CHAPTER10MANAGEMENTOFTRANSLATIONEXPOSURESUGGESTEDANSWERSANDSOLUTIONSTOENDOFCHAPTER
QUESTIONSANDPROBLEMS
QUESTIONS
1Explai
thediffere
cei
thetra
slatio
processbetwee
themo
etary
o
mo
etarymethoda
dthetemporalmethod
A
swerU
derthemo
etary
o
mo
etarymethodallmo
etarybala
cesheetaccou
tsofaforeig
subsidiaryaretra
slatedatthecurre
texcha
gerateOtherbala
cesheetaccou
tsaretra
slatedatthehistoricalrateexcha
geratei
effectwhe
theaccou
twasfirstrecordedU
derthetemporalmethodmo
etaryaccou
tsaretra
slatedatthecurre
texcha
gerateOtherbala
cesheetaccou
tsarealsotra
slatedatthecurre
trateiftheyarecarriedo
thebooksatcurre
tvalueIftheyarecarriedathistoricalvaluetheyaretra
slatedattheratei
effecto
thedatetheitemwasputo
thebooksSi
cefixedassetsa
di
ve
toryareusuallycarriedathistoricalcoststhetemporalmethoda
dthemo
etary
o
mo
etarymethodwilltypicallyprovidethesametra
slatio
2Howaretra
slatio
gai
sa
dlossesha
dleddiffere
tlyaccordi
gtothecurre
tratemethodi
compariso
totheotherthreemethodsthatisthecurre
t
o
curre
tmethodthemo
etary
o
mo
etarymethoda
dthetemporalmethod
A
swerU
derthecurre
tratemethodtra
slatio
gai
sa
dlossesareha
dledo
lyasa
adjustme
tto
etworththrougha
equityaccou
t
amedthe“cumulativetra
slatio
adjustme
t”accou
tNothi
gpassesthroughthei
comestateme
tTheotherthreetra
slatio
methodspassforeig
excha
gegai
sorlossesthroughthei
comestateme
tbeforetheye
tero
tothebala
cesheetthroughtheaccumulatedretai
edear
i
gsaccou
t
IM1
f3Ide
tifysomei
sta
cesu
derFASB52whe
aforeig
e
tity’sfu
ctio
alcurre
cywouldbethesameasthepare
tfirm’scurre
cy
A
swerThreeexamplesu
derFASB52wheretheforeig
e
tity’sfu
ctio
alcurre
cywillbethesameasthepare
tfirm’scurre
cyareitheforeig
e
tity’scashflowsdirectlyaffectthepare
t’scashflowsa
darereadilyavailableforremitta
cetothepare
tfirmiithesalespricesfortheforeig
e
tity’sproductsarerespo
siveo
ashorttermbasistoexcha
geratecha
geswheresalespricesaredetermi
edthroughworldwidecompetitio
a
diiithesalesmarketisprimarilylocatedi
thepare
t’scou
tryorsalesco
tractsarede
omi
atedi
thepare
t’scurre
cy
4Describetheremeasureme
ta
dtra
slatio
processu
derFASB52ofawhollyow
edaffiliatethatkeepsitsbooksi
thelocalcurre
cyofthecou
tryi
whichitoperateswhichisdiffere
ttha
itsfu
ctio
alcurre
cy
A
swerForaforeig
e
titythatkeepsitsbooksi
itslocalcurre
cywhichisdiffere
tfromitsfu
ctio
alcurre
cythetra
slatio
processaccordi
gtoFASB52istofirstremeasurethefi
a
cialreportsfromthelocalcurre
cyi
tothefu
ctio
alcurre
cyusi
gthetemporalmethodoftra
slatio
ar