When translating a foreign financial statement where would the gains and losses from remeasurement and translation be reported?

Foreign currency translation gains or losses are recorded in other comprehensive income (a separate component of stockholder’s equity), while remeasurement or transaction gains or losses are recorded in current net income.

What is the most significant difference between translation and remeasurement of a foreign subsidiary’s financial statement?

The key difference between translation and remeasurement is that translation is used to express financial results of a business unit in the parent company’s functional currency whereas remeasurement is a process to measure financial results that are denominated or stated in another currency into the functional currency …

What is the difference between currency translation and remeasurement when it comes to consolidation?

The primary difference between the two is that we use translation to convert the financial numbers of a subsidiary into the functional currency of a parent company. Remeasurement, on the other hand, is a process to calculate the financial numbers in another currency in the functional currency of a company.

How do you translate foreign currency financial statements?

The three steps in the foreign currency translation process are as follows:

Determine the functional currency of the foreign entity.
Remeasure the financial statements of the foreign entity into the functional currency.
Record gains and losses on the translation of currencies.
Current rate Method.
Temporal Rate Method.

Which method of translating foreign currency financial statements must be used under GAAP?

temporal method
The foreign currency financial statements of a foreign operation that has the parent’s presentation currency as its functional currency are translated using the temporal method, and the translation adjustment is included as a gain or loss in income. US GAAP refer to this process as remeasurement.

What is the rationale for the remeasurement of foreign currency transactions?

Companies use remeasurement when translating the value of revenues and assets from a foreign subsidiary that is denominated in another currency. Remeasurement is also important because it can help companies revalue fixed assets (physical, long-term assets) as well as intangible assets, such as goodwill.

Under what circumstances would the remeasurement of a foreign subsidiary’s financial statements be required?

Remeasurement and translation of foreign currency financial statements are required only when (for example) a company located in the United States owns a subsidiary that is located in a different country and that uses a different currency from the U.S. dollar and the subsidiary produces its own financial statements in …

Which method of translating a foreign subsidiary’s financial statements is correct?

Temporal method
Which method of remeasuring a foreign subsidiary’s financial statements is correct? Temporal method.

Which translation method does U.S. GAAP require for operations in highly inflationary countries?

U.S. GAAP requires financial statements of such foreign entities to be translated using the temporal method. U.S. GAAP specifically defines hyperinflation as cumulative three-year inflation greater than 100%.

What is the remeasurement process and when is it used?

Remeasurement is the process of re-establishing the value of an item or asset to provide a more accurate financial record of its value. Companies use remeasurement when translating the value of revenues and assets from a foreign subsidiary that is denominated in another currency.

What are the two major issues related to the translation of foreign currency financial statements?

The two major issues related to the translation of foreign currency financial statements are: (1) which method should be used, and (2) where should the resulting translation adjustment be reported in the consolidated financial statements.

Which method is usually required for translating a foreign subsidiary’s financial statements into the parent’s reporting currency?

The correct answer is C. The translation adjustment is a function of the foreign subsidiary’s net assets. The foreign currency translation done at the current rate methods revalues the assets and liabilities in the reported currency.

What is foreign currency translation?

Foreign currency translation, or simply currency translation is an accounting method by which an international company translates the results of its foreign subsidiaries in its reporting currency. Foreign currency translation comprises three steps: Determine the functional currency of the foreign subsidiary.

What is foreign currency translation reserve?

Foreign currency translation is used to convert the results of a parent company’s foreign subsidiaries to its reporting currency. This is a key part of the financial statement consolidation process.

What is foreign currency accounting?

Foreign currency account. Foreign Currency Account (FCA) is a transactional account denominated in a currency other than the home currency and can be maintained by a bank in the home country (onshore) or a bank in another country (offshore). Foreign currency accounts are generally not covered by national deposit insurance schemes.