Temporal Method vs Current Method in Hyper-inflationary environment

CFA Level II
#1

Hi all, Could anyone advise me on 2 points? 1 : when a subsidiary operates on an hyper-inflationary environment (>100% over 3Years), do we need to use the Temporal Method (FASB) or still use the current method by first adjusting BS account for inflation and then apply the correct X rate? 2 : when the foreign ccy is depreciating, when do we recognize a loss or a gain when translating FS in the parent ccy? Thanks in advance, Viper

#2
  1. US GAAP: Use Temporal IFRS: Restate BS for inflation and use current method. 2. All translation gains/losses flow through the IS under the temporal method. Under the current method, translation gains/losses bypass the IS.
#3

OK thanks Brian Good luck

#4

IFRS adjust for inflation than translate using all current US GAAP Apply temporal directly Gains and losses depend on if there is a net asset postion or a net liability position Current rate Method when foreign currency appreciates and there is a net asset position that results in a gain. opposite for net liability position Temporal when foreign currency appreciates and there is a net monetary asset position that results in a gain. opposite for net monetary liability position