Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
15th Edition
ISBN: 9780134476315
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
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Chapter 19.5, Problem 19.14RQ
Summary Introduction
To discuss: The steps to be followed while adjusting a subsidiary's accounts relative to the third parties when that local currency of the subsidiary's is predicted to appreciate in value in relation to the currency of the parent MNC.
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Financial accounting is shaped to a significant extent, by the environment, and
in particular all of the following, except
Select the correct response:
The means of measuring economic activity
The overall organization of economic activity in society
The many uses and users which it serves
The characteristics and limitations of financial accounting and
financial statements
Statement 1 - A foreign currency transaction is initially recognized by
translating the foreign currency amount into the functional currency using the
spot exchange rate at the date of the transaction.
Statement 2- An entity is required to present its financial statements using its
presentation currency (i.e., Philippine pesos). However, whenever needed, the
entity may translate its financial statements into any functional currency.
Select the correct response:
Both statements are incorrect
Only statement 1 is correct
Only statement 2 is correct
Both statements are correct
1. For reporting purposes, currencies are defined as
Operating, International and presentation
Domestic and international
Foreign, functional and presentation
International and functional
2. The functional currency is
Currency in which the entity reports earnings.
The currency in which the entity primarily operates.
The currency in which the entity presents the financial statements.
The currency in which the entity primarily conducts banking activities
3. Which consideration would not be relevant in determining the entity's functional currency?
The currency in which receipts from operating activities are retained.
The currency in which finance or fund is generated
The currency that influences the cost of the entity.
The currency that the most internationally acceptable for trading
4. Under IFRS, how is presentation currency defined?
The currency in which the financial statements are presented.
The currency that uses the current rate
The currency of…
15. What is a subsidiary’s functional currency? A. The parent’s reporting currency. B. The currency in which transactions are denominated. C. The currency in which the entity primarily generates and expends cash. D. Always the currency of the country in which the company has its headquarters.
Chapter 19 Solutions
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
Ch. 19.1 - Prob. 19.1RQCh. 19.1 - Prob. 19.2RQCh. 19.1 - Prob. 19.3RQCh. 19.1 - Prob. 19.4RQCh. 19.2 - Under FASB No. 52, what are the translation rules...Ch. 19.3 - Prob. 19.6RQCh. 19.3 - Explain how differing inflation rates between two...Ch. 19.3 - Discuss macro and micro political risk. What is...Ch. 19.4 - Prob. 19.9RQCh. 19.4 - Prob. 19.10RQ
Ch. 19.4 - Prob. 19.11RQCh. 19.4 - Prob. 19.12RQCh. 19.5 - Prob. 19.13RQCh. 19.5 - Prob. 19.14RQCh. 19.5 - Prob. 19.15RQCh. 19.6 - Prob. 19.16RQCh. 19 - Prob. 19.1WUECh. 19 - Prob. 19.2WUECh. 19 - Prob. 19.3WUECh. 19 - Prob. 19.4WUECh. 19 - Prob. 19.5WUECh. 19 - Prob. 19.1PCh. 19 - Prob. 19.2PCh. 19 - Prob. 19.3PCh. 19 - ETHICS PROBLEM Is there a conflict between...
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Translation exposure results when an MNC translates each subsidiary's financial data to its home currency for consolidated financial statements. Group of answer choices True Falsearrow_forwardWhat four factors must be considered when Measuring income in financial statement Preparation? When a U.S. company operates globally and its Financial statements are to be consolidated With a foreign subsidiary, what must first Нарpen?arrow_forwardThis question is related to (International Accounting) course. Critically discuss the issues associated with the calculation of profit of a foreign subsidiary.arrow_forward
- The principle of conservatism is concerned with Oa. the company's procedures for recording activities at their initial exchange price. Ob. the company's ability to carry out its existing commitments. Oc. the avoidance of overstating assets or income in the preparation of financial statements. Od. the minimization of costs associated with providing financial information.arrow_forwardQ1. Explain the differences between translation and remeasurement of financial statements of a foreign subsidiary.arrow_forwardThe functional currency is Currency in which the entity reports earnings. The currency in which the entity primarily operates. Matched quizlet The currency in which the entity presents the financial statements. The currency in which the entity primarily conducts banking activitiesarrow_forward
- Which of the following considerations would not be relevant in determining the entity's functional currency? The currency that influences the costs of entity O The currency that is most internationally acceptable for trading The currency in which receipts from operating activities are retained O The currency in which finance or fund is generatedarrow_forwardUnder IFRS, how is presentation currency defined? The currency in which the financial statements are presented. The currency that uses the current rate The currency of the primary environment in which the entity operates. A currency other than the functional currencyarrow_forwardPlease explain and analyze the effect of major differences between IFRS and U.S. GAAP related to the financial reporting of a specific category of account (e.g. current liabilities, provisions, employee benefits, share-based payment, income taxes, revenue, financial instruments, leases).arrow_forward
- 5.Will a company use the same exchange rate when translating ,Assets ,Liabilities,Revenues and Expenses? Explainarrow_forwardWhat accounting issues arise for a company as a result of engaging in international trade (imports and exports)?arrow_forwardThe financial statements of an entity that reports in the currency of a hyperinflationary economy shall be stated in terms of: a. Historical cost b. Current cost c. Fair value d. Measuring unit current at the end of reporting periodarrow_forward
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