国际会计学第六版hapter 6.ppt

Choi/Meek, 6/e International Accounting, 6/e Frederick D.S. Choi Gary K. Meek Learning Objectives Why do firms translate from one currency to another? What is the difference between a spot, forward, and swap transaction? What exchange rates are used in the currency translation process and what are their financial statement effects? Why do Firms Translate? Facilitates the preparation of consolidated financial statements that allow readers to see the performance of a multinational company’s total operations both domestic and foreign. Facilitates the measurement of a firm’s exposure to foreign exchange risk. Types of Transaction Rates Spot transactions: the physical exchange of one currency for another in which delivery takes place immediately. Direct quote: the exchange rate specifies the number of domestic currency units needed to acquire a unit of foreign currency. Indirect quote: the exchange rate specifies the price of a unit of the domestic currency in terms of the foreign currency. Accounting for Spot Transactions Spot transaction: occurs when an enterprise purchases or sells goods for which payment is made in a foreign currency, or when it borrows or lends foreign currency. At the transaction date, each asset, liability, revenue, and expense denominated in a foreign currency is measured and recorded in the functional currency of the reporting entity at the spot exchange rate in effect on that date. Accounting for Spot Transactions (contin) A foreign exchange gain or loss is recorded whenever the exchange rate changes between the original transaction date and the settlement date, or between the original transaction date and the financial statement date should financial statements be prepared prior to settlement.  Types of Translation Rates and their Statement Effects Historical rate: the exchange rate prevailing when a foreign currency asset was first acquired or a foreign currency liability first incurred. Preserves the original cost equiv