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TRANSLATION OF FOREIGN CURRENCY FINANCIAL STATEMENTS

TRANSLATION OF FOREIGN CURRENCY FINANCIAL STATEMENTS. When a U.S. company prepares its financial statements, it must include its foreign-based operations: a) measured in US dollars b) reported using GAAP.

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TRANSLATION OF FOREIGN CURRENCY FINANCIAL STATEMENTS

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  1. TRANSLATION OF FOREIGN CURRENCY FINANCIAL STATEMENTS

  2. When a U.S. company prepares its financial statements, it must include its foreign-based operations:a) measured in US dollarsb) reported using GAAP

  3. The foreign operations may be:a) subsidiariesb) branchesc) other investments of the US firm

  4. OBJECTIVE OF TRANSLATION PROCESS:Provide information that shows the expected impact of exchange rate changes on the US company’s cash flows and equity.

  5. STEPS IN THE TRANSLATION PROCESS:Receive financial statements of foreign subsidiary (reported in a foreign currency).Restate to conform to GAAP (on worksheet).Translate amount in each account into US $.Consolidate the translated accounts with the parent’s accounts.

  6. METHODS OF TRANSLATION PERMITTED UNDER GAAP:Current Rate MethodTemporal MethodChoice based on Functional Currency of the foreign operation.

  7. FUNCTIONAL CURRENCY:The currency of the environment in which the entity primarily generates and expends cash.[In highly inflationary economies, the Functional Currency must be the US dollar].

  8. Tugas 25: Tugas KelompokTugas25.doc lihat di folder Tugas25

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