高級(jí)會(huì)計(jì)學(xué)(第10版)教師手冊(cè)Beams10e-IM-5

CHAPTER13

FOREIGNCURRENCYFINANCIALSTATEMENTS

ChapterOutline

CONVERSIONOFFOREIGNCURRENCYFINANCIALSTATEMENTSOFFOREIGNSUBSIDIARIES

AU.S.corporationsconverttheforeigncurrencyfinancialstatementsoftheirforeign

subsidiariesintoU.S.dollarsundertheprovisionsofFASBStatementNo.52

BForeigncurrencyfinancialstatementsarestatementspreparedinacurrencyotherthan

thereportingcurrency(theU.S.dollar)oftheU.S.parent-investor.

1StatementsofoperationslocatedoutsidetheU.S.thatarepreparedinU.S.dollarsarenotforeigncurrencystatementsandFAS52provisionsdonotapply.

CThemethodforconvertingtheforeigncurrencystatementsintoU.S.dollarsandthe

classificationoftheresultinggainorlossdependsontheforeignentity’sfunctionalcurrency.

APPLICATIONOFTHEFUNCTIONALCURRENCYCONCEPT

AForeigncurrencystatementsmustbeinconformitywithgenerallyacceptedaccounting

principlesbeforetheycanbetranslated.

BAccountbalancesontheforeigncurrencystatementsthataredenominatedinaforeign

currencyfromtheviewpointoftheforeignentitymustbeadjustedtoreflectcurrentexchangerates.

1Forexample,aGermansubsidiarymustadjustayen-dominatedaccountsreceivablebalancetoreflectcurrentexchangerates(illustratedinChapter12).

CAnobjectiveofthefunctionalcurrencyconceptistomeasureaforeignentity’sassets,

liabilities,andoperationsinitsfunctionalcurrency.

1Subsequently,theforeignentity’sfinancialstatementsareconsolidatedwiththeU.S.parentinthereportingcurrency(theU.S.dollar).

DConvertingtheforeignentity’sfinancialstatementsintothecurrencyoftheparentmay

requiretranslation,remeasurement,orboth.

?2009PearsonEducation,Inc.publishingasPrenticeHall141

1

2

3

4

5

Themethodselecteddependsonwhethertheforeignsubsidiary’sbooksaremaintainedinitsfunctionalcurrency,oracurrencydifferentfromitsfunctionalcurrency.

Functionalcurrencyisthecurrencyoftheprimaryeconomicenvironmentinwhichthesubsidiaryoperates,normallythecurrencyinwhichitcollectsitsreceivablesandpaysitsliabilities.

Otherfactors,includingmanagement’sjudgment,impacttheselectionofa

subsidiary’sfunctionalcurrency.

Ifasubsidiary’sfunctionalcurrencyistheU.S.dollar,theforeignfinancialstatementsareremeasuredintoU.S.dollarsusingthetemporalmethod.

Ifasubsidiary’sfunctionalcurrencyisthelocalcurrencyoftheforeignentity,itsfinancialstatementsaretranslatedintoU.S.dollarsusingthecurrentratemethod.

EWhentheforeignentity’sbooksaremaintainedinitsfunctionalcurrency(thatis,

functional=local),thestatementsaretranslatedintothecurrencyofthereportingentityusingthecurrentratemethod.

1Translationinvolvesexpressingfunctionalcurrencymeasurementsinthereportingcurrency.

2Allelementsoffinancialstatements(assets,liabilities,revenues,andexpenses)aretranslatedusingacurrentexchangerate(thecurrentratemethod.)

3Asanexpedient,revenuesandexpensesareusuallytranslatedataweightedaverageexchangeratefortheperiod.

4Theeffectsoftheexchangeratechangesarereportedasstockholders’equityadjustments,inOtherComprehensiveIncome,becausetheyarenotexpectedtoimpactthecashflowsoftheparent-investor.

5Theequityadjustmentsfromtranslationareaccumulateduntiltheinvestmentissoldorliquidated,atwhichtimetheyaretreatedasadjustmentstothegainorlossonsale.

FWhentheforeignentity’sbooksarenotmaintainedinitsfunctionalcurrency(thatis,

functionalNOT=local),thestatementsareremeasuredinthefunctionalcurrencyusingthetemporalmethod.

1Ifthefunctionalcurrencyisthereportingcurrency(functional=U.S.dollar)theconversioniscomplete.

?2009PearsonEducation,Inc.publishingasPrenticeHall142

2

3

4

IfthefunctionalcurrencyisnottheU.S.dollar,theremeasuredstatementsmustthenbetranslatedintoU.S.dollarsusingthecurrentratemethod.

Underthetemporalmethodmonetaryassetsandliabilitiesareremeasuredatcurrentexchangeratesandotherassetsandequitiesareremeasuredathistoricalrates.

Gainsorlossesfromremeasuringtheforeigncurrencystatementsareincludedinincomebecausetheyareexpectedtoimpactcashflowsoftheparent-investor.

GRequirementChart

ForeignCurrencyintoFunctionalCurrencyinto$

remeasure

temporalmethod

translate

currentratemethod

Example1foreign

foreign

(translationrequired)

$

Example2

Example3

foreign

foreign

$

(remeasurementrequired)

functional

(bothrequired)

$

S

HIntercompanytransactionsbetweenaU.S.parentanditsforeignsubsidiarymaybea

foreigncurrencytransactiontooneaffiliate,neitheraffiliateortobothaffiliates.

1Thetransactionisaforeigncurrencytransactionofaparticularaffiliateifitresultsinareceivableorpayablebalancedenominatedinacurrencyotherthanthatentity’sfunctionalcurrency.

2Intercompanyaccountbalancesdenominatedinaforeigncurrencyareadjustedatthebalancesheetdatetothecurrentexchangerate.

aIftheintercompanybalancesarenotofalong-terminvestmentnature,the

exchangegainorlossisincludedinincomefortheperiod.

bAnexchangegainorlossonsettlementisalsoincludedinincomeforthe

period.

?2009PearsonEducation,Inc.publishingasPrenticeHall143

cIftheintercompanybalancesareofalong-terminvestmentnature

(settlementisnotexpectedintheforeseeablefuture),theexchangegainorlossisreportedinstockholders’equity(inOtherComprehensiveIncome)asanequityadjustmentfromtranslation.

FOREIGNENTITIESOPERATINGINHIGHLYINFLATIONARYECONOMIES

AAhighlyinflationaryeconomyundertheprovisionsofFAS52isonewithacumulative

three-yearinflationrateofapproximately100percentormore.

BForeigncurrencyfinancialstatementsofentitiesoperatinginhighlyinflationaryeconomies

areremeasuredusingtheU.S.dollarreportingcurrencyasthefunctionalcurrency.

CExchangegainsandlossesarerecognizedintheincomefortheperiod.

BUSINESSCOMBINATIONS

ATheassetsandliabilitiesaretranslatedintoU.S.dollarsusingthecurrentexchangerate

ineffectatthedateofthebusinesscombination.

BTheidentifiableassetsandliabilitiesareadjustedtotheirfairvaluesinlocalcurrency

andtranslatedatthecurrentexchangerate.Anydifferencebetweentheinvestmentcostandtranslatednetassetsacquiredisgoodwill.

1Whentheforeignentity’sfunctionalcurrencyisitslocalcurrency,theexcesscostoverbookvalueacquiredisassignedtoassets,liabilities,andgoodwillinlocalcurrencyunitsandsubsequentlytranslatedatcurrentexchangerates.

2Whentheforeignentity’sfunctionalcurrencyistheU.S.dollar,remeasurementisrequired.Theexcessallocatedtoidentifiablenetassetsisamortizedatthehistoricalexchangerateineffectatthetimeofthebusinesscombination.

CThenoncontrollinginterestinaforeignsubsidiaryiscomputedaftertheforeigncurrency

financialstatementshavebeentranslatedorremeasuredintoU.S.dollars.

DSimilarly,theequitymethodisappliedaftertheforeignentity’sfinancialstatements

havebeentranslatedorremeasuredintoU.S.dollars.

TRANSLATIONOFAFOREIGNSUBSIDIARY(Illustration13-1)

AAnyintercompanyaccountbalancesdenominatedinaforeigncurrencyareadjustedat

thebalancesheetdatetothecurrentexchangerate.

?2009PearsonEducation,Inc.publishingasPrenticeHall144

1Iftheintercompanytransactionisofalong-terminvestmentnature,thegainorlossisincludedinothercomprehensiveincome.

2Otherwise,thegainorlossisincludedinincomeoftheperiod.

BWhentheforeignsubsidiary’sadjustedtrialbalanceistranslatedusingthecurrentrate

method

1Assetsandliabilitiesaretranslatedatthecurrentrateatthebalancesheetdate.

2Revenuesandexpensesareusuallytranslatedatanaveragerate.

3Dividendsaretranslatedattherateineffectwhenthedividendsarepaid.

4Retainedearnings(RE)isnottranslatedaftertheacquisitiondate.

aInyearssubsequenttotheyearofacquisition,REequalsREatacquisition,

plusnetincome,lessdividendsafteracquisition,allintranslateddollaramounts

5Capitalstockandotherpaid-incapitalaccountsaretranslatedattheexchangerateineffectwhenthesubsidiary(orinvestee)wasacquired.

6ThedifferencebetweenthetranslateddebitsandthetranslatedcreditsisanequityadjustmentfromtranslationandisreportedinOtherComprehensiveIncome.

aAninequalityresultsfromtranslatingsomeaccountsusingthecurrentrate

(assets)andotheraccountsusingthehistoricalrate(capitalstock).

CThetranslatedfinancialstatementsareusedinapplyingtheequitymethod.

DNoncontrollinginterestiscomputedasapercentageofthesubsidiary’stranslated

stockholders’equity;inotherwords,theequityadjustmentfromtranslationisincludedinthecomputation.

ETheeliminationofintercompanyprofitsshouldbebasedontheexchangeratesineffect

whentheintercompanytransactiontookplace;however,reasonableapproximationsoraveragesarepermittedbyFAS52.

REMEASUREMENTOFAFOREIGNSUBSIDIARY

AWhenthefunctionalcurrencyistheU.S.dollar,theforeignentity’saccountsare

remeasuredintoU.S.dollars.

?2009PearsonEducation,Inc.publishingasPrenticeHall145

BTheobjectiveofremeasurementistoproducethesameresultsasifthebooksofthe

subsidiaryhadbeenmaintainedinU.S.dollars.

CWhentheadjustedtrialbalanceofaforeignsubsidiaryisremeasured

1

2

3

4

5

6

7

8

Monetaryassetsareremeasuredatthecurrentrate(thesameastheyareintranslatedstatements).

Dividendspaidaretranslatedatreciprocalamountsindollarsrecordedbytheparentcompanyonitsownbooks.

Inventoriesareremeasuredathistoricalrates.

Purchasesareremeasuredataveragerates.Specialproceduresarerequiredforinventoriescarriedatthelowerofcostormarket(AppendixC).

Expensesareremeasuredataverageratesduringtheperiodiftheyrelatetomonetaryitemsandathistoricalexchangeratesiftheyrelatetononmonetaryitems,suchasplantassetsorintangibles.

aIfasingleexpenseaccountrelatestobothmonetaryandnonmonetaryitems,

theremeasurementinvolvesmorecomputationsthantheapplicationofasingleaveragerate.

Capitalstockandotherpaid-incapitalareremeasuredathistoricalexchangerates(thesameasintranslatedamounts).

Theretainedearnings(RE)balanceiscomputed,butnotremeasured.

aEndingRE=BeginningRE+remeasurednetincome–remeasureddividends.

Totaldebitsintheremeasuredtrialbalancearesubtractedfromtotalcreditsandtheresultingexchangegainorlossisincludedinincomefortheperiod.

aAgain,aninequalityresultsfromtranslatingsomeaccountsusingdifferent

ratesfromotheraccounts.

DTheequitymethodisappliedtotheremeasuredfinancialstatements.Sinceall

remeasurementgainsandlossesarerecognizedincurrentincome,theequitymethodisthesameasfordomesticsubsidiaries.

EBecauseinventoryandcostofsalesaccountsareremeasuredathistoricalexchangerates,

intercompanyprofitsinconsolidationworkingpapersareeliminatedinthesamemannerasfordomesticsubsidiaries.

?2009PearsonEducation,Inc.publishingasPrenticeHall146

HEDGINGANETINVESTMENTINAFOREIGNENTITY

AAU.S.firmmayenterintoaforwardcontracttohedgeanetinvestmentinaforeign

entitywhosefunctionalcurrencyisotherthantheU.S.dollar.

1ProcedurestohedgeaninvestmentinaforeignsubsidiaryarenotapplicabletoinvesteeswithaU.S.dollarfunctionalcurrency(accountedforasspeculation).

aThisisbecauseconversionoftheinvestee’sfinancialstatementsintoU.S.

dollarsresultsinagainorlossthatisincludedinnetincome.Thegainorlossfromtherelatedhedgeisalsoincludedinnetincome.

2TranslationofthefinancialstatementsofaforeignentitywhosefunctionalcurrencyisnottheU.S.dollarproducesagainorlossthatisexcludedfromnetincomeandisreportedinOtherComprehensiveIncome.

3Againandlossonahedgeofanetinvestmentinaforeigninvesteeisalsoexcludedfromnetincome,andisreportedinOtherComprehensiveIncome.

4Theinvestee’sassetsandliabilitieshedgeeachother,soonlythenetassetsareexposedtoexchangerategainsandlosses.

5Tohedgetheforeigncurrencyexposure,thetranslationadjustmentfromthehedgemustmoveintheoppositedirectionofthetranslationadjustmentfromthenetassetsoftheinvestee.

DescriptionofAssignmentMaterial

Minutes

Questions(15)

Exercises(10)

E13-19MCgeneralquestions(FASBStatementNo.52concepts)20

E13-2AICPA5MCgeneralquestions15

E13-3[Paily/Standt]Consolidatedbalancesheetimmediatelyafteracquisition20

(100%ownership,excessallocatedtoland,equipment,andgoodwill)

E13-4[Port/Stadt]Calculatelower-of-cost-or-marketinventory10

E13-5[Panama/Simenon]Calculatepatentandrecordpatentamortization15

(translation)

E13-6[Psalter/Stanford]Calculateequityadjustmentonexcessallocatedtoequipment20

?2009PearsonEducation,Inc.publishingasPrenticeHall147

andpatent

E13-7[Packer/Swiss]Calculateequityadjustmentonexcessallocatedtoland15

E13-8AICPA7MCproblem-typequestions30

E13-94MCproblem-typequestions,noncontrollinginterest20

E13-10[Pender/Shinhan]Computecostofsalesandinventory,noncontrollinginterest20

Problems(15)

P13-1[Parkway/Scorpio]Calculateincomeandinvestmentbalancefor40%25

investee(patent)

P13-2

[Placid/Sorrier]Calculationsfor40%investee(patent)

25

P13-3

[Pylon/Sooth]Preparetranslationworksheetandone-lineconsolidationentries

25

P13-4

[Peter/Schultz]Preparetranslationworksheet,calculateincomeandinvestmentbalance(patentandminorityinterest)

25

P13-5

[Pardi/Sari]Preparearemeasurementworksheet

20

P13-6

[Philip/Stuart]Remeasurementworksheet(prepaidexpensesandadditionalequipmentpurchase)

30

P13-7

[Pella/Sapir]Preparetranslationworksheetandjournalentries(100%ownership,intercompanyadvance,andpatent]

35

P13-8

[PWA/SAA]Journalentriesandconsolidationworkingpapers(100%ownedsubsidiary,patent,short-termU.S.dollaradvancetosubsidiary)

60

P13-9

[Par/San]Translationworksheet,journalentries,consolidationworking

papers(noncontrollinginterestandshort-termU.S.dollaradvancetosubsidiary)

70

P13-10

[Pence/Sevin}Translationworksheet,netincome,noncontrollinginterest

40

P13-11

[Paragon/Freeman]Remeasurementworksheetandsubsidiaryfinancialstatements(additionalequipmentpurchased,short-termadvance,andbaddebtexpense)

45

P13-12

[Pilot/Saussure]Computetheinvestmentaccountbalance,patent,andtheequityadjustmentfromtranslation(translationworksheetgiven)

20

P13-13

[Pic/Sol]Determinepatent,equityadjustmentfromtranslationandminority

Interest

40

P13-14

[Perry/SmithelConsolidationworkingpapersfortwoyearsandaconsolidatedstatementofcashflows(patent,noncontrollinginterest,long-termadvancetoparent)

operations

120

P13-15

[Progress/Scheele]Comparativeconsolidatedincomestatements,

retainedearningsstatements,andbalancesheetsfortwoyearsandconsolidatedcashflowstatementforoneyear(patent,noncontrollinginterest,andshort-termU.S.dollaradvancetosubsidiary)

120

InternetAssignment

UsingFordMotorCompany’s2003annualreportfromitswebsite,answerquestionsregarding

?2009PearsonEducation,Inc.publishingasPrenticeHall148

functionalcurrencies,reportingofremeasurementandtranslationgainsandlossesandcashflowhedges.

Illustration13-1

TRANSLATIONANDCONSOLIDATIONOFAFOREIGNSUBSIDIARY

SubCorporationisaforeignfirmwhoselocalcurrencyisdesignatedLCU(localcurrencyunits.)

TheexchangerateonDecember31,20Xlis2LCUfor$1U.S.,andtheDecember31,20XlbalancesheetofSubinLCUandU.S.dollarsisasfollows:

Cash

Plantassets-net

Totalassets

Capitalstock

RetainedearningsTotalequities

LCU

5,000

20,00025,000

20,000

5,000

25,000

Exchange

Rate

$.50

.50

.50

U.S.

Dollars

$2,500

10,000

$12,500

$10,000

2,500

$12,500

OnJanuary1,20X2ParCorporation,aU.S.firm,acquiresallthecapitalstockofSubfor$15,000.Par'smanagementdeterminesthatthefunctionalcurrencyofitssubsidiary,SubCorporation,istheLCU.Anyexcessofcostoverbookvalueisattributabletoapatentandistobeamortizedover5years.

CostofinvestmentinSubatJanuary1,20X2

Bookvalueofinterestacquired

$15,000

12,500

Patent(in$)

$2,500

PatentinLCU$2,500/$.50=5,000LCU

January1,20X2purchaseofSubCorporation

ParrecordsitsinvestmentinSubasfollows:

InvestmentinSub

Cash

$15,000

$15,000

TorecordacquisitionofSubequaltobookvalueplus$2,500

patent(5,000LCUpatent)witha5-yearamortizationperiod.

?2009PearsonEducation,Inc.publishingasPrenticeHall149

ACTIVITIES–20X2:

TheexchangeratesforLCUfor20X2are$.475averagefortheyear,$.47whenthedividendsarepaid,and$.45atDecember31,20X2.

AtranslationworksheettoconvertSub'saccountsinLCUintoU.S.dollarsunderthecurrentratemethodisasfollows:

TranslationWorksheet

December31,20X2

LCU

Cash17,000

Plantassets-net18,000

Expenses8,000

Dividends2,000

Equityadjustment,

20X2change

45,000

CapitalstockRetainedearnings

Revenue

20,000

5,000

20,000

45,000

One-lineConsolidation-20X2

Exchange

Rate

$.45C

.45C

.475A

.47H

.50H

measured

.475A

U.S.

Dollars

$7,650

8,100

3,800

940

1,510

$22,000

$10,000

2,500

9,500

$22,000

ParrecordsitsincomeanddividendsfromSubfor20X2asfollows:

Cash$940

InvestmentinSub

Torecorddividendsreceived(2,000LCUx$.47exchangerate).

InvestmentinSub

EquityadjustmentfromtranslationIncomefromSub

$4,1901,510

TorecordequityinSub'sincome($9,500-$3,800).

IncomefromSub$475

Equityadjustmentfromtranslation225

InvestmentinSub

Torecordamortizationofpatentcomputedasfollows:5,000LCU/5yearsx$.475exchangerate=$4754,000LCUendingbalancex$.45currentrate=$1,800Patentchange:$2,500-$1,800=$700

$940

$5,700

$700

?2009PearsonEducation,Inc.publishingasPrenticeHall150

Consolidation-20X2:

WorkingpaperstoconsolidatethefinancialstatementsofParandSubfortheyearendedDecember31,20X2areillustratedasfollows:

ParCorporationandSubsidiary

ConsolidationWorkingPapers

fortheyearendedDecember31,20X2

IncomeStatement

Revenue

IncomefromSub

Expenses

Netincome

RetainedEarningsStatementRetainedearnings-ParRetainedearnings-SubNetincome

Dividends

Retainedearnings12/31/20X2

BalanceSheet

Cash

Plantassets-net

InvestmentinSub

Patent

Capitalstock

Retainedearnings

Equityadjustment-Par

Equityadjustment-Sub

Adjustmentand

Eliminations

a.5,225

c.475

b.2,500

a.940

a.4,285

b.13,265

c.475

b.1,510

Consolidate

d

Statements

$39,500

(29,275)$10,225

$10,000

10,225 (6,000)$14,255

$10,59020,100

1,800$32,490$20,000 14,225(1,735)

$32,490

Par

$30,000 5,225(25,000)$10,225

$10,000

10,225 (6,000)$14,225

$2,94012,00017,550

$32,490$20,000 14,225(1,735)

$32,490

Sub

$9,500

(3,800)$5,700

$2,5005,700 (940)$7,260

$7,650

8,100

$15,750$10,0007,260

(1,510)$15,750

b.2,275

b.10,000

?2009PearsonEducation,Inc.publishingasPrenticeHall151

ACTIVITIES-20X3:

TheexchangeratesforLCUfor20X3are$.425averagefortheyear,$.42whenthedividendsarepaid,and$.40atDecember31,20X3.

AtranslationworksheettoconvertSub'saccountsinLCUintoU.S.dollarsunderthecurrentratemethodisasfollows:

TranslationWorksheet

December31,20X3

ExchangeU.S.

LCURateDollars

Cash10,000$.40C$4,000

Plantassets-net36,000.40C14,400

Expenses12,000.425A5,100

Dividends2,000.42H840

Equityadjustment,

20X3change2,03560,000$26,375

Capitalstock

Retainedearnings,Jan.1Equityadjustmentbalance

onJanuary1

Revenue

20,000

15,000

25,00060,000

.50H

measured

measured

.425A

$10,000

7,260

(1,510)

10,265$26,375

One-lineConsolidation-20X3

ParrecordsitsincomeanddividendsfromSubfor20X3asfollows:

Ca