temporal method anything, statements, critical, question, currency

laurab

If functional currency is the same as parent's presentation currency, the temporal method is used to remeasure the foreign currency financial statements.


My question: if both currencies are same, what is the need to translate anything? Why can't you just do a full consolidation?

Thanks, pls answer very critical to my understanding.

flyinggirl

i didn't get this at first either.

i believe it's b/c transactions are still taking place in a local currency (wherever the subsidiary is located) no matter what.

so if the parent co is a company in US and presentation currency is USD and they have a subsidiary in Europe then the local currency is EUR.

if the functional currency of the sub is USD, then the functional and presentation match, so the Euros are translated at the temporal rate

if the functional currency is not the presentation currency of the parent (ie sub's functional matches local, EUR), then use current method.

MiniMe7

Just see the question, of course we can't translate anything if it's the same currency.

yalo

Maybe this is a little clearer. Just because a company might do business with the US and its functional currency is in $, it will file its financials in Euro's. So when the parent consolidates financial statements it has to adjust them for exchange rates. Hope that helps.

jacksparrow

they have to report their financial statement in the local currency to the local government.
So temporal method is an easy way to translate.

ap0258

i guess this gives me the following rules

if presentation = functional = local (do consolidation)
if (presentation = functional) != local (do temporal)
if presentation ! = (functional = local) (do current)

ok, makes sense. may be....!