国际会计第七版英文版课后答案(第七章)_免费下载

1、chapter 7financial reporting and changing pricesdiscussion questions solutions1. historical-based financial statements may be misleading during periods of significant inflation. many resources may have been acquired in periods when the purchasing power of the monetary unit was much higher. these exp

2、enses then typically are deducted from revenues that reflect current purchasing power. the resulting income number is unintelligible. another problem for statement readers is that the value of assets recorded at their historical acquisition cost is typically understated as a result of inflation. und

3、erstated asset values produce understated expenses and overstated earnings. financial trends are also difficult to interpret, as trend statistics generally include monetary units of different purchasing power. a positive trend in sales may be due to price changes, not real increases in sales.2. a pr

4、ice index is a cost ratio, that is, the ratio of a representative “basket” of goods and services consumed by an average family, compared to the price of that same basket in a benchmark (“base”) year. the price index is invaluable in enabling a statement reader to translate sums of money paid in the

5、past to their current purchasing power equivalents.3. this statement is partly true and shows the confusion that surrounds inflation accounting. in accounting for changing prices, users must distinguish between general price changes and specific price changes. general prices refer to the prices of a

6、ll goods and services in the economy. the object of accounting for general price level changes is to preserve the general purchasing power of a companys money capital. specific price changes refer to changes in the prices of specific commodities. the object of accounting for specific price changes i

7、s to preserve a companys productive capacity or operating capability. 4. the congressman is wrong. the object of inflation accounting is to clarify the distinction between capital and income, not to minimize corporate taxes. inflation accounting shows how much money the company can pay in expenses,

8、taxes, and dividends, while keeping enough resources to maintain its capital. 5. although it is generally conceded in principle that price level-adjusted financial statements are more useful than conventional accounting statements during periods of significant inflation, it is a judgment call to ide

9、ntify exactly when price level-adjusted statements become more meaningful. as a rule of thumb, executives in brazil use an inflation rate greater than 10 % per month. investors in germany or switzerland may believe that 5 % inflation per year is alarming. unfortunately, no one has yet developed a fo

10、rmal, rigorous, easy-to-apply definition of meaningfulness.how does one determine whether the benefits of price level-adjusted accounting information exceed the costs? while the costs to generate such information can be measured, it is much harder to quantify the benefits. financial accounting deals

11、 with information produced by business enterprises for use by external decision makers. consequently, measurement of the benefits of price level-adjusted information must cover all user groups in an economy. multiple user groups, uneven distributions of benefits (both within and between groups), and

12、 favorable economy-wide spillover effects of price level information complicate the task. adding international dimensions makes the problem even worse. 6. the u.s. approach resembles the price-level adjusted current cost model, whereas the u.k. approach embraces the current cost model. while both re

13、quire disclosure of the impact of changing prices on monetary items, the u.s. approach basically uses the general price level index to compute monetary gains and losses, whereas the u.k. employs specific prices changes by way of its gearing adjustment. 1. the international accounting standards board

14、 sanctions use of the general price level model or the current cost framework. whichever method is employed, these inflation adjustments must be expressed in terms of constant purchasing power as of the balance sheet date. purchasing power gains or losses are to be included in current income. firms

15、adjusting their accounts for changing prices must disclose, at a minimum: a) the fact that end-of-period purchasing power adjustments have been made, b) the asset valuation framework employed in the primary financial statements, c) the type of inflation index or indexes employed and their level at t

16、he end of the period as well as their movements during the period, and d) the net purchasing power gain or loss on net monetary items held during the period. given the options that are available, analysts must understand the differences between the approved inflation accounting methods to be able to

17、 compare companies choosing one option over the other and to assure proper interpretation of inflation adjusted amounts. 2. the historical cost-constant dollar model measures the impact of general price level changes on a firms reported performance and financial position. the current cost model exam

18、ines the impact of specific price changes on enterprise income and wealth. the two measurement frameworks are similar in that both attempt to clarify the distinction between capital and income. they differ in reporting objectives. whereas the historical cost/constant dollar model attempts to preserv

19、e the general purchasing power of a firms original money capital, the current cost model attempts to preserve an entitys physical capital or productive capacity.3. your authors think that restating foreign and domestic accounts to their current cost equivalents produces information that is far more

20、helpful to investor decisions than historical cost methods, whether or not adjusted for changes in general price levels. such information provides a performance measure that signals the maximum amount of resources that enterprises can distribute without reducing their productive capacity. it also fa

21、cilitates comparisons of consolidated data. 10. the gearing adjustment is an inflation adjustment that partially offsets the additional charges to income associated with assets whose values are restated for inflation (e.g., higher depreciation and cost of sales). this adjustment recognizes that borr

22、owers generally gain from inflation because they can repay their debts with currency of reduced purchasing power. hence, it is unnecessary to recognize the higher replacement cost of inventory and plant and equipment in the income statement so far as they are financed by debt. 11. accounting for for

23、eign inflation differs from accounting for domestic inflation in two major ways. first, foreign rates of inflation often are higher than domestic rates, which increases potential distortions in an entitys reported results from changing prices. second, as foreign exchange rates and differential natio

24、nal rates of inflation are seldom perfectly negatively correlated, care must be taken to avoid double-dipping when consolidating the results of foreign operations. 12. double-dipping refers to methods that count the effects of foreign inflation twice in reported earnings. earnings are reduced once w

25、hen cost of sales is adjusted upwards for inflation, and again when inventories are translated to domestic currency using a current exchange rate, which yields a translation loss. since the change in the exchange rate itself was caused by inflation, the result is a double charge for inflation.exerci

26、se solutions1. this exercise is a good way to test students understanding of the various approaches to accounting for changing prices. vestels earnings numbers are based on the general price level model whereas infosys is measuring its performance based on a current cost framework. modello goes a st

27、ep further and adjusts its current cost statements for changes in the general price level. some may feel that current cost data, which is based on the notion of replacement costs, is too subjective a notion to be reliable. since general price level data are based on general price level indices, the

28、numbers appearing in vestels income statement are much more objective and facilitates comparisons among companies using a similar methodology. moreover, vestels statements do not violate the historical cost doctrine. others will argue that the value of stock investments are based on discounted futur

29、e cash flows. accordingly, the current cost framework provided by infosys is more germane to investor decisions as it measures the amount of earnings that could be distributed as dividends without reducing the firms future dividend generating potential. moreover, current cost earnings, including the

30、 gearing adjustment , reflects how the firm is impacted by prices that are more germane to the firm, as opposed to the general public. some will argue that modellos income statement combines the best of both worlds. however, there is merit to the argument that the income statement should measure the

31、 performance of the firm and that this is best accomplished with the current cost framework. since individual investors are affected by the general price level, they should adjust their share of a firms current cost earnings distributions for general inflation. 2. a. income statementhistoricalprice

32、levelhistorical cost-costadjustmentconstant dollarrevenue mxp 144,000,000 420/340 mxp 177,882,353operating expenses (86,400,000) 420/340 (106,729,412)depreciation (36,000,000) 420/263 (57,490,494)operating income mxp 21,600,000 mxp 13,662,447amonetary gains (losses) - (73,248,759)net income mxp 53,2

33、80,000 mxp(59,586,312)balance sheetcash mx(p 157,600,000 420/420 mxp 157,600,000land 180,000,000 420/263 287,452,471building 720,000,000 420/263 1,149,809,885acc. depreciation (36,000,000) 420/263 (57,490,494)total mxp 1,021,600,000 mxp 1,537,371,862owners equity (beg.) mxp1,000,000,000 rolled forwa

34、rdb mxp 1,596,958,174 net income (loss) 21,600,000 (59,586,312)owners equity mxp 1,021,600,000 mxp 1,537,371,862(end)amonetary loss: cashbeginning balance1,000,000,000 420/2631,596,958,174purchase of real estate( 900,000,000) 420/263 (1,437,262,356)rental revenues 144,000,000 420/340 177,882,353oper

35、ating expenses (86,400,000) 420/340 106,729,412) 157,600,000 230,848,759 -157,600,000 monetary loss (73,248,759) b beginning equity x price level adjustment = adjusted amount= p 1,000,000,000 x 420/263 = p 1,596,958,1742.b.costhc/constant dollar return on assets 21,600,000 (59,586,312) 1,021,600,000

36、 1,537,371,862 = 2.1% = -3.9%cost-based profitability ratios tend to provide a distorted (overstated) picture of a companys operating performance during a period of inflation. 3. 20x7 20x8cash mjr 2,500 mjr 5,100current liabilities (1,000) (1,200)lt-debt (3,000) (4,000) net monetary liabilities mjr

37、(1,500) mjr (100)zonolia enterprises net monetary liability position changed by mjr1,400 during the year (mjr100) (mjr1,500).4. nominalrestate forconstantmjrs majikstan gplmjrsnet monetary liab.smjr 1,500 x 32,900/30,000 = mjr1,64512/31/x7decrease during year (1,400) = (1,400)net monetary liab.s mjr

38、 100 x 32,900/36,000 = mjr 91 12/31/x8monetary (general purchasing power) gain mjr 1545. historicalcurrent costcurrentincome statement costadjustmentcostrevenues mxp 144,000,000 - mxp 144,000,000operating expenses 86,400,000 - 86,400,000depreciation (36,000.000) 1.8 64,800,000net income (loss) mxp 2

39、1,600,000 mxp (7,200,000)balance sheetcashmxp 157,600,000- p 157,600,000land 180,000,0001.9 342,000,000building 720,000,0001.8 1,296,000,000acc. depreciation (36,000,000) 1.8 (64,800,000) total mxp1,021,600,000 mxp 1,730,800,000owners equitybeg. balance mxp1,000,000,000 mxp 1,000,000,000oe revaluati

40、ona - 738,000,000net income (loss) 21,600,000 (7,200,000) total mxp1,021,600,000 mxp 1,730,800,000a revaluation of land mxp 162,000,000 revaluation of building 576,000,000 mxp 738,000,0006. solution in 000,000s: mjr8,000 x 137.5/100.0 = mjr11,000 20x7 20x8current cost mjr8,000 mjr11,000accpage: 5spe

41、ll out. depreciation (1,600) (3,300)anet current cost mjr6,400 mjr7,700 a current cost depreciation = mjr800 x 137.5/100.0 = 1,100 per year for 3 years.7. as no new assets were acquired during the year, we must determine to what extent the mjr3,000 increase in the current cost of zonolias equipment

42、exceeded the change in the general price level during the year. the appropriate calculation follows:mjr11,000 - mjr8,000 x 36,000/30,000= mjr11,000 - mjr9,600 = mjr1,400alternatively, if we follow the fasbs suggested methodology, where calculations are expressed in average (20x8) dollars, current co

43、st depreciation would be computed by reference to the average current cost of the related assets. thus,current cost, 12/31/x7mjr8,000,000current cost, 12/31/x8 11,000,000 mjr19,000,000average current costmjr19,000,000/2 = mjr9,500,000current cost depreciation at 10% = mjr950,000increase in current c

44、ost of equipment, net of inflation (000s):current restate forcurrent cost/costinflationconstant zonoscurrent cost, net 12/31/x7 mjr6,400 x 32,900/30,000 mjr7,019depreciation (950) (950)current cost, net 12/31/x8 7,700 x 32,900/36,000 7,037 mjr 2,250 mjr968the increase in the current cost of equipmen

45、t, net of inflation is mjr968. the difference between the nominal renge amount (mjr2,250) and constant renges (mjr968) is the inflation component of the equipments current cost increase.8. restate-translate method:constanttranslate$ equivalentsrengesof constantrengesincrease in currentcost of equip.

46、, netof inflationmjr968,000x1/4,800=$202translate-restate methodpage: 6verify column heads.:cc (mjr) translate cc ($) restate cc/ constant $ u.s. gplcc, netmjr 6,400,000 x 1/4,800 = $1,333 x 292.5/281.5 = $1,38512/31/x7dep. (950,000) x 1/4,800 = (198) = (198)cc, net 7,700,000 x 1/4,800 = 1,604 x 292

47、.5/303.5 = 1,54612/31/x8 mjr 2,250,000 $ 469 $ 3599.20x720x8 m m trade receivables242 270-trade payables (170) (160) net monetary working capital 72 110change in monetary working capital = 38 (110 - 72) nominal restate for constant british ppi net monetary w/c 72 x 110/100 = 79.2 12/31/20x7increase

48、during year 38 = 38.0net monetary w/c 110 x 110/120 = 100.8 12/31/20x8 monetary working capital adjustment = (16.4page: 7is text below the fn text?)aathis amount is added to the current cost adjustments for depreciation and cost of sales because trade receivables exceeded trade payables, thus tying

49、up working capital in an asset that lost purchasing power.gearing adjustment:(tl ca)/(fa + i + mwc) cc dep. adj. + cc sales adj. + mwcawhere tl = total liabilities other than trade payables ca = current assets other than trade receivables and inventory fa = fixed assets including investments i = inv

50、entory mwc = monetary working capital cc dep. adj. = current cost depreciation adjustment cc sales adj. = current cost of sales adjustment mwca = monetary working capital adjustment = (128 75)/(479 + 220 + 110 m 216 = .066 216 = 14.3the only number i could readily identify in problem 9 is inventory

51、of 220. the next number i could come close on is fixed assets. looks like the solution above says 479, the text for 08 indicates 473. i could not see where the 110 (mwc) came from. neither is it clear where the other 3 items in brackets came from. the solution needs to be clearer before i can check the numbers.this gearing adj