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发表于 2011-3-9 16:20 | 只看该作者

Reading 25: Multinational Operations-LOS f 习题精选

methods, question, accounting, div, class
Session 6: Financial Reporting and Analysis: Intercorporate Investments, Post-Employment and Share-Based Compensation, and Multinational Operations
Reading 25: Multinational Operations

LOS f: Illustrate and analyze alternative accounting methods for subsidiaries operating in hyperinflationary economies.

 

 

Which of the following asset or liability values is likely to be the most understated in a hyperinflationary economy if translation occurs under the current rate method?

A)
 A plant purchased several years ago.
B)
 Accounts receivable.
C)
 Dividends payable.

 

The accounts receivable and dividends payable will each have book values that are closer to their market values than a plant purchased many years ago.

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土豆妮

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2#
发表于 2011-3-9 16:20 | 只看该作者

In a hyperinflationary economy, translation under the current rate method will most likely result in relatively:

A)
 high balance sheet values for long term assets.
B)
 high translation gains.
C)
 low balance sheet values for long term liabilities.

In a hyperinflationary economy, translation under the current rate method will most likely result in relatively low balance sheet values for assets and liabilities. Translation losses will also occur.

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土豆妮

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3#
发表于 2011-3-9 16:20 | 只看该作者

Under U.S. GAAP, the temporal method is preferred to the current rate method in hyperinflationary economies because the temporal method:

A)
 is easier to perform under hyperinflation.
B)
 results in non-monetary asset values that are a better proxy for the economic values of those assets.
C)
 provides better conversions of subsidiary revenues.

The temporal method results in non-monetary asset values that are a better proxy for the economic values of those assets than those obtained under the current rate method. Both methods convert revenues and SG&A at the average rate so there could be no clear preference when considering these measures.

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4#
发表于 2011-3-9 16:21 | 只看该作者

Which translation method should be used under a hyperinflationary economy when using U.S. GAAP?

A)
 All-current, because dividends are translated at the rate that applied when they were issued.
B)
 Monetary/non-monetary, because all monetary accounts are translated at the historical rate.
C)
 Temporal, because all non-monetary accounts are re-measured at the historical rate.

The temporal method is more appropriate because all non-monetary accounts are remeasured at the historical rate. Under IFRS, the financials would be restated for inflation, and then translated under the current rate method.

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5#
发表于 2011-3-9 16:21 | 只看该作者

(Assume U.S. GAAP for this question.) For a subsidiary in a hyperinflationary economy, the functional currency should be the:

A)
 Parent's currency.
B)
 Local currency.
C)
 Subsidiary's operating currency.

The functional currency should be the parent's currency. Under IFRS, the firm would restate the financials for inflation, and then translate under the current rate method.

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6#
发表于 2011-3-9 16:21 | 只看该作者

A hyperinflationary economy is typically defined as one that has:

A)
 an inflation rate that exceeds 10% per year for three consecutive years.
B)
 cumulative inflation that exceeds 100% over a three-year period.
C)
 cumulative inflation that exceeds 100% over a twelve-year period.

The typical definition is that cumulative inflation exceeds 100% over a three-year period.

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7#
发表于 2011-3-9 16:21 | 只看该作者

In reality, what best describes the real value of non-monetary assets and liabilities in a hyperinflationary environment?

A)
 Typically not affected because their local currency-denominated values decrease to offset the impact of inflation.
B)
 All non-monetary accounts are re-measured at the current rate.
C)
 Typically not affected because their local currency-denominated values increase to offset the impact of inflation.

Typically not affected because their local currency-denominated values increase to offset the impact of inflation (i.e., real estate values typically rise with inflation).

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8#
发表于 2011-3-9 16:22 | 只看该作者

The nation of Deadoa is experiencing hyperinflation. A subsidiary of a multinational operating in Deadoa will notice changes in its purchasing power and in its financial results as reported on its parent company's financial statements. Which of the following best describes the situation for a subsidiary operating in Deadoa? Purchasing power will:

A)
 dramatically appreciate and the local currency will be rapidly appreciating against the presentation currency.
B)
 quickly deteriorate and the local currency will be rapidly depreciating against the presentation currency.
C)
 quickly deteriorate and the local currency will be rapidly appreciating against the presentation currency.


Purchasing power and Deadoa currency will depreciate.

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