國際會(huì)計(jì)學(xué)第六章

1、編輯pptChoi/Meek, 6/e1International Accounting, 6/eFrederick D.S. ChoiGary K. MeekChapter 6: Foreign Currency Translation編輯pptOutlinelResults of operationslReasons for translationlBackground and terminologylFinancial statement effects of alternative translation rateslForeign currency translationlTrans

2、lation accounting developmentlForeign currency translation and inflation 編輯pptChoi/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 proce

3、ss and what are their financial statement effects? lHow does a translation gain or loss differ from a transactions gain or loss?編輯pptLearning 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 o

4、f currency translation differ from the current rate method? lWhat is the relationship between currency translation and inflation?編輯pptResults of operationlCase: Alcan CorporationlPerformance is impacted by foreign currency translationlReported currency: USDlForeign currency: Canadian, Australian dol

5、lars, EurolImpacts on Alcans operating resultslRevenue and expenselConsolidationlForeign currency transactions編輯pptCase: Alcans income編輯pptAlcans global operation編輯ppt編輯pptDo reported currency effects matter?lYeslRelation b/t changes in currency values and stock returnslPredicting changes in earning

6、slMeasure 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?編輯pptChoi/Meek, 6/e10Why do Firms Translate?lPreparing consolidated financial statements lAn aggregate viewlTotal ope

7、rations both domestic and foreignlRecording of foreign currency transactionslforeign currency sales, purchases, borrowing or lending in the consolidated entitys reporting currency lMeasuring a firms exposure to foreign exchange risklforeign currency risklCommunicating with foreign audiences-of-inter

8、est lconvey accounting information to non-domestic users編輯pptBackground 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 marketlMarke

9、t valuelSpot, forward, or sChoi/Meek, 6/e11編輯pptChoi/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

10、 versus indirect quotelBid quote versus ask quote編輯ppt編輯ppt編輯pptChoi/Meek, 6/e15編輯pptChoi/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

11、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 Septemb

12、er 1, $0.13 = SEK 1 on September 30, and $0.11 = SEK 1 on December 1. 編輯pptTerminologylForward 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 curr

13、ency. lTake advantage of higher interest rate in a foreign countrylAgainst unfavorable movement lExample: Swiss franc vs U.S. dollarChoi/Meek, 6/e17編輯pptChoi/Meek, 6/e18編輯ppt編輯pptThe problemlWhat is the problem in dealing with foreign currency translation?lCurrency fluctuationslEspecially in Eastern

14、 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 translation編輯ppt編輯pptFinancial statement effects of alternative translation rateslAlternative translation rate: lCurrent rate lT

15、he 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 histor

16、ical exchange rates Choi/Meek, 6/e22編輯pptExchange 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 tr

17、ansactions (real gain/loss)lGain and losses on unsettled transactions (unrealized)lExamples (p131)lExhibit 6-3 (p132)Choi/Meek, 6/e23編輯pptChoi/Meek, 6/e24編輯pptIssues associated with fluctuating exchange ratelWhat exchange rate was used to translated foreign currency balances to domestic currency?lWh

18、ich foreign currency assets and liabilities are exposed to exchange rate changes?lHow are translation gains and losses accounted for?編輯pptForeign currency transactionlForeign currency transactions occur whenever an enterprise lpurchases or sells goods for which payment is made in a foreign currency

19、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 Mexic

20、an assembly operation of a U.S. parentChoi/Meek, 6/e26編輯pptChoi/Meek, 6/e27編輯pptAccounting 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 adjustmentltransac

21、tion gains and losseslSingle transaction perspectivelTwo-transaction perspective編輯pptSingle-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

22、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. 編輯pptCho

23、i/Meek, 6/e30編輯pptTwo-transaction perspectivelSale and collection are treated as two separate eventslRecognize exchange loss on each reporting daylUnsettled transaction losslSettled transaction losslExample lExhibit 6-6編輯pptChoi/Meek, 6/e32編輯pptChoi/Meek, 6/e33Types of Translation Methods lSingle ra

24、te 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 method

25、lTemporal method編輯pptChoi/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)lP

26、reserve the original financial statement relationshipslPresume all local currency assets are exposed to exchange risklDistort performance measurementlExample (P136)編輯pptMultiple-rate methodlCombine current and exchange historical rateslCurrent-Noncurrent methodlMonetary-Nonmonetary methodlTemporal m

27、ethodlDistinctions among these four methods (Exhibit 6-7)編輯pptChoi/Meek, 6/e36編輯pptChoi/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

28、depreciation and amortization) ltranslated at average rates.lDepreciation and amortization charges lat historical rates in effect when related assets are acquiredlAdvantages and disadvantages(?)編輯pptChoi/Meek, 6/e38Monetary-Nonmonetary Method lMonetary assets and liabilities ltranslated at current r

29、ates.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. lAdvantage

30、s and disadvantages(?)編輯pptChoi/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

31、 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 (?)編輯pptChoi/Meek, 6/e40Financial Statement Effects lDifferent metho

32、d 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 r

33、ate 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). 編輯pptChoi/Meek, 6/e41編輯pptChoi/Meek, 6/e42編輯pptWhich method is best?lWhether a single translation method is appropria

34、te 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?編輯pptWhich rate should b

35、e 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 rates編輯pptTranslation gains and losseslApproaches to accounting for translation adjustments:lDe

36、ferral 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/e45編輯pptTranslation accounting development in the U.S.lPre-1965lThe current-noncurrent methodlincomel1965-1975lExc

37、eption to current-noncurrent methodl1975-1981lFAS No.8lThe temporal methodlNo deferrall1981-presentlFAS No.52編輯pptChoi/Meek, 6/e47Features of FASB 52 and IAS 21lDifferencelSame objectiveslReflect in consolidated statements the financial results and relationships measured in the primary currency in w

38、hich 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 loca

39、l currencylFunctional currency can be the currency of a third country編輯pptChoi/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 we

40、ighted average ratelTranslation gains and losses disclosed as a separate component of consolidated equity編輯pptTranslation 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

41、 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 income編輯pptTranslation when foreign currency is functionallFirst measured from the local currency into the functional currency (temporal method)lAnd then translated into the reporting curr