Before I get into it, let me start by saying relax! Looks like you're panicked a bit, and rightfully so. The test is daunting, but you're one of the brightest I've seen on here. Be confident like JRo said!
Here's what I have for Foreign Currency (God I hope I don't confuse things any further! If so, don't read any more than once).
First thing I had to understand is that the Functional Currency is either the Local (Recording) or Reporting. There are not 3 different types as I initially thought, just 2 that can be designated as Functional. Reporting is typically the dollar since we're in the US so make that assumption when thinking things through.
If Local = Functional, Gain/Loss (G/L) is in OCI. If Functional = Reporting, G/L is Income. Since US is Reporting, and foreign “functions” as US, include in income. On the flip side, Local is foreign, and foreign “functions” as foreign, so put it in OCI.
The exchange rates to use are the same for almost everything whether the Functional = Local or Functional = Reporting. The only difference is for non-monetary assets carried at cost which is recorded at the historical rate.
Rationale:
Same Accounting whether Functional = Local or Functional = Reporting:
For Revenues, Expenses, Gains, and Losses, you use either the rate when earned/incurred or the weighted average rate.
Use the historical rate to translate PIC, but not any rate before initial consolidation.
Use the rate at the Balance Sheet date for monetary (or non-monetary carried at market) assets and liabilities.
Differences:
Functional = Local, translate non-monetary Assets and Liabilities carried at cost using the rate at the Balance Sheet date. (so really, if Functional = Local, you use the rate at the Balance Sheet date for all Assets and Liabilities).
Functional = Reporting, translate non-monetary Assets and Liabilities carried at cost using the historical rate.
So most of it is exactly the same as far as the rates to use to translate, except for the non-monetary assets carried at cost.
Using the assumption that the US is the reporting currency, it makes since to record these at historical rate because the assets and liabilities are part of the “functions” of the US.
Hope this helps!!
FAR: 4/19/2014 - 85!
AUD: 5/27/2014 - 90!
REG: 7/18/2014 - 81!
BEC: 8/13/2014 - 84!
4 up, 4 down, in 4 months.
Licensed 9/22 in NC.
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