FRA Multinational Ops accounts, exchange, company, current, foreign

Darien

Hi,
Question 2 on paes 268: if the exchange rate for the foreign subs. is weakening, the Parent company’s gross profit margin would be higest if it accounts for the subsidiary’s inventory by the All current method?

jmh530

gazhoo wrote:
Hi,
Question 2 on paes 268: if the exchange rate for the foreign subs. is weakening, the Parent cdopany’s maring would be higest if it accounts for the subsidiary’s inventory by the All current method?
maring ?

PalacioHill

that was gross profit margin. sorry.

JonnyKay

Ok then please ignore the depreciation expense. The gross margin deal only with cogs heje

ShooterMcCFA

Well in Temporal COGS is taken at date of inventory buy
In current method it is taken at avg rate
Now since foreign subsidiary currency is weakining it means for holding company it is best to take COGS at average rate which is lower than the rate at the date of inventory but as per temporal
So gross profit will be higher in current rate as COGS is lower.
  Revenue will be same in both methods
Correct me if i am wrong as I have also not revised this chapter