[MustPass1988]

I know this isn’t a big topic and chances are I’ll only get one or two questions on this, if any, but I just want to understand this. I understand how to restate F/S in both ways but my confusion is determining whether or not it should be restated or translated from the beginning.

For example, this MCQ question throws me off. “Fogg, Co., a US Company, contracted to purchase foreign goods. Payment in foreign currency was due one month after the goods were received at Foggs Warehouse. Between the receipt of goods and the time of payment, the exchange rates changed in Foggs favor. The resulting gain should be included in Foggs Financial Statements as:

a) Extraordinary Item

b) Component of Income from Continuing Operations

c) Deferred Credit

d) Separate component of OCI

I incorrectly thought the answer was D but it was actually B. I’ve read & reread the explanation for this and I just don’t understand how to tell that it was a remeasurement question, not a translation.

AUD: PASSED [81]; Expired, retaking August 23rd
BEC: PASSED [83]; Expired, retaking July 11th
REG: PASSED [83]
FAR: FAILED [64]; Retaking May 23rd

[MustPass1988]

Sorry, that should read “my confusion is determining whether or not it should be reMEASURED or translated from the beginning”

AUD: PASSED [81]; Expired, retaking August 23rd
BEC: PASSED [83]; Expired, retaking July 11th
REG: PASSED [83]
FAR: FAILED [64]; Retaking May 23rd

[Anonymous]

OK–After rereading my notes it seems like this is neither a remeasurement or a translation, which are both methods of translating a foreign subsidiaries books into the parent company's currency. Remeasurement is used when the functional currency = the reporting currency and translation is used when the functional currency = the local currency.

This question does not involve translating financial statements, it involves a TRANSACTION with a foreign company and all transaction gains/losses are included in current period income from continuing operations.

[Study Monk]

The difference between your translated financials and financials before translation is booked to OCI ONLY at year end. You do not make adjustments during the year, because you are only using OCI as a garbage can for the differences at year-end that arise when preparing year end financials in two different currencies. The gain in this question is actual and measurable and will be a component of income. If you buy something on credit for $15 in China and you end up paying $12 because the US dollar goes up in value then you actually have another $3 to spend. OCI gains do not result in an increase of physical cash and when physical cash is recognized it will be classified from OCI to the income statement. OCI is the land of misfit gains and losses. OCI in affect/effect(always get these mixed up) is for valuing things that change value frequently but don't result in actual spendable cash or realizable losses. It's around for misc valuation purposes.

I spoke to an ancient wise man who sent me on a mushroom induced journey through an ancient forest to find the key to passing the CPA exam. A talking spider monkey told me to throw the last of my drinking water in the dirt to find what I was looking for. So I followed his instructions and the following message appeared in the soil:

"Do 5000 multiple choice questions for each section"

[Not a Quitter]

This is a great question- thanks for asking and thanks to those who responded.

FAR- 85 I'm DONE!
BEC- 75
REG- 60,60,75
AUD- 74,74,83

CPAExcel used for BEC, AUD, REG
Exam Matrix used for FAR plus NINJA Blitz, cpareviewforfree and a little CPAExcel

[Mike]

Just wanted to throw a little more confusion out there for you between Translation and Re-measurement.

Translation G/L = OCI

Re-measurement = Income from continuing operations

You are trying to get to the reporting currency for the consolidated financials, and there are THREE ways to get there. This is how I understand it.

You need to get to the reporting currency (Consolidated Statement's Currency) from your functional currency (Currency you do business in) which must be remeasured from your Local Currency (Currency the SUB has their financials in). So the 3 ways to get there are as follows:

1. If your Functional Currency (Currency you do business in) = Local Currency (Currency the SUB has their financials in), just TRANSLATE (G/L to OCI) to the reporting currency (Consolidated Statement's Currency). No need to remeasure since your already in your functional currency. Done.

2. If your Functional Currency (Currency you do business in) = reporting currency (Consolidated Statement's Currency). Then you need to REMEASURE (G/L to I/S) to your functional currency, which happens to also be your reporting currency (Consolidated Statement's Currency). So you are done. ***This is what you also have to do for the exceptions to these rules, i.e., hyperinflation or highly integrated with parent.

3. If your Functional Currency (Currency you do business in) = some other currency, i.e., not your reporting or local currency. You need to REMEASURE (G/L to I/S) your local currency statements to your functional currency, THEN TRANSLATE (G/L to OCI) to your reporting currency. Then your done.

So to recap. You always start at your local currency. If that isn't already your functional currency, then remeasure to get there. Now you need to get to your reporting currency, so if your functional currency isn't already your reporting currency translate your way there. Done.

The Parent's Local Currency=Functional Currency=Reporting Currency

[MustPass1988]

Thanks for the replies everyone! I think I understand it a little better although it's still confusing. I'll just review it and hope to only get one or two questions on it 🙂

AUD: PASSED [81]; Expired, retaking August 23rd
BEC: PASSED [83]; Expired, retaking July 11th
REG: PASSED [83]
FAR: FAILED [64]; Retaking May 23rd

[ron10590]

Thank you Mike, your explanation really helped me understand this!

REG (7/14): 82
FAR (11/14): 81
BEC (1/15): 83
AUD (5/15):

[Author]

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