- UID
- 223326
- 帖子
- 348
- 主题
- 123
- 注册时间
- 2011-7-11
- 最后登录
- 2013-9-23
|
63#
发表于 2012-3-29 16:08
| 只看该作者
Geocorp is a global corporation with operations in North America, Asia, and Europe. Its primary business is marketing industrial machinery for the construction industry. Geocorp has regional headquarters located in New York, Tokyo, and Paris. All North American and U.S operations report to its regional and world headquarters located in New York, while all Asian operations report to Tokyo, and all European operations report to Paris.
The following information is relevant to Geocorp’s subsidiaries:- Geocorp has a Canadian subsidiary that reports its results in Canadian dollars (CAD). The CAD is the functional currency.
- All domestic U.S. operations report their results in U.S. dollars (USD).
- All world-wide operations are reported in USD.
- Geocorp’s Asian operations report their results in Japanese yen (JPY). The JPY is the functional currency.
- Geocorp has a Chinese subsidiary that reports its results in Chinese yuan renminbi (CNY). The USD is the functional currency.
- Geocorp’s European headquarters (in Paris) operations report their results in euros (EUR). The EUR is the functional currency.
- Geocorp has a British subsidiary that reports its results in British pounds (GBP). The USD is the functional currency.
The following table is a summary of selected financial results from Geocorp’s foreign operations:
All values are in millions | CAD | JPY | CNY | GBP | EUR |
Revenues |
50 | 5,000 |
250 |
150 |
700 |
Cost of goods sold (COGS) |
20 | 2,700 |
110 |
100 |
480 |
Gross profit |
30 | 2,300 |
140 |
50 |
220 |
Selling, general & administrative (SGA) expenses |
18 | 1,000 |
52 |
29 |
200 |
EBIT |
12 | 1,300 |
88 |
21 |
10 |
Cash |
35 | 4,200 |
130 |
102 |
400 |
Accounts receivable |
12 | 1,400 |
55 |
45 |
170 |
Inventory |
20 | 3,900 |
135 |
123 |
300 |
Fixed assets |
62 | 7,680 |
188 |
370 |
450 |
Accounts payable |
27 | 3,300 |
76 |
68 |
350 |
Long-term debt |
70 | 8,450 |
290 |
320 |
550 |
Common stock |
10 | 2,000 |
150 |
50 |
350 |
The following exchange rates apply (USD per foreign currency unit):Currency | Historical Rate | Average Rate | December 31, 2002 |
CAD | USD 0.7013 | USD 0.6803 | USD 0.6592 |
JPY | USD 0.0094 | USD 0.0088 | USD 0.0082 |
CNY | USD 0.1010 | USD 0.1109 | USD 0.1208 |
EUR | USD 0.9801 | USD 1.0318 | USD 1.0834 |
GBP | USD 1.4803 | USD 1.5506 | USD 1.6209 |
With respect to the Canadian subsidiary, what method should be used to value its revenues, what is the appropriate exchange rate, and what is the translated value (in USD)? A)
| Temporal method, average rate, USD 34.0 million. |
| B)
| Current method, current rate, USD 33.0 million. |
| C)
| Current method, average rate, USD 34.0 million. |
|
The basis for using the current rate method is when Functional Currency is NOT the same as Parent's Presentation (reporting) Currency. The basis for using the temporal method is when Functional Currency = Parent's Presentation Currency.
Self-contained, independent subsidiaries reporting their results in the local currency that is also the functional currency use the current method. Revenues under the current method are translated using the average rate. Hence, 50 × 0.6803 = USD 34.0 million. (Study Session 6, LOS 24.d)
With respect to the Japanese subsidiary, what method should be used to value its accounts receivable, what is the appropriate exchange rate, and what is the translated value (in USD)? A)
| Temporal method, current rate, USD 11.5 million. |
| B)
| Current method, current rate, USD 11.5 million. |
| C)
| Current method, average rate, USD 12.3 million. |
|
Self-contained, independent subsidiaries reporting their results in the local currency that is also the functional currency use the current method. Assets under the current method are translated using the current rate. Hence, 1400 × 0.0082 = USD 11.5 million. (Study Session 6, LOS 24.d)
With respect to the European HQ subsidiary, what method should be used to value its SG&A expenses, what is the appropriate exchange rate, and what is the translated value (USD)? A)
| Temporal method, average rate, USD 206.4 million. |
| B)
| Current method, average rate, USD 206.4 million. |
| C)
| Current method, current rate, USD 216.7 million. |
|
Self-contained, independent subsidiaries reporting their results in the local currency that is also the functional currency use the current method. Expenses under the current method are translated using the average rate. Hence, 200 × 1.0318 = USD 206.4 million. (Study Session 6, LOS 24.d)
With respect to the British subsidiary, what method should be used to value its fixed assets, what is the appropriate exchange rate, and what is the translated value (USD)? A)
| Current method, current rate, USD 599.7 million. |
| B)
| Temporal method, historical rate, USD 547.7 million. |
| C)
| Current method, historical rate, USD 547.7 million. |
|
Self-contained, independent subsidiaries reporting their results in the local currency that is NOT the functional currency use the temporal method. Fixed assets under the temporal method are translated using the historical rate. Hence, 370 × 1.4803 = USD 547.7 million. (Study Session 6, LOS 24.d)
With respect to the Chinese subsidiary, what method should be used to value its long term debt, what is the appropriate exchange rate, and what is the translated value (in USD)? A)
| Temporal method, historical rate, USD 29.3 million. |
| B)
| Temporal method, current rate, USD 35.0 million. |
| C)
| Current method, current rate, USD 35.0 million. |
|
Self-contained, independent subsidiaries reporting their results in the local currency that is NOT the functional currency use the temporal method. Long-term debt under the temporal method is considered a monetary liability and is translated using the current rate. Hence, 290 × 0.1208 = USD 35.0 million. (Study Session 6, LOS 24.d)
Which of the following statements is most accurate with respect to accounting for inventory and cost of goods sold (COGS) using last-in first out (LIFO) under the temporal method? A)
| Inventory is translated at historical rates, and COGS is translated at the current rate. |
| B)
| Inventory is translated at the current rate while COGS is translated at historical rates. |
| C)
| Inventory is translated at historical rates, and COGS is translated at historical rates. |
|
If using LIFO, units sold during the year are the ones purchased during the year. Under the temporal method, COGS and inventory would be translated at historical rates. (Study Session 6, LOS 24.c) |
|