Everybody post 1 item whether it be a formula or a concept that is your must know for the test in 2 more days. Let’s try and consolidate some of the most important concepts so we do not miss any gimme questions… Mine is All Current— I/S all Average Rates B/S Current Rate for everything except for common stock Temporal-- I/S average rates (except for COGS and DEP) B/S Monetary Assets at Current Rate Non Monetary(rate when purchased) Exposure All Current-- Equity Exposure Temporal-- Net Monetary Assets Flow Effect-- Change in exposure (End-Avg) Holding Effect-- Beg Exp (End-Beg)
H Model [{(D0*1+GL)/ r-gL}] + [{(DO*(T/2)+(GS-GL)}/r-gL]
since we are on the subject of Currency G/L: Operational Effect = change in I/S Item * Previous Yr Avg. Rate Exchange Rate Effect = I/S Item * Change in Avg. Rate
You won’t make a stupid mistake with Equity Method if you remember that the investor’s equity must “mirror” the equity in the host according to the % owned. They make $100, you get 30% of $100 They pay div $20 you deduct 30% of $20 Tip for foreign exchange: ever divide the differentials the wrong way? Won’t happen again if you just keep track of which currency needs to depreciate. Divide the differentials EITHER way then divide or multiply the spot rate according to which currency needs to go up or down.