国际会计学第六章ppt课件.ppt

Choi Meek 6 e 1 InternationalAccounting 6 e FrederickD S ChoiGaryK Meek Chapter6 ForeignCurrencyTranslation Outline ResultsofoperationsReasonsfortranslationBackgroundandterminologyFinancialstatementeffectsofalternativetranslationratesForeigncurrencytranslationTranslationaccountingdevelopmentForeigncurrencytranslationandinflation Choi Meek 6 e 3 LearningObjectives Whydofirmstranslatefromonecurrencytoanother Whatisthedifferencebetweenaspot forward andswaptransaction Whatexchangeratesareusedinthecurrencytranslationprocessandwhataretheirfinancialstatementeffects Howdoesatranslationgainorlossdifferfromatransactionsgainorloss LearningObjectives Istheremorethanonewayoftranslatingfinancialstatementsfromonecurrencytoanother Ifso whatarethey Howdoesthetemporalmethodofcurrencytranslationdifferfromthecurrentratemethod Whatistherelationshipbetweencurrencytranslationandinflation Resultsofoperation Case AlcanCorporationPerformanceisimpactedbyforeigncurrencytranslationReportedcurrency USDForeigncurrency Canadian Australiandollars EuroImpactsonAlcan soperatingresultsRevenueandexpenseConsolidationForeigncurrencytransactions Case Alcan sincome Alcan sglobaloperation Doreportedcurrencyeffectsmatter YesRelationb tchangesincurrencyvaluesandstockreturnsPredictingchangesinearningsMeasureafirm sexchangerateexposureImplicationforstatementreadersFigureoutthenatureofforeignexchangegainsandlossesHowthesenumbersarederivedandwhattheymean Choi Meek 6 e 10 WhydoFirmsTranslate PreparingconsolidatedfinancialstatementsAnaggregateviewTotaloperationsbothdomesticandforeignRecordingofforeigncurrencytransactionsforeigncurrencysales purchases borrowingorlendingintheconsolidatedentity sreportingcurrencyMeasuringafirm sexposuretoforeignexchangeriskforeigncurrencyriskCommunicatingwithforeignaudiences of interestconveyaccountinginformationtonon domesticusers Backgroundandterminology Translation TheprocessofrestatingfinancialinformationfromonecurrencytoanotherAchangeinmonetaryexpressionConversion ThephysicalexchangeofonecurrencyforanotherForeignexchangemarketMarketvalueSpot forward ors Choi Meek 6 e 11 Choi Meek 6 e 12 Terminology Spottransactions thephysicalexchangedeliverytakesplaceimmediatelySpotmarketrateDifferentinflationratesamongcountriesDifferentnationalinterestsExpectationaboutthedirectionoffutureratesDirectquoteversusindirectquoteBidquoteversusaskquote Choi Meek 6 e 15 Choi Meek 6 e 16 AccountingforSpotTransactions Aforeignexchangegainorlossisrecordedwhenevertheexchangeratechangesbetweentheoriginaltransactiondateandthesettlementdate orbetweentheoriginaltransactiondateandthefinancialstatementdateshouldfinancialstatementsbepreparedpriortosettlement Example OnSeptember1 acalendaryearU S manufacturersells on90 daycredit goodstoaSwedishimporterforSEK1 000 000 Thedollar kronaexchangerateis 0 14 SEK1onSeptember1 0 13 SEK1onSeptember30 and 0 11 SEK1onDecember1 Terminology Forwardtransaction agreementstoexchangeaspecifiedamountofonecurrencyforanotheratafuturedate S involvesthesimultaneousspotpurchaseandforwardsale orspotsaleandforwardpurchaseofacurrency TakeadvantageofhigherinterestrateinaforeigncountryAgainstunfavorablemovementExample SwissfrancvsU S dollar Choi Meek 6 e 17 Choi Meek 6 e 18 Theproblem Whatistheproblemindealingwithforeigncurrencytranslation CurrencyfluctuationsEspeciallyinEasternEurope LatinAmerica andcertainpartsofAsiaDatafromtheFederalReserveBankthatindicatethefluctuationTherefore theproblemistochoseanexchangeratefortranslation Financialstatementeffectsofalternativetranslationrates Alternativetranslationrate CurrentrateTheexchangerateprevailingasofthefinancialstatementdateHistoricalrateTheprevailingexchangeratewhenaforeigncurrencyassetisfirstacquiredoraforeigncurrencyliabilityfirstincurredPreservetheoriginalcostAveragerateAsimpleorweightedaverageofeithercurrentorhistoricalexchangerates Choi Meek 6 e 22 Exchangegainsandlosses Translationgainsandlosses arisingfromtranslationofforeigncurrencyfinancialstatementsUnrealizedgain lossTransactiongainsandlosses arisingfromtranslationofforeigncurrencytransactionGainandlossesonsettledtransactions realgain loss Gainandlossesonunsettledtransactions unrealized Examples p131 Exhibit6 3 p132 Choi Meek 6 e 23 Choi Meek 6 e 24 Issuesassociatedwithfluctuatingexchangerate Whatexchangeratewasusedtotranslatedforeigncurrencybalancestodomesticcurrency Whichforeigncurrencyassetsandliabilitiesareexposedtoexchangeratechanges Howaretranslationgainsandlossesaccountedfor Foreigncurrencytransaction ForeigncurrencytransactionsoccurwheneveranenterprisepurchasesorsellsgoodsforwhichpaymentismadeinaforeigncurrencyorborrowsorlendsforeigncurrencyFunctionalcurrencyistheprimarycurrencyinwhichittransactsbusinessandgeneratesandspendscash ExamplesEurosfortheBelgiansubsidiaryofaU S parentTheIndianaccountsifaU S subsidiarywithBritishpoundsasitsfunctionalcurrencyAMexicanassemblyoperationofaU S parent Choi Meek 6 e 26 Choi Meek 6 e 27 AccountingforFCtransactions FASNo 52 FASB 1981 thetransactiondateMeasureandrecordedinthefunctionalcurrencythebalancesheetdateTranslatetothereportingcurrencyForeignexchangeadjustmenttransactiongainsandlossesSingletransactionperspectiveTwo transactionperspective Single transactionperspective Premise atransactionanditssettlementareasingleeventExchangeadjustmentsaretreatedasAnadjustmenttotheoriginaltransactionExampleOnSeptember1 2008 amanufacturersellsgoodstoaSwedishimporterfor1millionSwedishkrona SEK Theexchangerateis 0 14 1SEK andthekronareceivableareduein90days andtheU S operateinacalendar yearbasis Bytheendofthemonth theexchangerateis 0 13 1SEK onDecember1 2008 itis 0 11 1SEK Choi Meek 6 e 30 Two transactionperspective SaleandcollectionaretreatedastwoseparateeventsRecognizeexchangelossoneachreportingdayUnsettledtransactionlossSettledtransactionlossExampleExhibit6 6 Choi Meek 6 e 32 Choi Meek 6 e 33 TypesofTranslationMethods Singleratemethod currentratemethod appliesasingleexchangerate thecurrentrate toallforeigncurrencyassetsandliabilitiesMultipleratemethods Usesomecombinationorcurrentandhistoricalratestotranslateforeigncurrencybalances Current NoncurrentmethodMonetary NonmonetarymethodTemporalmethod Choi Meek 6 e 34 Current Single RateMethod Allforeignassetsandliabilitiestranslatedatthecurrentrate AllrevenuesandexpensestranslatedbyanappropriatelyweightedaverageofcurrentexchangeratesfortheperiodIssuesrelatedSinglerate notsinglecurrency PreservetheoriginalfinancialstatementrelationshipsPresumealllocalcurrencyassetsareexposedtoexchangeriskDistortperformancemeasurementExample P136 Multiple ratemethod CombinecurrentandexchangehistoricalratesCurrent NoncurrentmethodMonetary NonmonetarymethodTemporalmethodDistinctionsamongthesefourmethods Exhibit6 7 Choi Meek 6 e 36 Choi Meek 6 e 37 Current NoncurrentMethod Currentassetsandcurrentliabilitiestranslatedatthecurrentrate Noncurrentassetsandliabilitiestranslatedatthehistoricalrate Revenuesandexpenses excludingdepreciationandamortization translatedataveragerates DepreciationandamortizationchargesathistoricalratesineffectwhenrelatedassetsareacquiredAdvantagesanddisadvantages Choi Meek 6 e 38 Monetary NonmonetaryMethod Monetaryassetsandliabilitiestranslatedatcurrentrates Nonmonetaryassetsandliabilitiestranslatedathistoricalrates Revenuesandexpenses excludingdepreciation amortizationandcostofsales ataveragerates Depreciation amortizationcharges andcostofsalesathistoricalratesineffectwhenrelatedassetsareacquired Advantagesanddisadvantages Choi Meek 6 e 39 TemporalMethod Monetaryassetsandliabilitiestranslatedatthecurrentrate NonmonetaryitemsForeigncurrencybalances FCB athistoricalcost historicalratesFCBatcurrentcostormarketvalue currentrate Revenuesandexpenses andcostofsalesifinventoriesarecarriedatmarketaverageratesDepreciation amortizationcharges andcostofsaleswheninventoriesarecarriedatcosthistoricalratesineffectwhenrelatedassetsareacquiredAdvantagesanddisadvantages Choi Meek 6 e 40 FinancialStatementEffects DifferentmethodresultindifferentadjustmentsExample ThebalancesheetofahypotheticalMexicansubsidiaryofaU S basedmultinationalenterpriseappearsinpesosinthefirstcolumnofexhibit6 8 ThesecondcolumndepictstheU S dollarequivalentsoftheMexicanpeso MXN balanceswhentheexchangeratewasMXN1 0 11 ShouldthepesodepreciatetoMXN1 0 09 severaldifferentaccountingresultsarepossiblewhenapplyingdifferenttranslationmethods seeExhibit6 8and6 9 Choi Meek 6 e 41 Choi Meek 6 e 42 Whichmethodisbest Whetherasingletranslationmethodisappropriateforallcircumstances Whatareacceptableforeigncurrencytranslationmethodsandunderwhatconditions Aretheresituationsinwhichcurrencytranslationmaybeinappropriate Aretheresituationsinwhichcurrencytranslationsmayconfuseratherthanenlightenusers Whichrateshouldbeused Historical current averageBuyingandsellingratesSpotandforwardratesOfficialandfree marketratesDividendremittancerates 2 freemarketrates 3 anyapplicablepenaltyorpreferencerates Translationgainsandlosses Approachestoaccountingfortranslationadjustments DeferralWhy reasons Whynot DeferralandamortizationHowandwhy PartialdeferralRecognizelossesassoonastheoccuranddefergainNodeferralRecognizeinincome Choi Meek 6 e 45 TranslationaccountingdevelopmentintheU S Pre 1965Thecurrent noncurrentmethodincome1965 1975Exceptiontocurrent noncurrentmethod1975 1981FASNo 8ThetemporalmethodNodeferral1981 presentFASNo 52 Choi Meek 6 e 47 FeaturesofFASB52andIAS21 DifferenceSameobjectivesReflectinconsolidatedstatementsthefinancialresultsandrelationshipsmeasuredintheprimarycurrencyinwhicheachconsolidatedentitydoesbusinessProvideinformationcompatiblewiththeexpectedeconomiceffectsofanexchangeratechangeonanentity scashflowsandequityBasedonthenotionofafunctionalcurrencyFunctionalcurrencycanbetheparentcurrencyFunctionalcurrencycanbethelocalcurrencyFunctionalcurrencycanbethecurrencyofathirdcountry Choi Meek 6 e 48 Translationwhenthelocalcurrencyisfunctional Currencyassetsandliabilitiesaretranslatedatcurrentrate capitalaccountsathistoricalratesRevenuesandexpensesaretranslatedatcurrentrate orweightedaveragerateTranslationgainsandlossesdisclosedasaseparatecomponentofconsolidatedequity Translationwhentheparentcurrencyisfunctional Monetaryassetsandliabilities andnonmonetaryassetsvaluedatcurrentmarketpricesatcurrentrate otherassetsnonmonetaryitemsandcapitalaccountsathistoricalratesRevenuesandexpensesataveragerates exceptthoserelatedtononmonetaryitemsTranslationgainsandlossesresultingfromthetranslationprocessareincludedincurrentincome Translationwhenforeigncurrencyisfunctional Firstmeasuredfromthelocalcurrencyintothefunctionalcurrency temporalmethod Andthentranslatedintothereportingcurrenc