国际会计学第六章.ppt

Choi/Meek,6/e1International Accounting,6/eFrederick D.S.ChoiGary K.MeekChapter 6:Foreign Currency TranslationOutline1.Results of operations2.Reasons for translation3.Background and terminology4.Financial statement effects of alternative translation rates5.Foreign currency translation6.Translation accounting development7.Foreign currency translation and inflation Choi/Meek,6/e3Learning Objectives lWhy do firms translate from one currency to another?lWhat is the difference between a spot,forward,and swap transaction?lWhat exchange rates are used in the currency translation process and what are their financial statement effects?lHow does a translation gain or loss differ from a transactions gain or loss?Learning Objectives lIs there more than one way of translating financial statements from one currency to another?If so,what are they?lHow does the temporal method of currency translation differ from the current rate method?lWhat is the relationship between currency translation and inflation?Results of operationlCase:Alcan CorporationlPerformance is impacted by foreign currency translationlReported currency:USDlForeign currency:Canadian,Australian dollars,EurolImpacts on Alcans operating resultslRevenue and expenselConsolidationlForeign currency transactionsCase:Alcans incomeAlcans global operationDo reported currency effects matter?lYeslRelation b/t changes in currency values and stock returnslPredicting changes in earningslMeasure a firms exchange rate exposurelImplication for statement readerslFigure out the nature of foreign exchange gains and losseslHow these numbers are derived and what they mean?Choi/Meek,6/e10Why do Firms Translate?1.Preparing consolidated financial statements lAn aggregate viewlTotal operations both domestic and foreign2.Recording of foreign currency transactionslforeign currency sales,purchases,borrowing or lending in the consolidated entitys reporting currency 3.Measuring a firms exposure to foreign exchange risklforeign currency risk4.Communicating with foreign audiences-of-interest lconvey accounting information to non-domestic usersBackground and terminologylTranslation:The process of restating financial information from one currency to anotherlA change in monetary expressionlConversion:The physical exchange of one currency for anotherlForeign exchange marketlMarket valuelSpot,forward,or sChoi/Meek,6/e11Choi/Meek,6/e12TerminologylSpot transactions:lthe physical exchange ldelivery takes place immediatelylSpot market ratelDifferent inflation rates among countrieslDifferent national interestslExpectation about the direction of future rateslDirect quote versus indirect quotelBid quote versus ask quoteChoi/Meek,6/e15Choi/Meek,6/e16Accounting for Spot TransactionslA foreign exchange gain or loss is recorded whenever the exchange rate changes between the original transaction date and the settlement date,or between the original transaction date and the financial statement date should financial statements be prepared prior to settlement.lExample:On September 1,a calendar year U.S.manufacturer sells,on 90-day credit,goods to a Swedish importer for SEK 1,000,000.The dollar/krona exchange rate is$0.14=SEK1 on September 1,$0.13=SEK 1 on September 30,and$0.11=SEK 1 on December 1.TerminologylForward transaction:agreements to exchange a specified amount of one currency for another at a future date.lS:involves the simultaneous spot purchase and forward sale,or spot sale and forward purchase of a currency.lTake advantage of higher interest rate in a foreign countrylAgainst unfavorable movement lExample:Swiss franc vs U.S.dollarChoi/Meek,6/e17Choi/Meek,6/e18The problemlWhat is the problem in dealing with foreign currency translation?lCurrency fluctuationslEspecially in Eastern Europe,Latin America,and certain parts of AsialData from the Federal Reserve Bank that indicate the fluctuationlTherefore:the problem is to chose an exchange rate for translationFinancial statement effects of alternative translation rateslAlternative translation rate:lCurrent rate lThe exchange rate prevailing as of the financial statement datelHistorical ratelThe prevailing exchange rate when a foreign currency asset is first acquired or a foreign currency liability first incurredlPreserve the original costlAverage rate lA simple or weighted average of either current or historical exchange rates Choi/Meek,6/e22Exchange gains and losseslTranslation gains and losses:arising from translation of foreign currency financial statementslUnrealized gain/losslTransaction gains and losses:arising from translation of foreign currency transactionlGain and losses on settled transactions(real gain/loss)lGain and losses on unsettled transactions(unrealized)lExamples (p131)lExhibit 6-3(p132)Choi/Meek,6/e23Choi/Meek,6/e24Issues associated with fluctuating exchange ratelWhat exchange rate was used to translated foreign currency balances to domestic currency?lWhich foreign currency assets and liabilities are exposed to exchange rate changes?lHow are translation gains and losses accounted for?Foreign currency transactionlForeign currency transactions occur whenever an enterprise lpurchases or sells goods for which payment is made in a foreign currency lor borrows or lends foreign currencylFunctional currency islthe primary currency in which it transacts business and generates and spends cash.lExamples lEuros for the Belgian subsidiary of a U.S.parentlThe Indian accounts if a U.S.subsidiary with British pounds as its functional currencylA Mexican assembly operation of a U.S.parentChoi/Meek,6/e26Choi/Meek,6/e27Accounting for FC transactions lFAS No.52(FASB,1981)lthe transaction datelMeasure and recorded in the functional currency lthe balance sheet datelTranslate to the reporting currency lForeign exchange adjustmentltransaction gains and losseslSingle transaction perspectivelTwo-transaction perspectiveSingle-transaction perspectivelPremise:a transaction and its settlement are a single eventlExchange adjustments are treated aslAn adjustment to the original transactionlExample On September 1,2008,a manufacturer sells goods to a Swedish importer for 1 million Swedish krona(SEK).The exchange rate is$0.14=1SEK,and the krona receivable are due in 90 days,and the U.S.operate in a calendar-year basis.By the end of the month,the exchange rate is$0.13=1SEK;on December 1,2008,it is$0.11=1SEK.Choi/Meek,6/e30Two-transaction perspectivelSale and collection are treated as two separate eventslRecognize exchange loss on each reporting daylUnsettled transaction losslSettled transaction losslExample lExhibit 6-6Choi/Meek,6/e32Choi/Meek,6/e33Types of Translation Methods lSingle rate method（current rate method）:applies a single exchange rate,the current rate,to all foreign currency assets and liabilitieslMultiple rate methods:Use some combination or current and historical rates to translate foreign currency balances.lCurrent-Noncurrent methodlMonetary-Nonmonetary methodlTemporal methodChoi/Meek,6/e34Current(Single)Rate MethodlAll foreign assets and liabilities ltranslated at the current rate.lAll revenues and expenses ltranslated by an appropriately weighted average of current exchange rates for the periodlIssues relatedlSingle rate(not single currency)lPreserve the original financial statement relationshipslPresume all local currency assets are exposed to exchange risklDistort performance measurementlExample (P136)Multiple-rate methodlCombine current and exchange historical rateslCurrent-Noncurrent methodlMonetary-Nonmonetary methodlTemporal methodlDistinctions among these four methods(Exhibit 6-7)Choi/Meek,6/e36Choi/Meek,6/e37Current-Noncurrent MethodlCurrent assets and current liabilities ltranslated at the current rate.lNoncurrent assets and liabilities ltranslated at the historical rate.lRevenues and expenses(excluding depreciation and amortization)ltranslated at average rates.lDepreciation and amortization charges lat historical rates in effect when related assets are acquiredlAdvantages and disadvantages(?)Choi/Meek,6/e38Monetary-Nonmonetary Method lMonetary assets and liabilities ltranslated at current rates.lNonmonetary assets and liabilities ltranslated at historical rates.lRevenues and expenses,excluding depreciation,amortization and cost of sales,lat average rates.lDepreciation,amortization charges,and cost of sales lat historical rates in effect when related assets are acquired.lAdvantages and disadvantages(?)Choi/Meek,6/e39Temporal MethodlMonetary assets and liabilities ltranslated at the current rate.lNonmonetary itemslForeign currency balances(FCB)at historical cost historical rateslFCB at current cost or market value current rate.lRevenues and expenses,and cost of sales if inventories are carried at marketlaverage rateslDepreciation,amortization charges,and cost of sales when inventories are carried at costlhistorical rates in effect when related assets are acquiredlAdvantages and disadvantages(?)Choi/Meek,6/e40Financial Statement Effects lDifferent method result in different adjustmentslExample:The balance sheet of a hypothetical Mexican subsidiary of a U.S.-based multinational enterprise appears in pesos in the first column of exhibit 6-8.The second column depicts the U.S.dollar equivalents of the Mexican peso(MXN)balances when the exchange rate was MXN1=$0.11.Should the peso depreciate to MXN1=$0.09,several different accounting results are possible when applying different translation methods(see Exhibit 6-8 and 6-9).Choi/Meek,6/e41Choi/Meek,6/e42Which method is best?lWhether a single translation method is appropriate for all circumstances?lWhat are acceptable foreign currency translation methods and under what conditions?lAre there situations in which currency translation may be inappropriate?lAre there situations in which currency translations may confuse rather than enlighten users?Which rate should be used?lHistorical,current,averagelBuying and selling rateslSpot and forward rateslOfficial and free-market rateslDividend remittance rates,(2)free market rates,(3)any applicable penalty or preference ratesTranslation gains and losseslApproaches to accounting for translation adjustments:lDeferral lWhy?(reasons)lWhy not?lDeferral and amortizationl How and why?lPartial deferrallRecognize losses as soon as the occur and defer gainlNo deferrallRecognize in incomeChoi/Meek,6/e45Translation accounting development in the U.S.lPre-1965lThe current-noncurrent methodlincomel1965-1975lException to current-noncurrent methodl1975-1981lFAS No.8lThe temporal methodlNo deferrall1981-presentlFAS No.52Choi/Meek,6/e47Features of FASB 52 and IAS 21lDifferencelSame objectiveslReflect in consolidated statements the financial results and relationships measured in the primary currency in which each consolidated entity does businesslProvide information compatible with the expected economic effects of an exchange rate change on an entitys cash flows and equitylBased on the notion of a functional currencylFunctional currency can be the parent currencylFunctional currency can be the local currencylFunctional currency can be the currency of a third countryChoi/Meek,6/e48Translation when the local currency is functionallCurrency assets and liabilities are translated at current rate;capital accounts at historical rateslRevenues and expenses are translated at current rate,or weighted average ratelTranslation gains and losses disclosed as a separate component of consolidated equityTranslation when the parent currency is functionallMonetary assets and liabilities,and nonmonetary assets valued at current market prices at current rate;other assets nonmonetary items and capital accounts at historical ratesl Revenues and expenses at average rates,except those related to nonmonetary itemslTranslation gains and losses resulting from the translation process are included in current incomeTranslation when foreign currency is functionallFirst measured from the local currency into the functional currency(temporal method)lAnd then translated into the reporting currency using the current rate methodlException:lCumulative inflation of the local currency in the preceding 3 years exceeds 100%lDenominate the stronger currency(parent currency)as functional currencylTemporal method for translationChoi/Meek,6/e51Measurement issueslReporting perspectivelWhat happened to historical cost?lConcept of income lManaged earningsChoi/Meek,6/e53Foreign Currency Translation and InflationlThe external value of a countrys currency is inversely related to its rate of inflation.lIAS 21 permits restatement for local inflation prior to currency translation.lFAS 52 requires use of the parent currency as the functional currency for foreign operations located in hyperinflationary environments(i.e.,countries where the cumulative rate of inflation exceeds 100%over a three-year period).Foreign Currency Translation elsewherelCanadalGains and losses are deferred and amortizedlU.K.lHyperinflationary countries,first adjusted to current price levels,and then the current-rate methodlIASB(IAS 21)lLike U.K.standardlJapanlCurrent-rate method for all circumstanceslThe EUlNo provision.Practices vary considerablyAppendix 6-1lTranslation and remeasurement under FAS No.52lCM corporationlCurrent-rate method lTemporal methodChoi/Meek,6/e56Choi/Meek,6/e57Choi/Meek,6/e58此课件下载可自行编辑修改，供参考！感谢您的支持，我们努力做得更好！