I know that for all current method, it is shareholder’s equity. How do we calculate this? Just multiply by it historical rate or you need to take the difference of last year’s effect and this year’s effect
It is IN shareholder’s equity. It is a component of Shareholder’s equity and is not the entire thing. Translation Effect would be CTA Now - CTA Previous year. (Translation gain/loss).
I meant net assets i.e equity (including retained). what rate do we take? Historical or current?
For the current rate method: You would take A-L at Current Rate and get to the Equity - at the Current Rate. This is the full translated Equity. Now Equity Translated = Common Stock + RE End Common Stock is at the Historical Rate. Substituting above - you get RE End. RE End = RE Begin + NI Translated + CTA Current - Div (if any). From the income statement translated at the Average rate => you get to the NI Translated. Now in the above you have 4 out of 5 variables - RE End, NI Translated, RE Begin (maybe 0 to start with) and Div paid (Historic rate). get to the CTA position.
cpk123 Wrote: ------------------------------------------------------- > It is IN shareholder’s equity. It is a component > of Shareholder’s equity and is not the entire > thing. > > Translation Effect would be CTA Now - CTA Previous > year. (Translation gain/loss). Schweser covered ths but in like on paragraph - took me a bit to undrestand, but its covered in that one example they give in the section. I think in the example, they assume CTA starts at 0, so its easier to calculate.