[ilysaml]

I know this has been discussed a lot here, but I need some light to conform with my understanding.

Scenario 1

US parent company that has a sub in Europe, the functional currency (the currency of the primary market which it operates in) is the Euro and the sub reports it’s F/S in Euros then I’ll just translate and plug the adjustment to OCI.

Scenario 2

US parent company that has a sub in USA, the functional currency (the currency of the primary market which it operates in) is the US $ but the sub is keeping records in Euros then I’ll just remeasure and plug the adjustment to the I/S.

Scenario 3

US parent that has a sub in Europe, the sub is trading in Rupees so in this case I’ll just remeasure to the functional currency (Euro) then translate to the US $ which is the reporting currency.

Scenario 4

US company parent or a subsidiary that has some individual transactions in Euro, the company’s functional currency is the reporting currency ($) then I’ll just remeasure and record foreign transaction G/L in the IS, is that correct?

Scenario 5

US parent that has a sub, both have transactions in the same currency (reporting currency) then i’ll do nothing, is that correct?

Are all the scenarios above correct or am I missing something, I’d appreciate any help that makes this topic more easy to understand for me.

[makiu]

@ilysaml

This is a very interesting post. When I first saw it I almost passed away…very intimated..lol..I have not had a chance to go over scenario by scenario yet but I will go over this weekend. For me this one of the area that I would like to nail down in my brain. Let me share the notes that I made for this subject:

Step#1 Identify the functional currency

Step#2 FUNCO ( functional currency) of the sub=FORCU ( foreign currency) =translation :OCI

translate the financial statements A/L{ assets & liabilities|@ current rates; R/E{revenue and expenses} average rate

Summary:

FUNCO=FORCU=OCI=TRANSLATED@A/L@CURRENT RATES R/E@AVERAGE RATES

II. Remeasurement

If FUNCU=PARCU{ parent currency} US GAAP applies, remeasured monetary accounts @12/31 { cash, receivables and payables}; nonmonetary accounts{inventory fixed assets} remeasured @historical rates when asset acquired, exchange rate adjustment as part of net income.

Summary:

FUNCO=PARCU=Net Income=Remeasured @ Monetary assets@ current rates, Non-Monetary assets@historical rates. Hope that this post help other candidates and any feedback is very welcome in how to improved this formula.

Good luck studying!!!

[ilysaml]

@makiu

Thanks for taking the time to help, I already figured it out and all the scenarios above were correct with just some classification adjustments.

[Author]

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