高级会计学（第10版）教师手册 Beams10e-IM13

CHAPTER13

FOREIGNCURRENCYFINANCIALSTATEMENTS

ChapterOutline

CONVERSIONOFFOREIGNCURRENCYFINANCIALSTATEMENTSOFFOREIGN

SUBSIDIARIES

AU.S.corporationsconverttheforeigncurrencyfinancialstatementsoftheirforeign

subsidiariesintoU.S.dollarsundertheprovisionsofFASBStatementNo.52

BForeigncurrencyfinancialstatementsarestatementspreparedinacurrencyotherthan

thereportingcurrency(theU.S.dollar)oftheU.S.parent-investor.

1StatementsofoperationslocatedoutsidetheU.S.thatarepreparedinU.S.dollars

arenotforeigncurrencystatementsandFAS52provisionsdonotapply.

CThemethodforconvertingtheforeigncurrencystatementsintoU.S.dollarsandthe

classificationoftheresultinggainorlossdependsontheforeignentity'sfunctional

currency.

APPLICATIONOFTHEFUNCTIONALCURRENCYCONCEPT

AForeigncurrencystatementsmustbeinconformitywithgenerallyacceptedaccounting

principlesbeforetheycanbetranslated.

BAccountbalancesontheforeigncurrencystatementsthataredenominatedinaforeign

currencyfromtheviewpointoftheforeignentitymustbeadjustedtoreflectcurrent

exchangerates.

1Forexample,aGermansubsidiarymustadjustayen-dominatedaccountsreceivable

balancetoreflectcurrentexchangerates(illustratedinChapter12).

CAnobjectiveofthefunctionalcurrencyconceptistomeasureaforeignentity9sassets,

liabilities,andoperationsinitsfunctionalcurrency.

1Subsequently,theforeignentity'sfinancialstatementsareconsolidatedwiththeU.S.

parentinthereportingcurrency(theU.S.dollar).

DConvertingtheforeignentity'sfinancialstatementsintothecurrencyoftheparentmay

requiretranslation,remeasurement,orboth.

1Themethodselecteddependsonwhethertheforeignsubsidiary^booksare

maintainedinitsfunctionalcurrency,oracurrencydifferentfromitsfunctional

currency.

2Functionalcurrencyisthecurrencyoftheprimaryeconomicenvironmentinwhich

thesubsidiaryoperates,normallythecurrencyinwhichitcollectsitsreceivablesand

paysitsliabilities.

3Otherfactors,includingmanagement^judgment,impacttheselectionofa

subsidiary'sfunctionalcurrency.

4Ifasubsidiary'sfunctionalcurrencyistheU.S.dollar,theforeignfinancial

statementsareremeasuredintoU.S.dollarsusingthetemporalmethod.

5Ifasubsidiary'sfunctionalcurrencyisthelocalcurrencyoftheforeignentity,its

financialstatementsaretranslatedintoU.S.dollarsusingthecurrentratemethod.

Whentheforeignentity'sbooksaremaintainedinitsfunctionalcurrency(thatis,

functional=local),thestatementsaretranslatedintothecurrencyofthereportingentity

usingthecurrentratemethod.

1Translationinvolvesexpressingfunctionalcurrencymeasurementsinthereporting

currency.

2Allelementsoffinancialstatements(assets,liabilities,revenues,andexpenses)are

translatedusingacurrentexchangerate(thecurrentratemethod.)

3Asanexpedient,revenuesandexpensesareusuallytranslatedataweighted

averageexchangeratefortheperiod.

4Theeffectsoftheexchangeratechangesarereportedasstockholders9equity

adjustments,inOtherComprehensiveIncome,becausetheyarenotexpectedto

impactthecashflowsoftheparent-investor.

5Theequityadjustmentsfromtranslationareaccumulateduntiltheinvestmentis

soldorliquidated,atwhichtimetheyaretreatedasadjustmentstothegainorloss

onsale.

Whentheforeignentity'sbooksarenotmaintainedinitsfunctionalcurrency(thatis,

functionalNOT=local),thestatementsareremeasuredinthefunctionalcurrencyusing

thetemporalmethod.

©2009PearsonEducation,Inc.publishingasPrenticeHall142

1Ifthefunctionalcurrencyisthereportingcurrency(functional=U.S.dollar)the

conversioniscomplete.

2IfthefunctionalcurrencyisnottheU.S.dollar,theremeasuredstatementsmust

thenbetranslatedintoU.S.dollarsusingthecurrentratemethod.

3Underthetemporalmethodmonetaryassetsandliabilitiesareremeasuredat

currentexchangeratesandotherassetsandequitiesareremeasuredathistorical

rates.

4Gainsorlossesfromremeasuringtheforeigncurrencystatementsareincludedin

incomebecausetheyareexpectedtoimpactcashflowsoftheparent-investor.

GRequirementChart

ForeignCurrencyintoFunctionalCurrencyinto$

remeasuretranslate

temporalmethodcurrentratemethod

Example1foreignforeign$

(translationrequired)

Example2foreign$$

(remeasurementrequired)

Example3foreignfunctionals

(bothrequired)

HIntercompanytransactionsbetweenaU.S.parentanditsforeignsubsidiarymaybea

foreigncurrencytransactiontooneaffiliate,neitheraffiliateortobothaffiliates.

1Thetransactionisaforeigncurrencytransactionofaparticularaffiliateifitresults

inareceivableorpayablebalancedenominatedinacurrencyotherthanthat

entity'sfunctionalcurrency.

2Intercompanyaccountbalancesdenominatedinaforeigncurrencyareadjustedat

thebalancesheetdatetothecurrentexchangerate.

aIftheintercompanybalancesarenotofalong-terminvestmentnature,the

exchangegainorlossisincludedinincomefortheperiod.

bAnexchangegainorlossonsettlementisalsoincludedinincomeforthe

period.

cIftheintercompanybalancesareofalong-terminvestmentnature

(settlementisnotexpectedintheforeseeablefuture),theexchangegainor

lossisreportedinstockholders9equity(inOtherComprehensiveIncome)as

anequityadjustmentfromtranslation.

FOREIGNENTITIESOPERATINGINHIGHLYINFLATIONARYECONOMIES

AAhighlyinflationaryeconomyundertheprovisionsofFAS52isonewithacumulative

three-yearinflationrateofapproximately100percentormore.

BForeigncurrencyfinancialstatementsofentitiesoperatinginhighlyinflationaryeconomies

areremeasuredusingtheU.S.dollarreportingcurrencyasthefunctionalcurrency.

CExchangegainsandlossesarerecognizedintheincomefortheperiod.

BUSINESSCOMBINATIONS

ATheassetsandliabilitiesaretranslatedintoU.S.dollarsusingthecurrentexchangerate

ineffectatthedateofthebusinesscombination.

BTheidentifiableassetsandliabilitiesareadjustedtotheirfairvaluesinlocalcurrency

andtranslatedatthecurrentexchangerate.Anydifferencebetweentheinvestmentcost

andtranslatednetassetsacquiredisgoodwill.

1Whentheforeignentity'sfunctionalcurrencyisitslocalcurrency,theexcesscost

overbookvalueacquiredisassignedtoassets,liabilities,andgoodwillinlocal

currencyunitsandsubsequentlytranslatedatcurrentexchangerates.

2Whentheforeignentity'sfunctionalcurrencyistheU.S.dollar,

remeasurementisrequired.Theexcessallocatedtoidentifiablenetassets

isamortizedatthehistoricalexchangerateineffectatthetimeofthe

businesscombination.

CThenoncontrollinginterestinaforeignsubsidiaryiscomputedaftertheforeigncurrency

financialstatementshavebeentranslatedorremeasuredintoU.S.dollars.

DSimilarly,theequitymethodisappliedaftertheforeignentity9sflnancialstatements

havebeentranslatedorremeasuredintoU.S.dollars.

TRANSLATIONOFAFOREIGNSUBSIDIARY(Illustration13-1)

©2009PearsonEducation,Inc.publishingasPrenticeHall144

AAnyintercompanyaccountbalancesdenominatedinaforeigncurrencyareadjustedat

thebalancesheetdatetothecurrentexchangerate.

1Iftheintercompanytransactionisofalong-terminvestmentnature,thegainorloss

isincludedinothercomprehensiveincome.

2Otherwise,thegainorlossisincludedinincomeoftheperiod.

BWhentheforeignsubsidiary'sadjustedtrialbalanceistranslatedusingthecurrentrate

method

1Assetsandliabilitiesaretranslatedatthecurrentrateatthebalancesheetdate.

2Revenuesandexpensesareusuallytranslatedatanaveragerate.

3Dividendsaretranslatedattherateineffectwhenthedividendsarepaid.

4Retainedearnings(RE)isnottranslatedaftertheacquisitiondate.

aInyearssubsequenttotheyearofacquisition,REequalsREatacquisition,

plusnetincome,lessdividendsafteracquisition,allintranslateddollar

amounts

5Capitalstockandotherpaid-incapitalaccountsaretranslatedattheexchangerate

ineffectwhenthesubsidiary(orinvestee)wasacquired.

6Thedifferencebetweenthetranslateddebitsandthetranslatedcreditsisan

equityadjustmentfromtranslationandisreportedinOtherComprehensiveIncome.

aAninequalityresultsfromtranslatingsomeaccountsusingthecurrentrate

(assets)andotheraccountsusingthehistoricalrate(capitalstock).

CThetranslatedfinancialstatementsareusedinapplyingtheequitymethod.

DNoncontrollinginterestiscomputedasapercentageofthesubsidiary'stranslated

stockholders5equity;inotherwords,theequityadjustmentfromtranslationisincludedin

thecomputation.

ETheeliminationofintercompanyprofitsshouldbebasedontheexchangeratesineffect

whentheintercompanytransactiontookplace;however,reasonableapproximationsor

averagesarepermittedbyFAS52.

REMEASUREMENTOFAFOREIGNSUBSIDIARY

AWhenthefunctionalcurrencyistheU.S.dollar,theforeignentity'saccountsare

remeasuredintoU.S.dollars.

BTheobjectiveofremeasurementistoproducethesameresultsasifthebooksofthe

subsidiaryhadbeenmaintainedinU.S.dollars.

CWhentheadjustedtrialbalanceofaforeignsubsidiaryisremeasured

1Monetaryassetsareremeasuredatthecurrentrate(thesameastheyarein

translatedstatements).

2Dividendspaidaretranslatedatreciprocalamountsindollarsrecordedbythe

parentcompanyonitsownbooks.

3Inventoriesareremeasuredathistoricalrates.

4Purchasesareremeasuredataveragerates.Specialproceduresarerequiredfor

inventoriescarriedatthelowerofcostormarket(AppendixC).

5Expensesareremeasuredataverageratesduringtheperiodiftheyrelateto

monetaryitemsandathistoricalexchangeratesiftheyrelatetononmonetary

items,suchasplantassetsorintangibles.

aIfasingleexpenseaccountrelatestobothmonetaryandnonmonetaryitems,

theremeasurementinvolvesmorecomputationsthantheapplicationofa

singleaveragerate.

6Capitalstockandotherpaid-incapitalareremeasuredathistoricalexchangerates

(thesameasintranslatedamounts).

7Theretainedearnings(RE)balanceiscomputed,butnotremeasured.

aEndingRE=BeginningRE+remeasurednetincome-remeasureddividends.

8Totaldebitsintheremeasuredtrialbalancearesubtractedfromtotalcredits

andtheresultingexchangegainorlossisincludedinincomefortheperiod.

aAgain,aninequalityresultsfromtranslatingsomeaccountsusingdifferent

ratesfromotheraccounts.

DTheequitymethodisappliedtotheremeasuredfinancialstatements.Sinceall

remeasurementgainsandlossesarerecognizedincurrentincome,theequitymethodisthe

sameasfordomesticsubsidiaries.

©2009PearsonEducation,Inc.publishingasPrenticeHall146

EBecauseinventoryandcostofsalesaccountsareremeasuredathistoricalexchangerates,

intercompanyprofitsinconsolidationworkingpapersareeliminatedinthesame

mannerasfordomesticsubsidiaries.

HEDGINGANETINVESTMENTINAFOREIGNENTITY

AAU.S.firmmayenterintoaforwardcontracttohedgeanetinvestmentinaforeign

entitywhosefunctionalcurrencyisotherthantheU.S.dollar.

1Procedurestohedgeaninvestmentinaforeignsubsidiaryarenotapplicableto

investeeswithaU.S.dollarfunctionalcurrency(accountedforasspeculation).

aThisisbecauseconversionoftheinvestee9sfinancialstatementsintoU.S.

dollarsresultsinagainorlossthatisincludedinnetincome.Thegainorloss

fromtherelatedhedgeisalsoincludedinnetincome.

2Translationofthefinancialstatementsofaforeignentitywhosefunctionalcurrency

isnottheU.S.dollarproducesagainorlossthatisexcludedfromnetincomeandis

reportedinOtherComprehensiveIncome.

3Againandlossonahedgeofanetinvestmentinaforeigninvesteeisalsoexcluded

fromnetincome,andisreportedinOtherComprehensiveIncome.

4Theinvestee'sassetsandliabilitieshedgeeachother,soonlythenetassetsare

exposedtoexchangerategainsandlosses.

5Tohedgetheforeigncurrencyexposure,thetranslationadjustmentfromthehedge

mustmoveintheoppositedirectionofthetranslationadjustmentfromthenet

assetsoftheinvestee.

DescriptionofAssignmentMaterialMinutes

Questions(15)

Exercises(10)

E13-19MCgeneralquestions(FASBStatementNo.52concepts)20

E13-2AICPA5MCgeneralquestions15

El3-3[Paily/Standt]Consolidatedbalancesheetimmediatelyafteracquisition20

(100%ownership,excessallocatedtoland,equipment,andgoodwill)

El3-4[Port/Stadt]Calculatelower-of-cost-or-marketinventory10

E13-5[Panama/Simenon]Calculatepatentandrecordpatentamortization15

(translation)

El3-6[Psalter/Stanford]Calculateequityadjustmentonexcessallocatedtoequipment20

andpatent

E13-7[Packer/Swiss]Calculateequityadjustmentonexcessallocatedtoland15

E13-8AICPA7MCproblem-typequestions30

El3-94MCproblem-typequestions,noncontrollinginterest20

E13-10[Pender/Shinhan]Computecostofsalesandinventory,noncontrollinginterest20

Problems(15)

P13-1[Parkway/Scorpio]Calculateincomeandinvestmentbalancefor40%25

investee(patent)

P13-2[Placid/Sorrier]Calculationsfor40%investee(patent)25

P13-3[Pylon/Sooth]Preparetranslationworksheetandone-lineconsolidation25

entries

Pl3-4(Peter/Schultz]Preparetranslationworksheet,calculateincomeand25

investmentbalance(patentandminorityinterest)

P13-5[Pardi/Sari]Preparearemeasurementworksheet20

P13-6[Philip/Stuart]Remeasurementworksheet(prepaidexpensesandadditional30

equipmentpurchase)

P13-7[Pella/Sapir]Preparetranslationworksheetandjournalentries(100%35

ownership,intercompanyadvance,andpatent]

P13-8[PWA/SAA]Journalentriesandconsolidationworkingpapers(100%60

ownedsubsidiary,patent,short-termU.S.dollaradvancetosubsidiary)

P13-9[Par/SanlTranslationworksheet,journalentries,consolidationworking70

papers(noncontrollinginterestandshort-termU.S.dollaradvancetosubsidiary)

P13-10[Pence/Sevin}Translationworksheet,netincome,noncontrollinginterest40

P13-11[Paragon/Freeman]Remeasurementworksheetandsubsidiaryfinancial45

statements(additionalequipmentpurchased,short-termadvance,andbad

debtexpense)

P13-12[Pilot/Saussure]Computetheinvestmentaccountbalance,patent,andthe20

equityadjustmentfromtranslation(translationworksheetgiven)

P13-13[Pic/Sol]Determinepatent,equityadjustmentfromtranslationandminority40

Interest

P13-14[Perry/SmithelConsolidationworkingpapersfortwoyearsanda120

consolidatedstatementofcashflows(patent,noncontrollinginterest,long-term

advancetoparent)

operations

P13-15[Progress/Scheele]Comparativeconsolidatedincomestatements,120

retainedearningsstatements,andbalancesheetsfortwoyearsandconsolidated

cashflowstatementforoneyear(patent,noncontrollinginterest,andshort-term

©2009PearsonEducation,Inc.publishingasPrenticeHall

U.S.dollaradvancetosubsidiary)

InternetAssignment

UsingFordMotorCompany's2003annualreportfromitswebsite,answerquestionsregarding

functionalcurrencies,reportingofremeasurementandtranslationgainsandlossesandcash

flowhedges.

Illustration13-1

TRANSLATIONANDCONSOLIDATIONOFAFOREIGNSUBSIDIARY

SubCorporationisaforeignfirmwhoselocalcurrencyisdesignatedLCU(localcurrency

units.)

TheexchangerateonDecember31,20X1is2LCUfor$1U.S.,andtheDecember31,20X1

balancesheetofSubinLCUandU.S.dollarsisasfollows:

ExchangeU.S.

LCURateDollars

Cash5,000$.50$2,500

Plantassets-net2(),0()().5()1(),00()

Totalassets25.000$12.500

Capitalstock20,000.5()$10,000

Retainedearnings5,()002.500

Totalequities25.000$12.500

OnJanuary1,20X2ParCorporation,aU.S.firm,acquiresallthecapitalstockofSubfor

$15,000.Par'smanagementdeterminesthatthefunctionalcurrencyofitssubsidiary,Sub

Corporation,istheLCU.Anyexcessofcostoverbookvalueisattributabletoapatentandis

tobeamortizedover5years.

CostofinvestmentinSubatJanuary1,20X2$15,000

Bookvalueofinterestacquired12,500

Patent(in$)$2.500

PatentinLCU$2,5OO/$.5O=5,000LCU

January1,20X2purchaseofSubCorporation

ParrecordsitsinvestmentinSubasfollows:

InvestmentinSub$15,000

Cash$15,00()

TorecordacquisitionofSubequaltobookvalueplus$2,500

patent(5,000LCUpatent)witha5-yearamortizationperiod.

©2009PearsonEducation,Inc.publishingasPrenticeHall150

ACTIVITIES-20X2:

TheexchangeratesforLCUfor20X2are$.475averagefortheyear,$.47whenthedividends

arepaid,and$.45atDecember31,20X2.

AtranslationworksheettoconvertSub'saccountsinLCUintoU.S.dollarsunderthecurrent

ratemethodisasfollows:

TranslationWorksheet

December31,20X2

ExchangeU.S.

LCURateDollars

Cash17,000$.45C$7,650

Plantassets-net18,000.45C8,100

Expenses8,000.475A3,800

Dividends2,000.47H940

Equityadjustment,

20X2change1,510

45.000$22.000

Capitalstock20,000.50H$10,00()

Retainedearnings5,000measured2,500

Revenue20.000.475A9.500

45,000$22,000

One-lineConsolidation-20X2

ParrecordsitsincomeanddividendsfromSubfor20X2asfollows:

Cash^40

InvestmentinSub$940

Torecorddividendsreceived(2,000LCUx$.47exchangerate).

InvestmentinSub$4,190

Equityadjustmentfromtranslation1,510

IncomefromSub$5,700

TorecordequityinSub'sincome($9,500-$3,800).

IncomefromSub$475

Equityadjustmentfromtranslation225

InvestmentinSub$700

Torecordamortizationofpatentcomputedasfollows:

5,000LCU/5yearsx$.475exchangerate=$475

4,000LCUendingbalancex$.45currentrate=$1,800

Patentchange:$2,50()-$1,800=$700

Consolidation-20X2:

WorkingpaperstoconsolidatethefinancialstatementsofParandSubfortheyearended

December31,20X2areillustratedasfollows:

ParCorporationandSubsidiary

ConsolidationWorkingPapers

fortheyearendedDecember31,20X2

ParSubAdjustmentandConsolidate

Eliminationsd

Statements

IncomeStatement

Revenue$30,000$9,500$39,500

IncomefromSub5,225a.5,225

Expenses(25,000)(3,800)c.475(29,275)

Netincome$10225$5*700$10.225

RetainedEarningsStatement

Retainedearnings-Par$10,00()$10,000

Retainedearnings-Sub$2,500b.2,500

Netincome10,2255,70010,225

Dividends(6,000)(940)a.940(6,000)

Retainedearnings12/31/20X2$14*225$7,260$14.255

BalanceSheel

Cash$2,940$7,650$10,590

Plantassets-net12,0008,10020,100

InvestmentinSub17,550a.4,285

b.13,265

Patentb.2,275c.4751,800

$32.490$15.750$32.490

Capitalstock$20,000$10,000b.10,000$20,000

Retainedearnings14,2257,26014,225

Equityadjustment-Par(1,735)(1,735)

Equityadjustment-Sub(1,510)b.1,510

$32.49Q$15.75Q$32.49Q

©2009PearsonEducation,Inc.publishingasPrenticeHall152

ACTIVITIES・20X3:

TheexchangeratesforLCUfor20X3are$.425averagefortheyear,$.42whenthedividends

arepaid,and$.40atDecember31,20X3.

AtranslationworksheettoconvertSub'saccountsinLCUintoU.S.dollarsunderthecurrent

ratemethodisasfollows:

TranslationWorksheet

December31,20X3

ExchangeU.S.

LCURateDollars

Cash10,000$.40C$4,000

Plantassets-net36,000.40C14,400

Expenses12,000.425A5,100

Dividends2,000.42H840

Equityadjustment,

20X3change2,035

60.000$26.375

Capitalstock20,000.50H$10,000

Retainedearnings,Jan.115,000measured7,260

Equityadjustmentbalance

onJanuary1measured(1,510)

Revenue25,00().425A10,265

60.000$26.375

One-lineConsolidation-20X3

ParrecordsitsincomeanddividendsfromSubfor20X3asfollows:

Cash$840

InvestmentinSub$840

Torecorddividendsreceived(2,000LCUx$.42exchangerate).

InvestmentinSub$3,49()

Equityadjustmentfromtranslation2,035

IncomefromSub$5,525

TorecordequityinSub'sincome($10,625-$5,100).

IncomefromSub$425

Equityadjustmen