first year student question


J

Jennifer Kulp

Hi all.

I've checked out the SEC, GAAP, and the FASB, and still haven't found a
definite answer.

When a US firm expands into foreign markets, they are required to translate
all transactions into US dollars.

Is that correct?

--
Blessings,
J. "Corabear" K.

(e-mail address removed)
BFCorabear on YIM & AIM
 
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B

Bob

Jennifer Kulp said:
Hi all.

I've checked out the SEC, GAAP, and the FASB, and still haven't found a
definite answer.

When a US firm expands into foreign markets, they are required to translate
all transactions into US dollars.

Is that correct?

--
Blessings,
J. "Corabear" K.

(e-mail address removed)
BFCorabear on YIM & AIM
No, -- transactions are in the local currency
 
M

Manhattaner32

Even if the parent home company is the one recording the foreign currency
transations, it needs to be recorded in the local currency if the underlying
transaction is in another currency (most often the case) so that foreign
currency translation can be computed (most GL systems allow you the ability
to record in different currencies, and then convert that into $). If I'm a
US company, with a receivable denominated in pounds, I need to be
recognizing the foreign currency translation effects. If the receivable is
pound denominated, and the pound depreciates against the dollar, then that
receivable is worth less (an FX loss is recognized).

What if the foreign subsidiary records the transaction? If the foreign
subsidiary's "functional currency" is the same as the parent company's
functional currency (the sub keeps its books in the same currency as the
parent), then the foreign currency translation is recorded as profit and
loss at the subsidiary, which is then consolidated into the parent company's
results. If the foreign subsidiary's functional currency is its local
currency, then the subsidiary keeps its books in their local currency, and
the currency translation effects when the sub's books are consolidated into
the subsidiary are recorded directly into stockholder's equity of the parent
company ("currency translation adjusment") instead of hitting the income
statement.

See Statement of Financial Accounting Standards 52 "Foreign Currency
Translation" for the definition of "functional currency"
 
H

HSalim

Why give a simple answer when we can complicate it and confuse the hell out
a beginner?

To put it simply, all transactions in foreign currency must be translated
into local currency.
This is true even for single transactions, regardless of expansions and
subsidiaries etc.
After all, Shareholders/owners and tax authorities must be able to see one
set of numbers.
- Receivables, payables, Inventory, Net Profit /loss etc.
makes sense, right?

HS
 
M

Manhattaner32

Just trying to be helpful salami.


HSalim said:
Why give a simple answer when we can complicate it and confuse the hell out
a beginner?

To put it simply, all transactions in foreign currency must be translated
into local currency.
This is true even for single transactions, regardless of expansions and
subsidiaries etc.
After all, Shareholders/owners and tax authorities must be able to see one
set of numbers.
- Receivables, payables, Inventory, Net Profit /loss etc.
makes sense, right?

HS



I'm
 
J

Jennifer Kulp

Ah, thanks. <giggle> I did understand the "longer" explination after I read
it a few times.

--
Blessings,
J. "Corabear" K.

(e-mail address removed)
BFCorabear on YIM & AIM
 
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J

Joe Bruno

Subject: Re: first year student question
From: (e-mail address removed) (JFisher282)
Date: 8/7/2004 3:34 PM Pacific Daylight Time
Message-id: <[email protected]>

salami

haaaaaaaaaaaaaaaaaaaaaa

best post this month!

Because of the shape they come in, American sailors call salami and bologna
"horsecock". Sailors are not known for gentile language.





Joe Bruno

Si vis pacem, para bellum
(If you want peace, prepare for war)
Ancient Roman Motto

Visit my web page for pictures, music, and accounting services
http://www.msnusers.com/Joepictures2008/shoebox.msnw
 

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