Has anyone come up with a good way of remembering when to use the temporal versus all-current method? I remember those charts in Schweser with the boxes for whether local currency equals functional or functional equals presentation currency, but I can never seem to accurately replicate that logic on questions. I need something like “Durbin Watson is a serial killer,” which refuses to leave my brain ever since I read that thread.
LC->FC=PC Temporal LC=FC->PC All current
Yeah, I think I may go with: Segregation is historical. Integration is modern. This suggests that companies whose subsidiaries are segregated (have costs and revenues denominated in local currency) should use the historic translation method => temporal. Likewise, well-integrated subsidiaries (the modern globalized case) should translate using all-current. Doesn’t some company have the motto “integration at the speed of light”. That may help too.
I have one, but it’s horribly vulgar and don’t think I should post it here BTW, I’ve found that the more vulgar the phrase, the easier it is to remember
Upon further reflection, I think I may have gotten the above backwards (once again). Shows that I am desperately in need of some deeper understanding on this subject. Do companies with well integrated subsidiaries use temporal or all-current method?
well integrated is temporal I believe. Functional would be same as reporting.
i think of it less as integrated and more it’s really needy and tied into the mothership, it can’t stand on it’s own so uses the parent’s currency as the functional. that would mean LC does NOT equal FC and then you’d use temporal. if the business can stand on it’s own and doesn’t need the parent to do it’s bad thing… LC = FC, all current.
This is my (simplified) way of looking at it: If the foreign site is independent (functions locally), then all the parent Co cares about the bottom line valuation on a specific date (the EoY IS and BS date) (All Current) If the local currency is not the functional, then timing matters (Temporal)
“always fun to present” all current is functional to presentation currency
“Durbin Watson is a serial killer” - best post ever.
Infinitesun Wrote: ------------------------------------------------------- > “Durbin Watson is a serial killer” - best post > ever. hehehe 
Best was “Dickey Fuller” sounds like a dick and is therefore not mentally stationary.
here’s my way. it is a little long , but have logic sense. An intergrated co. is fully controlled by parent co. , it is just like a internal department, just at a different location. " intergrated" is one word, I will use one word method, which is “temporal”. Since it is just a department of parent co. , all non-monetary assets (e.g. PPE) , paid in capital , COGS, depreciation are translated w/historic rate to reflect the original cost. monetary asset always w/current rate because of its nature. its exposure = net monetary asset/lia. why? Because it is part of parent, all non-monetary assets (e.g. PPE) at original cost; parent just care those money/debt in local $$. A " self-contained" co. is fully independent. it is a totally separated . " self-contained" is 2 words, I will use 2 words method, which is " all-current" . the name tells everything. all assets/lia. at current rate, common stock at historical rate. all Income statement at ave. rate. its exposure= shareholder’s equity. why? when parent sell the independent co. today, what’s gain/loss ? it 's the net book value change. hope this will help.