Question 1

If a subsidiary is in a country with dangerously high inflation, how should the translation of its financial statements be handled? Consider both FASB and IASB procedures in your discussion.

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Question 2

How does a company develop a hedged balance sheet?

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Question 3

Generally speaking, accounting translation gains and losses have no economic impact on the firm's cash flows and do not reflect a change in the firm's value. What are some exceptions to this conclusion?

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Question 4

Witten Publishing, a U.S. multinational, has a subsidiary in Mexico with the following balance sheet (denominated in pesos).
  The spot exchange rate is $0.097430/peso. The company's CFO has estimated the following average exchange rates for inventories, fixed assets, common stock, and retained earnings: $0.109240, $0.103580, $0.101160, and $0.121641, respectively. The subsidiary is classified as an integrated foreign entity. Translate the balance sheet into U.S. dollars, which is the reporting currency. (Hint: Depending upon the translation method used, all of the exchange rates may not be used.)
Financial statement translation Diff: T

Accepted Answer

The answer of Witten Publishing, a U.S. multinational, has a...

Question 5

Gard Tennis Supply, a U.S. multinational, has a subsidiary in France with the following balance sheet (denominated in euros).
  The spot exchange rate is $0.97380/euro. The company's CFO has estimated the following average exchange rates for inventories, fixed assets, common stock, and retained earnings: $0.96152, $0.9558, $1.1041, and $1.0853, respectively. The subsidiary is classified as a self-sustaining foreign entity. Translate the balance sheet into U.S. dollars, which is the reporting currency. (Hint: Depending upon the translation method used, all of the exchange rates may not be used.)

Accepted Answer

The answer of Gard Tennis Supply, a U.S. multinational, has...

Quiz 7: Translating and Consolidating Subsidiary Financial Statements

If a subsidiary is in a country with dangerously high inflation, how should the translation of its financial statements be handled? Consider both FASB and IASB procedures in your discussion.

How does a company develop a hedged balance sheet?

Generally speaking, accounting translation gains and losses have no economic impact on the firm's cash flows and do not reflect a change in the firm's value. What are some exceptions to this conclusion?