Chapter 6Foreign Currency TranslationDiscussion Questions Solutions1.Foreign currency translation is the process of restating aforeign account balance from onecurrency to another. Foreign currency conversion is the process of physically exchanging onecurrency for another.2.In the foreign exchange spot market, currencies bought and sold must be delivered immediately,normally within 2 business days. Thus a Singaporean tourist buying U.S. dollars at the airportbefore boarding a plane for New York would hand over Singapore dollars and immediatelyreceive the equivalent amount in U.S. dollars. The forward market handles agreements toexchange a fixed amount of one currency for another on an agreed date in the future. Forexample, a French manufacturer exporting goods invoiced in euros to a Japanese importer on 60- day credit terms would buy a forward contract to sell yen for euros 2 months in the future.Transactions in the swap market involve the simultaneous purchase (or sale) of one currency in the spot market and the sale (or purchase) of the same currency in the forward market. Thus, a Canadian investor wishing to take advantage of higher interest rates on 6-month Treasury bills in the United States would buy U.S. dollars with Canadian dollars in the spot market and invest in the United States. To guard against a fall in the value of the U.S. dollar before maturity (when the U.S. dollar proceeds are converted back to Canadian dollars), the Canadian investor would simultaneously enter into a forward contract to sell U.S. dollars for Canadian dollars 6 months in the future at today s forward exchange rate.3.The question refers to alternative exchange rates that are usedto translate foreign financialstatements. The current rate is the exchange rate at the financial statement date. It issometimes called the year-end or closing rate. The historical rate is the exchange rate at the time of the underlying transaction. The average rate is the average of various exchange rates during a fiscal period. Since the average rate normally is used to translate income statement items, it isoften weighted to reflect any seasonal changes in the volume of transactions during the period.Translation gains and losses do not occur if exchange rates do not change. However, if exchange rates change, the use of current and average rates causes translation gains and losses.These do not occur when the historical rate is used because the same (constant) rate is used each period.4. In this example, the Mexican Affiliate s Canadian dollar loan is denominated in Canadian dollars.However, because the Mexican affiliate’s functional currency is U.S. dollars, the peso equivalent of the Canadian dollar borrowing would be remeasured in U.S. dollars prior to consolidation. If the Mexican affiliate’s functional currency were the peso, the Canadian dollar loan would beremeasured in pesos before being translated to U.S. dollars.5. A transaction gain or loss occurs when a foreign currency transaction, e.g., a foreign currencyborrowing, is settled at a different exchange rate than that which prevailed when the transaction was originally incurred. In this case there is an exchange of one currency for another. Atranslation gain or loss, on the other hand, is simply the resultof a restatement process. There is1no physical exchange of currencies involved.6. It is not possible to combine, add, or subtract accounting measurements expressed in differentcurrencies; thus, it is necessary to translate those accounts that are measured or denominated in a foreign currency into a singlereporting currency. Foreign currency translation can involverestatement or remeasurement. In restatement, the local (functional) currency is kept as the unit of measure; that is, the translationprocess multiplies the financial results and relationships in the local currency accounts by a constant, the current rate. In contrast, remeasurement translateslocal currency results as if the underlying transactions had taken place in the reporting(functional) currency of the parent company; for example, it changes the unit of measure of aforeign subsidiary from its local (foreign) currency to the U.S. dollar.7. Major advantages and limitations of each of the majortranslation methods follow.Current Rate MethodAdvantages:a. Retains the initial relationships in the foreign currency statements.b. Simple to apply.Limitations:a. Violates the basic purpose of consolidation, which is to present the results of a parent and its subsidiaries as if they were a single entity.b. Inconsistent with historical cost.c. Presumes that all local assets and liabilities are subject to exchange risk.d. While stockholders equity adjustments shield an MNC s bottomline from translation gains and losses, such adjustments could distort certain financial ratios and be confusing.Current-noncurrent MethodAdvantages:a. Distortions in translated gross margins are reduced as inventories and translated at the current rate.b. Reported earnings are shielded from the distorting effects of currency fluctuations as excess translation gains are deferred and used to offset future translation losses.Limitations:a. Uses balance sheet classification as basis for translation.b. Assumes all current assets are exposed to exchange risk regardless of their form.c. Assumes long-term debt is sheltered from exchange rate risk.Monetary-nonmonetary MethodAdvantages:a. Reflects changes in domestic currency equivalent of long-term debt on a timely basis. Limitations:a. Assumes that only monetary assets and liabilities are subject to exchange rate risk.b. Exchange rate changes distort profit margins as sales transacted at current prices are matched against cost of sales measured at historical prices.c. Uses balance sheet classification as basis for translation.d. Nonmonetary items stated at current market values are translated at historical rates.Temporal MethodAdvantages:a. Theoretically valid: compatible with any accounting measurement method.b. Has the effect of translating foreign subsidiaries operations as if they were originally transacted in the home currency, which is desirable for foreign operations that are extensions of the pare nt’s activities. Limitation:a. A company increases its earnings volatility by recognizing translation gains and losses currently.In arguing for one translation method over another, your students should eventually realize that, in the present state of the art, there is probably no one translation method that is appropriate for all circumstances in which translations occur and for all purposes thattranslation serves. It is probably more fruitful to have students identify circumstances in which they think one translation method is more appropriate than another.8.The current rate method is appropriate when the foreign entity being consolidated is largelyindependent of the parent company. Conditions which would justify this methodology is when the foreign affiliate tends to generate and expend cash flows in the local currency, sells a product locally so that its selling price is largely insulated from exchange rate changes, incurs expenses locally, finances its self locally and does not have very many transactions with the parentcompany. In contrast, the temporal method seems appropriate in those instances when theforeign affiliate’s operations are integrally related to the parent company. Conditions whichwould justify use of the temporal method are when the foreign affiliate transacts business in the parent currency and remits such cash flows to the parent company, sells a product largely in the parent country and whose selling price is sensitive to exchange rate changes, sources its factorinputs from the parent company, receives most of its financing from the parent and has a largetwo way flow of transactions with it.9.The history of foreign currency translation in the United States suggests that the development ofaccounting principles does not depend on theoretical considerations so much as on political, institutional, and economic influences that affect accounting standard setting. It may be morerealistic to recognize that theoretically sound solutions are impossible as long as policyprescriptions are evaluated on practical grounds. Without specific choice criteria derived from investor decision models, it is fruitless to argue the conceptual merits of competing accounting treatments. It isfar more productive to admit that foreign currency translation choices are simply arbitrary.Readers of consolidated financial statements should know that the foreign currency translation method used is one of several alternatives, and this should be disclosed. This approach is more open and reduces the chance that readers will draw misleading inferences.10.Foreign inflation, in particular, the differential rate of inflation between the country in which asubsidiary is located and the country of its parent determines foreign exchange rates. Theserates, in turn, are used to translate foreign currency balances to parent currency.11.In the United Kingdom, financial statements of affiliates domiciled in hyperinflationaryenvironments must first be adjusted to current price levels and then translated using the current rate; in the United States, the temporal method would be employed. The second part of thisquestion is designed to get students from abroad to find out what companies in their homecountries are doing and thereby be in a position to share their new found knowledge with theirclassmates. They need simply get on the internet and read the footnotes of a major multinational company in their home country.12.Under FAS No. 52, the parent currency is designated as the functional currency for an affiliate,whose operations are considered to be an integral part of the parent company’s operations.Accordingly, anything that affects consolidated earnings, including foreign currency translation gains and losses, is relevant to parent company shareholders and is included in reported earnings.In contrast, when a foreign affiliate s operations are independent of the parent s, the localcurrency is designated as its functional currency. Since the focus is on the affiliate s localperformance, translation gains and losses that arise solely from consolidation are irrelevant and, therefore, are not included in consolidated income.Exercises Solutions1.￥250,000,000 X .008557 = $2,139,250.￥250,000,000 ÷ ￥116.86 = $2, 139,312The difference is due to rounding.2.Since ￡1 = US$1.9590 and €1 = US$1.3256, ￡1 =US$1.9590/US$1.3256 = €1.4778.Alternatively, €1 = US$1.3256/US$1.9590 = ￡.6767.3.Single Transaction Perspective:4/1 Purchases (￥32,500,000/￥116.91) $277,992Cash $27,800A/P(￥32,500,000 - ￥3,250,000)/￥116.91 250,192(Credit purchase)7/1 Purchases[(￥29,250,000/￥116.91) – (￥29,250,000/￥115.47) 3,120A/P 3,120(To record increase in purchases due to yen appreciation)7/1 Interest expense(￥29,250,000 X .08 X 3/12)/￥115.47 5,066A/P(￥29,250,000/￥115.47) 253,312Cash 258,378(To record settlement)Two Transactions Pers pective:4/1 Purchases $277,992Cash $27,800A/P 250,1927/1 Transaction loss 3,120A/P 3,1207/1 Interest expense 5,066A/P 253,312Cash 258,3784. a. MXN 1,750,000/MXN10.3 = C$169,903.b. The Canadian dollar equivalent of the Mexican inventory account would not change if the functional currencywas the Canadian dollar as the temporal method translates inventory, a nonmonetary asset, at the exchange rate that preserves its original measurement basis. Since inventory is being carried at its netrealizable value, it would be translated at the current rate. Had inventory been carried at historical cosuld have been translated at the historical rate or MXN3,750,000/MXN9.3 = C$403,226.5. Baht is the functional currency:B 2,500,000/20 years = B 125,000B 125,000/B37 = 3,378B 5,000,000/20 years = B 250,000B 250,000/B37 = 6,757U.S. dollar is the functional currency:B 2,500,000/20 years = B 125,000B 125,000/B40 = 3,125B 5,000,000/20 years = B 250,000B 250,000/B38 = 6,579Total depreciation $ 9,7046. If the euro is the German subsidiary’s functional currency, its accounts would be t ranslated into Australian dollarsusing the current rate method. In this case the translation gain of AUD4,545,455 would appear in consolidated equity.Thus the only item affecting current income would be thetransaction loss(loss on an unsettled transac tion) ofAUD1,514,515 on the euro borrowing.If the Australian dollar is deemed to be the functional currency, then the transaction loss andtranslation gain would both appear in reported earnings as follows:AUD(1,514,515) transaction lossAUD4,545,455 translation gainAUD3,030,940 net foreign exchange gain7.U.S. Dollar U.S. Dollar U.S. DollarBefore CNY After CNY After CNYAppreciation Appreciation DepreciationCNY Balance Sheet ($.12=CNY1) ($.15 = C NY1) ($0.09 = CNY1) Assets Amount Current Monetary Current MonetaryNoncurrent Nonmonetary Noncurrent NonmonetaryCash NT5,000 $600 $ 750 $ 750 $ 450 $ 450Accts. R eceivable 14,000 1,680 2,100 2,100 1,260 1,260 Inventories(cost=24,000) 22,000 2,640 3,300 2,640 1,980 2,640Fixed assets, net 39,000 4,680 4,680 4,680 4,680 4,680Total CNY 80,000 $9,600 $10,830 $10,170 $8,370 $9,030 Liabilities & Owners EquityAccts. Payable CNY21,000 $2,520 $ 3,150 $ 3,150 $1,890 $1,890Long-term debt 27,000 3,240 3,240 4,050 3,240 2,430 Stockholders equity 32,000 3,840 4,440 2,970 3,240 4,710 Total CNY 80,000 $9,600 $10,830 $10,170 $8,370 $9,030 Accou nting exposure CNY20,000 (29,000) 20,000 (29,000) Translation gain (loss) US$ 600 (870) (600) 8708.U.S. Dollar U.S. Dollar U.S. DollarBefore CNY After CNY After CNYAppreciation Appreciation DepreciationCNY Balance Sheet ($.12=CNY1) ($.15 = C NY1) ($.09 = C NY1) Assets Amou nt Temporal Current Temporal CurrentCash CNY5,000 $ 600 $ 750 $ 750 $ 450 $ 450Accts. R eceivable 14,000 1,680 2,100 2,100 1,260 1,260 Inventories(cost=24,000) 22,000 2,640 3,300 3,300 1,980 1,980Fixed assets, net 39,000 3,600 3,600 5,850 3,600 3,510 Total CNY 80,000 $8,520 $9,750 $12,000 $11,700 $7,200Liabilities & Owners EquityAccts. Payable CNY21,000 $2,520 $3,150 $3,150 $1,890 $1,890Long-term debt 27,000 3,240 4,050 4,050 2,430 2,430Stockholders equity 32,000 2,760 2,550 4,800 7,380 2,880Total NT$ 80,000 $8,520 $9,750 $12,000 $11,700 $7,200Accou nting exposure NT$ (7,000) 32,000 (7,000) 32,000Translation gain (loss) US$ (210) 960 210 (960)c. Students will quickly discover that each translation method has its advantages and disadvantages. After some discussion, the question of translation objectives will arise. Currency translation objectives are based on how foreign operations are viewed. If foreign operations are considered extensions of the parent, a case can be made for a historical rate method: current-noncurrent, monetary-nonmonetary, or temporal. If foreign operations are viewed from a local company perspective, a case can be made for the current rate method. Given the complexity of multinational business activities, one could argue that a single translation method will not serve all purposes for which translations are done. As long as the objectives of foreign currency translation differ among specific reporting entities, a practical solution is to insist onfull disclosure of the translation procedures used so that users have a basis for reconciling any differences that exist.9.Company A (Country A)(Reporting Currency = Apeso)Beginning of Year End of YearAssets: Exchange Rate Translated Exchange Rate TranslatedApeso 100 Apeso 100 Apeso 100Bol 100 Apeso 1 = Bol 1.25 Apeso 80 Apeso 1 = Bol 2 Apeso 50Apeso 180 Apeso 150Translation loss = A$ 30Company B (Country B)(Reporting Currency = Bol)Beginning of Year End of YearAssets: Exchange Rate Translated Exchange Rate TranslatedApeso 100 Apeso 1 = Bol 1.25 Bol 125 Apeso 1 = Bol 2 Bol 200Bol 100 Bol 100 Bol 100Bol 225 Bol 300Translation gain = Bol 75b. This exercise demonstrates the effect of the reporting currency on foreign currency translation results when the current rate method is used. Both companies are in seemingly identical situations, yet one reports a translation loss while the other reports a translation gain. One company reports shrinking assets while the other reports increasing assets. Nothing has actually happened but an exchange rate change. Also, despite a stronger Apeso, Company A reports a loss. Conversely, the Bol weakened, yet Company B reports a gain. It appears that a strengthening currency is not always good news, nor is a weakening currency always bad news.If the intention is to repatriate the funds invested in the foreign country (Country B from Company A’s perspective, Country A from Company B’s perspective), the scenario makes sense. After all, CompanyA will be repatriating fewer Apesos than originally invested and CompanyB will be repatriating moreB ol’s than originally invested. Fluctuating exchange rates have changed each company s command over a foreign currency. Assuming the company intends to repatriate the currency, it makes sense to include the respective gain or loss in income for the current year. On the other hand it can be argued that the gain or loss should be excluded fromincome if the company intends to keep the foreign assets invested permanently..10.Translation RateLocal Currency is Dollar isFunctional Currency Functional CurrencyCash Current CurrentMarketable securities (cost)Current Historical aAccounts receivable Current CurrentInventory (market) Current CurrentEquipment Current HistoricalAccumulated depreciation Current HistoricalPrepaid expenses Current HistoricalGoodwill Current HistoricalAccounts payable Current CurrentDue to parent (denominated in dollars) Current CurrentBonds payable Current CurrentIncome taxes payable Current CurrentDeferred income taxes Current CurrentCommon stock Historical HistoricalPremium on common stock Historical HistoricalRetained Earnings Balancing Residual Balancing ResidualSales Average AveragePurchases Average AverageCost of Sales Average HistoricalGeneral and administrative expenses Average AverageSelling expenses Average HistoricalDepreciation Average HistoricalAmortization of goodwill Average HistoricalIncome tax expense Average AverageInter-company interest expense Average Average___________________________________________________________________ _______________________________________________________a Fixed income securities intended to be held to maturity.11. a. Before riyal depreciation:Cash SAR 60,000,000 ÷ SA R3.75 = $ 16,000,000Inventory 120,000,000 ÷ SA R3.75 = 32,000,000Fixed Assets 750,000,000 ÷ SA R3.75 = 200,000,000Total $248,000,000After riyal depreciation:Cash SAR 60,000,000 ÷ SA R4.125 = $ 14,545,455Inventory 120,000,000 ÷ SA R3.75 = 32,000,000Fixed Assets 750,000,000 ÷ SA R3.75 = 200,000,000Total $246,545,455Translation loss $(1,454,455)b.The translation loss has no effect on MSC’s cash flows as it is the result of a restatement process.c.equity. However, in addition inventory and fixed assets would be translated at the current rate, as opposed to thehistorical rate, and the resulting translation loss would also be taken to consolidated equity. This would result in a different earnings number as well as asset measures.Before riyal depreciation:Cash SAR 60,000,000 ÷ SA R3.75 = $ 16,000,000Inventory 120,000,000 ÷ SA R3.75 = 32,000,000Fixed Assets 750,000,000 ÷ SA R3.75 = 200,000,000Total $248,000,000After riyal depreciation:Cash SAR 60,000,000 ÷ SA R4.125 = $ 14,545,455Inventory 120,000,000 ÷ SA R4.125 = 29,090,909Fixed Assets 750,000,000 ÷ SA R4.125 = 181,818,182Total $225,454,546Translation adjustnment reflected in equity$(22,545,454)Students could also be probed and asked how the adjusted numbers would impact certain ratios such as ROA or ROE, Debt to Equity, and asset turnover.12. a. The currency effects in the first and third paragraphs have an impact on Alcan’s cash flows. IN the firstparagraph, echange rate changes affect Alcan’s future revenues and costs and directly affect cash receipts andpayments. The third paragraph involves settling foreign currency transactions at a different echange rate than when the transaction were entered into.b.Alcan appears to be employing the monetary-nonmonetary method.c. Many analysts back out translation gains and losses from reported earnings as these are largely non-cash itemsthat simply result from a restatement process. This wouldespecially be the case if Alcan were being compared to a company employing the current rate method. Disregarding translation gains and losses would have the following effect on reported earnings:20X5 20X4 20X3With translation G/L $129m $258m $64mTranslation G/L (86) (153) (326)Without Translation G/L $215m $411m $390mThe impact on the pattern of earnings would change significantly. The year to year changes in earnings both before and after abstracting from currency translation effects are:20X5/20X3 20X5/20X4 20X4/20X3With translation G/L 102% -50% 303%Without Translation G/L 45% -48% 5%Case 6-1 Regents CorporationThe nature of Regents’s operation is such that choice of an appropriate functional currency is ultimately a judgement call. Students can argue for either currency and should be evaluated on the strength of their analysis. A major lesson of this case is that the functional currency choice is important since the currency designation dictateswhich translation method, (current or temporal) is ultimately used. The financial statement effects can be very different. Thus it is importantfor a reader of financial statements to understand how the differing measurement options affect the balance sheet and income statement and be prepared to adjust from one framework to the other, even if only crudely.TEMPORAL METHOD(U.S. DOLLAR IS THE FUNCTIONAL CURRENCY)Balance Sheet Accounts, 12/31/X7 Foreign Currency Exchange RateDollar EquivalentCash ￡ 1,060 1.80 $ 1,908Accounts receivable 2,890 1.90 5,491Inventory 3,040 1.78 5,411Fixed assets 4,400 1.70 7,480 Accumulated depreciation (420) 1.70 (714)Patent ----- -----Total ￡10,970 $19,576 Accounts payable ￡ 1,610 1.80 $ 2,898Due to parent 1,800 1.80 3,240Long-term debt 4,500 1.80 8,100 Deferred taxes 80 1.80 144 Common stock 1,500 1.70 2,550 Retained earnings 1,480 residual 2,644￡10,970 $19,576 Income Statement, 12/31/X8 Foreign Currency Exchange Rate Dollar Equivalent Sales ￡ 16,700 1.86 $ 31,062Cost of sales a (11,300) (20,706) General and administrative (1,600) 1.86 (2,976) Depreciation (280) 1.70 (476)(20) 1.82 (36) Interest (480) 1.86 (893) Transaction gain 125 1.86 233 Aggregate translation adjustment b (368) Taxes:Current (670) 1.86 (1,246)Deferred (40) 1.86 (74)Net income ￡ 2,435 $ 4,520 Retained earnings, 12/31X7 1,480 2,644 Dividends (300) 1.86 (558) Retained earnings, 12/31X8 ￡ 3,615 $ 6,606a Beginning inventory ￡ 3,040 1.78 $ 5,411 Purchases 11,690 1.86 21,743Ending inventory 3,430 1.88 6,448 Cost of Sales 11,300 $20,706b Aggregate translation adjustment:1. Monetary assets, 12/31/X7 ￡ 3,950Monetary liabilities, 12/31/X7 7,990(￡ 4,040) x (1.90 - 1.80) = ($404) 2. Change in negative exposure: 12/31/X7 (￡ 4,040)12/31/X8 (2,565 )￡ 1,475Composition of decrease:Sources of monetary items:Net income ￡2,435Depreciation 300 ￡2,735Uses of monetary items:Inventory increase ￡(390)Addition to fixed assets (500)Purchase of patent (70)Dividends (300 ) (1,260 )￡1,475￡2,345 x (1.90 - 1.86) = $94300 x (1.90 – 1.86) = 12 $1094. Uses of monetary items x difference in year-end rate and rate used to translate those items =￡(390) x (1.90 – 1.86) = $(15)(300) x (1.90 - 1.86) = (12)(500) x (1.90 - 1.82) = (40)(70) x (1.90 - 1.82) = (6 ) (73)Aggregate translation adjustment = ($404)109(73 )($368)Balance Sheet, 12/31/X8 Foreign Currency Exchange Rate Dollar EquivalentCash ￡ 1,150 1.90 $2,185 Accounts receivable 3,100 1.90 5,890 Inventory 3,430 1.88 6,448Fixed assets a 4,900 8,390 Accumulated depreciation b (720) (1,226)Patent 70 1.82 127Total ￡11,930 $21,814 Accounts payable ￡ 1,385 1.90 $ 2,632Due to parent 1,310 1.90 2,489Long-term debt 4,000 1.90 7,600 Deferred taxes 120 1.90 228 Common stock 1,500 1.70 2,550 Retained earnings 3,615 6,309Total ￡11,930 $21,814a Original assets ￡ 4,400 1.70 $ 7,480New assets 500 1.82 910$ 8,390b Original assets ￡ 700 1.70New assets 20 1.82 36$ 1,226CURRENT RATE METHOD(LOCAL CURRENCY IS THE FUNCTIONAL CURRENCY)Balance Sheet Accounts, 12/31/X7 Foreign Currency Exchange Rate Dollar Equivalent Cash ￡ 1,060 1.80 $ 1,908 Accounts receivable 2,890 1.80 5,202 Inventory 3,040 1.80 5,472Fixed assets 4,400 1.80 7,920 Accumulated depreciation (420) 1.80 (756)Patent --- ---Total ￡10,970 $19,746Accounts payable ￡ 1,610 1.80 $ 2,898Due to parent 1,800 1.80 3,240Long-term debt 4,500 1.80 8,100Deferred taxes 80 1.80 144Common stock 1,500 1.70 2,550Retained earnings 1,480 2,355Cumulative translation adjustment --- 459(given)Total ￡ 10,970 $19,746Income Statement, 12/31/X8 Foreign Currency Exchange Rate Dollar Equivalent Sales ￡16,700 1.86 $31,062Cost of sales (11,300) 1.86 (21,018)General and administrative (1,600) 1.86 (2,976) Depreciation (300) 1.86 (558)Interest (480) 1.86 (893) Transaction gain 125 1.86 232Taxes:Current (670) 1.86 (1,246)Deferred (40) 1.86 (74)Net income ￡ 2,435 $ 4,529Retained earnings, 12/31X7 1,480 2,355Dividends (300) 1.86 (558)Retained earnings, 12/31X8 ￡ 3,615 $ 6,326Balance Sheet, 12/31/X8 Foreign Currency Exchange Rate Dollar EquivalentCash ￡ 1,150 1.90 $ 2,185Accounts receivable 3,100 1.90 5,890Inventory 3,430 1.90 6,517Fixed assets 4,900 1.90 9,310Accumulated depreciation (720) 1.90 (1,368)Patent 70 1.90 133Total ￡ 11,930 $22,667Accounts payable ￡ 1,385 1.90 $ 2,632Due to parent 1,310 1.90 2,489Long-term debt 4,000 1.90 7,600Deferred taxes 120 1.90 228Common stock 1,500 1.70 2,550Retained earnings 3,615 6,326Cumulative translation adj. ----- 842aTotal ￡11,930 $22,667a Cumulative translation adjustment:1. Net exposed assets, 12/31/X7, x change in current rate = ￡2.980 x (1.90 - 1.80) = $2982. Change in net assets x difference between year-end and average rate = ￡2.135 x (1.90 - 1.86) = 853. Cumulative translation adjustment 12/31/X7 4594. Cumulative translation adjustment, 12/31/X8 $842Selected policy issues raised by the Regents Corporation case:1. Are the FASB s criteria for selecting a functional currency designation adequate? Are there criteria that are more definitive than those identified in this chapter?2. W ill statement readers understand the nature of the aggregate exchange adjustment appearing in the consolidated income statement under the temporal method of translation that includes both transaction and translation gains and losses?。
![西方经济学微观部分课后习题答案及解析[高鸿业第六版]](https://img.taocdn.com/s1/m/d26f9ba1bb4cf7ec4afed0c4.png)
