@ Sali 25: good luck with your midnight studies, i will be up like owl as well lol
so here is my lil notes for re measurement and translation ( though above explanation is pretty nice and clean) ..
Re measurement : when subsidiary is not self contained and depends upon parent's finance or local economy of sub is highly inflated ( then its dysfunctional ) and we use re-measurement..
since its dysfunctional : we translate B/S first
1) re measure all B/S items @ B/S close date except equity ( historical) and inventory ( spot rate). plug in the RE number by Liabality+ Shareholder equity – total asset
2) then translate the I/S items at weighted avg exchange rate excpet B/S related items (eg depreciation ) use b/s spot rate — then use the plug in RE as NI and then from NI add rev & sub expense accordingly the remaining balance is foreign exchange GAIN/LOSS ..
TRANSLATION METHOD ( functional)
when foreign sub is self contained and economy is strong we use translate method.
since its functional we start form I/S…
1) translate all I/S items @ weighted avg exchange rate
2) B/S translate all items to spot rate ( i.e exchange rate at b/s close date) excepte coomon stock its calculated at historical cost — remaining balance after reconcile asset and liberality—-> goes to Other comprehensive income
.