just trying to do it one topic at a time and retain a little. this stuff is a lot more dense I think than the L1 stuff… definitely taking longer to get through stuff.
yeah I gotta agree, you have to get down to the bottom of these readings. let me know how SS7 flows for you
Pg 243 of schw book2 says : Prof notes “…CFA curriculum providesno example of nonmonetary liab., so I suggest that on the exam you treat all liabs as monetary unless the question specifically tells you otherwise.” Hope it helps